Photo: Indonesian haj pilgrims boarding a plane in Medan heading to Jeddah, Saudi Arabia, on July 22, 2019. Randy Imanuel/Shutterstock

Islamic Finance

Indonesia studying plans for use of $10 bln haj fund after government cancels pilgrimage

JAKARTA – Indonesia’s haj fund management agency (BPKH) is exploring new avenues for the use of some funds after the government announced the pilgrimage this year is cancelled citing safety issues amid the continuing spread of COVID-19.

BPKH chairperson Anggito Abimayu said the agency is exploring plans including supporting the central bank to strengthen the rupiah and helping the government mitigate the financial and economic impacts of the COVID-19 pandemic.

“Currently we are managing $600 million and 135 trillion rupiah ($9.3 billion) in haj deposits that are mostly invested in government sukuk instruments,” Anggito told Salaam Gateway.

“Along with the central bank and government, we are studying whether this can be channeled into other baskets such as currency stabilization and COVID-19 risk mitigation,” he said.

BPKH is an independent body that overlooks Indonesia’s haj savings scheme that requires prospective pilgrims deposit money in appointed Islamic banks. When a person’s savings reaches 25 million rupiah (around $1,700), they will be allocated a haj place and informed of the tentative year of departure. The cost of a pilgrimage under the government-managed scheme is around $2,500. The balance costs must be paid by the prospective pilgrim in the year of their scheduled departure.

BPKH also invests haj funds in line with government act number 34/2014 that allows it to put monies in Islamic banking products, sukuk, gold, direct investments, and equity placements.

The cancellation of haj for 221,000 Indonesians this year means authorities are holding on to payments from its pilgrims. According to ministry of religious affairs spokesperson Oman Fathurahman, around 93% of all prospective pilgrims scheduled to go to haj this year have paid the full cost of their pilgrimage package.

The money will be kept and managed separately by the BPKH.

All pilgrims that have paid the full cost will automatically be put on next year’s haj list, Oman told Salaam Gateway.

Alternatively, the cost of the haj already paid by prospective pilgrims can be refunded to them if they so wish. The process will take 9 working days, according to Oman.

“We’ll coordinate with BPKH regarding this,” he said.

Oman said that even if the haj this year included extra costs for quarantine, the pilgrimage would still be affordable for Indonesians, despite Saudi Arabia tripling its value-added tax to 15% from July. Costs would be offset by cheaper flight tickets and other transport fares, according to Oman.

All Indonesia government-appointed airlines, and hotels and catering partners in Saudi Arabia will automatically be reselected for next year’s haj season.

(Reporting by Yosi Winosa; Editing by Emmy Abdul Alim

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