In recent years, concerns over the financial sustainability of Lembaga Tabung Haji (TH) have become more pressing. As Malaysia’s primary institution for hajj savings and management, TH plays a critical role in enabling Muslims to fulfil one of Islam’s five pillars. Notwithstanding, despite its longstanding reputation and national importance, signs are emerging that the institution’s deposit base is under increasing pressure.

Current statistics paint a troubling picture. Only half of Malaysian Muslims have a TH account, and more than 53% of these depositors have not reached the minimum RM1,300 savings threshold required to register for hajj.

From 2023 to 2024, deposits increased from RM89 billion to RM91.7 billion, marking a modest 3% growth. However, this was still below the 3.25% dividend distributed to depositors during the same period.

In the previous year, deposits rose by only 1.6%, while the dividend payout stood at 3.1%. This imbalance suggests that the growth of new deposits does not keep pace with the returns TH is obliged to pay.

More worryingly, over the last three years, net withdrawals from TH accounts have totalled approximately RM2 billion. In 2025 alone, nearly RM1 billion was withdrawn. According to TH chairman Tan Sri Abdul Rashid Hussain, in some instances, withdrawals have exceeded new deposits. This places additional stress on the institution’s long-term financial resilience.

The decline in TH’s deposit growth is not merely a statistical anomaly. It signals the urgent need for a comprehensive transformation in how the institution engages with depositors, builds trust, and plans for sustainability. Without decisive and structured interventions, TH risks losing the momentum needed to maintain a viable financial model and support Malaysian pilgrims well into the future.

Rising hajj service costs are only part of the broader challenge. In 2024, the cost for a muassasah pilgrim was RM33,300. This amount is difficult for many middle-income families to accumulate, especially amid rising living expenses. For pilgrims in the bottom 40% of households (B40) and middle 40% of households (M40) by income level, the burden is even heavier, making TH’s subsidy support essential.

However, TH must also reckon with changing depositor behaviour. Many no longer see TH as the exclusive or preferred platform for their financial planning. Today, the market is saturated with shariah-compliant savings and investment products, from Islamic banks to unit trust funds and digital fintech solutions. These often offer more competitive returns, more flexible features and, in some cases, tax incentives.

Against this backdrop, TH must reassert its relevance, particularly among younger families and the M40 demographic. Without intentional and strategic efforts to engage these segments, the next generation may grow up disconnected from TH’s mission and services. In time, this could erode the institution’s standing in the very community it was established to serve.

One promising pathway forward is through the establishment of a formal TH waqf initiative. This model, similar to Wakaf Mara Madani, could significantly strengthen TH’s deposit base by encouraging long-term, non-retractable contributions in the form of cash endowments.

By collaborating with state religious Islamic councils, TH could be appointed as a mutawalli, serving as a trustee and manager of cash waqf. The funds collected from donors across various states could be pooled, prudently invested, and used to subsidise the cost of hajj for underprivileged pilgrims. These donations are permissible under Section 15 of the Tabung Haji Act 1995 and could be managed on a state-by-state basis. For example, contributors from Perak could designate their waqf to benefit future pilgrims from the same state.

Cash endowments are not something foreign. Consider the University of Oxford, where the central institution holds endowment assets of about £1.3 billion (approximately RM7.7 billion), while its constituent colleges own additional endowments worth £5.06 billion (approximately RM30 billion). These examples show how long-term, structured giving can build sustainable financial foundations for generations.

In a similar vein, TH could offer a mechanism for wealthier depositors, particularly those in the top 20% of households (T20) category, to donate a portion of their annual dividends to the waqf fund. For instance, if the annual return is 3%, depositors could choose to allocate a fraction of that amount, let’s say 1%, as a continuous act of charity. Over time, such contributions could accumulate into a significant fund, supporting thousands of pilgrims who might otherwise never afford the journey.

To encourage participation, these waqf contributions should be eligible for tax deductions, similar to zakat payments. This would create a financial incentive for donors while also supporting a more stable deposit ecosystem. Unlike standard deposits, waqf funds cannot be withdrawn. Therefore, TH can manage them perpetually for the benefit of the community.

At the same time, attention must be given to the 10 million Muslims in Malaysia who still do not hold a TH account. Many of them come from underprivileged backgrounds, including children and youth from B40 households. In these cases, state zakat authorities could allocate a portion of their funds to open TH accounts and provide initial deposits. This would enable these individuals to begin saving for hajj from an early age.

Public education is also vital. A nationwide savings culture cannot be built without awareness and consistent messaging. TH should collaborate with state Islamic departments to promote hajj savings in Friday sermons. Schools, colleges, and universities must be included in financial literacy campaigns that emphasise the spiritual and financial discipline involved in saving for hajj.

Young Muslims, who represent Malaysia’s future workforce, should be encouraged to view their first hajj with the same pride and ambition as owning their first car or home. By embedding this goal early in life, TH can cultivate a new generation of committed depositors who see hajj not only as a spiritual obligation but also as a personal milestone worthy of planning and preparation.

The challenges ahead for TH are considerable. Yet each challenge also presents a new opportunity to innovate, to restructure, and to recommit to the institution’s founding purpose. A sustainable and self-reliant deposit system is not beyond reach. With the right vision, supportive policies, and strong community engagement, TH can continue to serve as a pillar of support for Malaysian Muslims for generations to come.

Dr Mohamed Hadi Abd Hamid is a certified shariah adviser and Islamic financial planner. Dr Mohd Zaidi Md Zabri is interim director of the Centre of Excellence for Research and Innovation in Islamic Economics (i-RISE), ISRA Institute, INCEIF University.