Indonesia’s Hajj funds can learn from Malaysia’s Tabung Haji

Indonesia’s long queue of prospective Hajj pilgrims offers a difficult but valuable lesson from neighboring Malaysia: the key issue is not simply how much money a fund manages, but the institutional system behind it.

Malaysia’s Tabung Haji manages almost twice as much money in US dollar terms as Indonesia’s BPKH and has 9.7 million active individual accounts. BPKH manages hundreds of trillions of rupiah, but the article says Hajj finances still operate within a cashier-like framework that pays for pilgrims in large queues, while Hajj operations remain trapped in procurement rules.

Tabung Haji began with an idea from Professor Ungku Abdul Aziz in 1959. It started operating in 1963 with deposits of RM46,610 from 1,281 people. Over more than six decades, it developed into an early and mature example of what the article calls a Sovereign Halal Fund, a Sharia-compliant public fund with a long-term social and religious mandate.

Its model combines personal savings, pilgrimage administration and productive investment. That combination distinguishes it from conventional sovereign wealth funds, which generally rely on natural-resource surpluses or foreign-exchange reserves. Tabung Haji therefore does more than collect money for pilgrimage. It builds collective capital while retaining individual ownership.

BPKH emerged in a different context. After Hajj funds had been managed for years by Indonesia’s Ministry of Religious Affairs and corruption cases ensnared ministers and senior officials, Law No. 34 of 2014 separated financial management from other functions. BPKH became an independent public legal entity in 2017. The author, Indra Gunawan, says it is still building the foundations of a Sovereign Halal Fund. Drawing on institutional theory associated with Daron Acemoglu, Simon Johnson and James Robinson, he argues that institutional character matters more than age: institutions should protect individual rights, encourage broad participation and restrict elite intervention and extraction.