Tabung Haji at risk of a ‘bank run’, report reveals

PETALING JAYA: Lembaga Tabung Haji (TH) gave returns for deposits as high as 8.25%, a move which also turned out to be a reason for its poor financial state of affairs.

In a startling revelation, a single depositor had more than RM190mil in the fund that was set up to help Muslims fulfil their haj.

Tabung Haji’s Recovery and Restructuring Working Plan revealed the high concentration of depositors to a small segment where 1.3%, or a mere 117,000 of them (depositors), contributed to 50% of its deposits.

The report highlighted the dangers that the fund faced should there be a “run” by this small group of depositors.

“Action taken by this small group can trigger a ‘ bank run’ ( when a large number of depositors withdraw their money) situation,” the report stated.

Towards this end, the plan has also outlined measures to improve the liquidity and financial position of Tabung Haji.

It suggested Tabung Haji to review the contracts for existing deposit products and set a savings limit of RM200,000 for depositors.

It also suggested that the remaining balance exceeding the RM200,000 limit be separated. This means the government would only guarantee up to RM200,000 for every depositor.

This is to lighten the government’s burden in the future as it currently insures all Tabung Haji savings with no limit unlike the Perbadanan Insurans Deposit Malaysia’s (PIDM) deposit insurance protection limit of RM250,000 per depositor per member bank.

The report said that this government protection combined with hibah distribution has inadvertently attracted more deposits, particularly from high-networth individuals, for the purpose of investment rather than for haj.

Tabung Haji’s hibah (dividends) distribution from 2013 to 2017 ranged from 6.25% up to 8.25%. Comparatively, fixed deposit rates are at about 3%.

The report said this attracted an annual deposit growth at the rate of 10.6% between 2011 and 2017.

Due to the demand for high hibah distribution, the report said Tabung Haji had been pressured to seek high risk, high return ventures.

Almost 40% of its assets are investment in shares from listed companies where it is exposed to the fluctuation of the financial market.

It said that at the end of October, the fair value of 30% of these investments dropped more than 50% of its initial investment value due to challenging market conditions, and high investment cost from aggressive profit-taking.

“Yet, TH is ill-equipped to become an asset management company that is resilient,” it said.