A critical examination of the management of hajj funds in Indonesia

Abstract

The hajj is the annual pilgrimage to Makkah conducted by people of the Islamic faith. It is incumbent on all Muslims who are financially and physically able to perform the hajj at least once in their lifetime. In Indonesia, two governmental bodies are involved in the administration of the hajj. One is the Ministry of Religious Affairs (MoRA), which is in charge of the practical organisation of the hajj. The other is the Hajj Fund Management Agency (BPKH), which is responsible for investing pilgrims’ deposits (in a Sharia compliant manner) so as to accumulate sufficient capital to cover the costs of the hajj, chief among these costs being the accommodation and transportation of the pilgrims. This thesis critically examines whether hajj funds management in Indonesia is efficient and effective. It is motivated by the 2017 reforms to hajj funds management, in which MoRA’s role as a fund manager was transferred to the newly dedicated BPKH, with MoRA being left only with event management. This thesis contends that this institutional reform, which was implemented in order to combat corruption in the use of hajj funds, has failed to fully achieve this objective. It is argued that the anti-corruption goal has been stymied by the continued influence of MoRA over the BPKH. Despite the creation of certain procedures and mechanisms in response to corruption scandals, especially in hajj operational disbursement, the potential for rent-seeking in the areas of accommodation and air transportation spending remain significant sources of inefficiency. Furthermore, the Maslahah Program, paid for out of the Ummah Perpetual Fund’s investment return, has disbursed for non-hajj activities, which it problematic in terms of both good governance and religious fidelity. Given this critical analysis of the past and current system in Indonesia, this thesis proposes further, more far-reaching reforms to the management of hajj funds. Indonesia’s hajj funds can be managed effectively and efficiently, complying with good governance and Sharia principles under the following conditions. First, the risk of corruption, transparency issues, and accountability must be of central concern to lawmakers in amending contradictory laws. In particular, consideration should be given reforming Law No 34 of 2014 concerning Hajj Financial Management and other regulations relating to hajj funds management in terms of the independence of the BPKH, the BPKH-pilgrim relationship, and the BPKH’s status as a nonprofit corporation. Second, as part of a further reform agenda, a review of hajj disbursement should explore the possibility of transforming the BPKH into a hajj bank.

Date of Thesis submission	2022
Original language	English
Awarding Institution	Western Sydney University
Supervisor	Edward Mariyani-Squire (Supervisor) & Maria Bhatti (Supervisor)