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Background

Lembaga Tabung Haji – TH (Pilgrims Fund Board) was established as a premiere economic-based Islamic financial institution inspired with a realization to help provide investment services and opportunities while managing pilgrimage activities for the Malaysian Muslim community.

TH was meant to play a bigger social role, thus in addition to managing pilgrimage activities, it operates as an alternative institutional body providing investment opportunities for Islamic depositors to save and invest in accordance to Islamic principles. Depositors' money is invested in selected investment establishments spread across a diverse range of investment portfolios based strictly on Syariah principles to preserve the purity and integrity of profits derived which is free from "riba" elements and to avoid trading in prohibited ‘haram' products.

The fund board was established in 1962 as a modest proposal to aid the Malayan rural economy and to enable the Muslims to perform 'Hajj', one of the tenets of their faith. Today TH is one of the greatest cooperative success stories in Malaysia. Its basic principles, structured by the Royal Professor Ungku Aziz who was then an economic lecturer and later became the Vice Chancellor of the University Malaya, remain unchanged, but the institution has developed beyond imagination.

In the early days, Islamic community in Malaysia resorted to rather unsystematic and traditional methods when it comes to saving their money for the purpose of performing the holy pilgrimage. Most believed that money kept under the pillow at home is a guaranteed way to preserve its integrity and free of ‘riba' practices. Another critical focus relates to the selling off their land and property for the same purpose. Such unsafe and imprudent ways create a freeze on asset liquidation and hinders the growth of the nation's economic resiliency. Pilgrims returning home suffered economic instability with the loss of their vital assets in life such as houses, and breeding animals which have either been sold or mortgaged in order to enable them to go perform their hajj.

To overcome this problem, a working paper on "A Plan to Improve The Economic Position of Potential Pilgrims" was presented to the Government by the Royal Professor Ungku Aziz in 1959 with the objective of setting up a ‘riba free' financial institution operating on a profit basis in line with Islamic principles. The proposal was fully endorsed and praised by Sheikh Muhammad al-Shaltout, the Grand Mufti of Egypt who visited Malaysia at that time.

Following this, in August 1962 the Malayan Pilgrim Savings Corporation was given ‘quasi' status gazetted in November of the same year. The incorporation was launched on 30th September 1963 and six years later merged with the Pilgrims Control Office based in Penang since 1951 giving birth to Lembaga Urusan dan Tabung Haji (Pilgrims Management and Fund Board). In 1995, a study was made to expand the operating framework of TH. As a result, the new Tabung Haji Act 1995 was approved and enacted by the Parliament and Act 8 of Lembaga Urusan Tabung Haji Act 1969 was repealed by Act 535 of the Laws of Malaysia.

With the new Act, TH is able to extend its business networking globally.