Hajj is the fifth pillar of Islam and is considered obligatory for every Muslim, once in a lifetime, who can afford expenses of the journey and has the required physical strength. Hajj is considered a physically and economically demanding journey that requires proper planning.
At the societal level, Hajj not only builds up the character of individuals but it also has a significant impact on different aspects of economic and social well-being.
To plan and perform Hajj and to save money for this holy journey is a desire of every Muslim, and Muslim societies have developed a culture of savings for Hajj in formal and informal manners with a careful approach to avoid any harm and impermissible income.
Millions of Muslims perform the holy journey annually; in 2023 the Hajj witnessed a massive participation of around 2.5 million pilgrims, while from Pakistan over 160,000 went on the pilgrimage.
The Hajj applications normally received are far higher than the given quota in Pakistan. Therefore, balloting is done regularly for the selection of pilgrims.
However, in 2023 because of inflationary pressure and currency devaluation, the cost of Hajj has gone beyond the reach of many individuals and a portion of the quota remains unutilised.
In this backdrop, there is a strong need for the development of a Hajj savings scheme or Hajj fund so individuals can start saving for this obligation at an early age.
Globally, we find successful stories of similar initiatives by Islamic countries where Shariah-compliant savings schemes are offered to help citizens save and perform Hajj.
Malaysia pioneered the Hajj savings scheme known as Tabung Haji in 1969 which is considered by many as a role model. Tabung Haji manages approximately $18.2 billion of deposits as of 2022 with more than 8 million depositors with a network of 119 branches and more than 6,000 touch points.
The fund invests in Shariah-compliant projects by allocating 53% of assets to equities, 27% to fixed income, 15% to real estate and keeping 5% in cash.
Similarly, Indonesia formed Badan Pengelola Keuangan Haji (BPKH) for managing Hajj finances after 2017. Even India with a large minority of Muslim population developed a Hajj fund for individuals in 2010 as a unit of Zakat Foundation and it utilises savings in Shariah-compliant projects.
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Nigeria, home to a large Muslim population, has recently established a Hajj savings and investment scheme named National Hajj Commission of Nigeria to register individuals who wish to perform Hajj in the next five years.
Based on the successful initiatives of Malaysia, Indonesia, and others, it is the right time for Pakistan to start working to establish and develop a Hajj savings plan that can benefit and enable millions to gradually accumulate savings and use them for the holy pilgrimage.
These savings will target to cover all Hajj end-to-end expenses and will also provide Shariah-compliant return to the customers on their investment.
In Pakistan, there are different Islamic financial institutions offering Shariah-compliant savings plans for Hajj but there is a need to establish a dedicated entity responsible for managing all activities from savings to ensuring a smooth Hajj journey.
It is suggested to establish Pakistan Hajj Fund (PHF) as a subsidiary of the Ministry of Religious Affairs through an Act of parliament or by way of approval of rules.
PHF will be empowered to take Hajj deposits, make investments under professional and qualified management to provide end-to-end Hajj management services, and undertake all allied and related tasks.
The potential of the proposed fund is huge given the population of 240 million with 98% Muslim majority and a very large proportion of younger people. If the fund is able to attract 20 million account holders with average savings of Rs100,000 per annum, this could mean over Rs2 trillion per annum.
If such a fund is managed professionally, the savings over time could easily reach the Rs10 trillion mark or $35 billion. Such a massive fund when invested in the real economic sector and Shariah-compliant businesses will pay huge economic dividends in addition to better management of the Hajj journey.
A portion of the profit will go back to the Hajj savers while another portion can be used to provide Hajj-related subsidies, thus reducing the burden on the government and general public.
The investment universe for the Hajj Fund includes different Shariah-compliant avenues including Sukuk, Islamic commercial papers, properties and real estate, manufacturing sector, infrastructure development, clean energy initiatives, development of startups, Shariah-compliant stocks, placement in Islamic banks and Islamic mutual funds, and other Shariah-compliant modes.
Once the idea is approved, a working committee of experts can be formed to launch this initiative in six months’ time.
Ahmed Ali Siddiqui is the Director IBA CEIF and Jaweriya Naz is the Lecturer NED University & Research Fellow Meezan Bank
Published in The Express Tribune, November 13th, 2023.
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