Islamic Finance

Independent agency to manage Indonesia’s $6.7 bln hajj fund to start in Q4

Photo: Indonesian Haj pilgrims wait to enter the departure area before leaving for Mecca at Soekarno-Hatta International airport near Jakarta, Indonesia, September 16, 2015. REUTERS/Nyimas Laula

Indonesia’s new hajj fund management agency (BPKH) will start operations in the fourth quarter of this year, a move aimed at increasing transparency and profitability for the 90 trillion Indonesian rupiah ($6.7 billion) fund, director of the country’s current Haj Fund Management Agency at the religious affairs ministry, Ramadhan Harisman, told Salaam Gateway.

The new agency is to be run independently of the government’s religious affairs ministry and was planned to open by the end of 2015. The delay in its establishment has been due to the government’s deliberations on the body’s legal status and the need to install proper regulations for it, according to Harisman.

The new state-linked fund will be run by industry professionals with no involvement from the religious affairs ministry. It will be answerable to the president of Indonesia and the Commission VI House of Representatives that overlooks trade, industrial, investment, cooperatives and SMEs, and state-owned enterprises affairs. It will be audited by the national Audit Board (BPK) every six months, said Harisman.

According to him, the government is currently selecting BPKH members: seven for its supervisory board and five for the management board.

“This new agency will manage hajj funds more effectively and transparently considering it will be conducted by professionals. Of course it will remain in line with Shariah requirements. We don’t want to see any corruption cases like that of former minister Suryadharma Ali again,” he said.

Named a graft suspect by the Corruption Eradication Commission in 2014, former religious affairs minister Ali was sentenced to prison for ten years last year after being found guilty of mishandling hajj funds from 2010 to 2013. He is estimated to have mishandled 27 billion rupiah ($2 million) and 17.97 million Saudi riyals ($4.8 million).

To increase the fund’s profitability, the government act number 34/2014 allows it to invest in Islamic banking products, sukuk, gold, direct investments, and equity placements.

“We have used sukuk for infrastructure projects before, so we can do the same with the hajj fund,” said Harisman.

In 2016, Indonesia’s hajj fund placed 54.57 trillion rupiah ($4 billion) in Islamic time deposits, 35.65 trillion rupiah ($2.6 billion) in government sukuk, and $10 million in conventional government bonds.

Indonesia looks to Malaysia’s experience and success with its own hajj fund, the government-linked Tabung Haji, as an example. Tabung Haji has around 64 billion Malaysian ringgit ($14.4 billion) in assets under management.


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