TH ‘profit’ distributions legally belong to depositors, says FT mufti dept

The federal territories mufti department has clarified that the annual profit distributions, or hibah, from Tabung Haji between 2014 and 2020 legally belonged to depositors. This is because depositors were unaware of the institution's internal financial situation at the time, the department stated. Tabung Haji's management was responsible for any issues related to mismanagement, non-compliance with the law, and reports of "creative accounting," according to the department.

The institution's concealment of its true financial state for years, leading to a discrepancy between reported profits and actual losses, was due to changes in impairment policies, unrecorded losses from troubled investments, and the use of "creative accounting" to justify profit distributions. The contracts between Tabung Haji and its depositors were considered "wadi'ah yad dhamanah" (guaranteed safekeeping) contracts, where Tabung Haji was seen as borrowing money from depositors for investment and other purposes.

As per Islamic finance principles, once hibah is credited to a depositor's account, it is deemed to have undergone "qabd," indicating a complete transfer and legal ownership by the depositor. The department suggested that Tabung Haji should transition to "wakalah" contracts in December 2019, which would distribute returns based on actual net investment profits, promoting financial prudence and transparency.