The Royal Commission of Inquiry's findings on Tabung Haji have prompted calls from prominent scholars for fundamental restructuring of the Islamic pilgrimage fund's decision-making apparatus and supervisory framework. Unveiled publicly in late July, the RCI report identified significant governance lapses spanning 2014 to 2020 and tabled 25 reform recommendations before parliament for debate.
According to Prof Datuk Dr Norman Mohd Saleh from Universiti Kebangsaan Malaysia's Faculty of Economics and Management, the crux of the problem lies in how institutional checks operate in practice. Currently, warnings issued by the Audit Committee and Risk Management Committee function merely as advisory inputs that senior management can dismiss or override. This structure fundamentally undercuts their protective value, leaving depositors exposed when risky strategies proceed despite internal objections. Prof Saleh emphasises that risk assessments must transition from being optional counsel to binding constraints on board decision-making, ensuring that high-impact choices receive proper scrutiny before affecting the accumulated savings of millions of Muslims.
A particularly stark vulnerability concerns the absence of external financial regulation. Unlike commercial banks and insurance companies, Tabung Haji operates without direct supervision from Bank Negara Malaysia regarding liquidity adequacy and capital reserves. Prof Saleh contends this regulatory gap should close immediately, bringing the fund under BNM's purview for assessing whether investment management practices maintain sufficient financial buffers against market stress. Such oversight represents a market-standard safeguard that a custodian of pilgrim savings cannot reasonably lack, especially given the institutional scale and complexity involved.
The appointment process demands equally rigorous reform. Selection through the Nomination and Remuneration Committee must embed transparent, integrity-centred criteria shielded from political interference and executive patronage. This matters acutely because Tabung Haji lacks the accountability mechanism that listed companies possess through annual general meetings, where shareholders directly question management. Without robust appointment standards and a governance-focused board culture, the institution operates with diminished accountability to its depositor base.
Dr Mohd Hafizuddin Syah Bangaan Abdullah, his UKM colleague specialising in finance and risk management, advocates a more granular approach to investment risk. Before any substantial transaction proceeds, TH should establish explicit investment appetite parameters, obtain independent risk assessments, conduct stress-test scenarios, and document predetermined exit strategies. This proactive architecture contrasts sharply with reactive governance that addresses problems only after losses crystallise. For especially consequential decisions, a red-flag escalation protocol should automatically escalate matters to the board when risk boundaries are breached, specialist opinion identifies material deficiencies, or conflicts of interest emerge.
Dr Hafizuddin further recommends organisational separation between the Risk Management Committee and Audit Committee—particularly crucial for complex institutions like Tabung Haji. The risk function centres on anticipatory identification of emerging threats, whereas audit examines historical compliance. Merging these distinct mandates often produces diluted effectiveness; compartmentalising them sharpens institutional focus and prevents competing priorities from compromising either function.
Both experts endorse the RCI's recommendation barring active politicians from serving as TH board chairs or directors. This change addresses a structural conflict where political actors pursuing partisan agendas or responsive to ministerial pressure cannot impartially steward depositors' interests. By establishing selection criteria rooted in demonstrable financial expertise and relevant industry experience through transparent skills matrices, the board composition would reflect professional capability rather than political convenience.
Monitoring frameworks also require overhaul. Dr Hafizuddin argues the board must regularly track three critical metrics: audited financial health, quality of financial reporting under Malaysian standards, and disclosure of related-party transactions. Inadequate attention to these indicators historically enabled problematic dealings to proceed undetected. Management compensation should similarly pivot toward rewarding sustainable, risk-adjusted long-term performance rather than short-term results, with clawback provisions that recover bonuses if underlying performance data proved inaccurate or unsustainable.
The governance paradigm itself must shift from essentially reactive intervention—where deficiencies trigger corrective measures only after damage occurs—to preventative early-detection systems that identify vulnerabilities before they metastasise. This forward-looking approach demands that oversight bodies combine specialised technical expertise in navigating complex financial and investment risks with day-to-day coordination across relevant government agencies and ministries.
Critically, both scholars stress that management and the board must jointly shoulder heightened responsibility for every material decision, moving beyond institutional fragmentation where accountability disperses across multiple actors. Such concentrated responsibility encourages more rigorous internal deliberation and raises personal professional stakes for board members. Given Tabung Haji's role safeguarding the accumulated wealth of predominantly lower and middle-income Muslims—many of whom entrust their pilgrimage savings to the fund—the stakes for governance quality are not merely institutional but profoundly social.
The RCI's comprehensive diagnosis and the academic community's detailed reform prescriptions now face the test of parliamentary and ministerial implementation. Whether these recommendations translate into genuine structural change depends on political will to prioritise depositor protection over institutional convenience and the persistence of reform advocates in holding authorities accountable to announced improvements.
