February 15, 2018
By Salahuddin bin Hisham
THERE is no problem with anyone having a cynical or critical attitude towards any announcement coming from government-linked institutions or companies.
It puts these executives on their toes, gives the other side of a story, and uncovers any attempt to cover-up wrongdoing or poor performance. Corporate public relations has a tendency to disclose as little as possible and has made an art of throwing big words to hide any shortcomings.
However, it is preposterous for a senior person to spread false and unsubstantiated accusations in his Facebook of Lembaga Tabung Haji (LTH) operating Ponzi scheme – somewhat like a Pak Man Telo get-rich quick scheme in the late 1980s through 1990s.
The Facebooker, Hussein Abdul Hamid promoted the opinion of a character by the name of ES Shanker who had interpreted Tabung Haji as having a negative reserve financial position but yet paid dividend consistently.
Whether ES Shanker is a known entity or not, fake or real, Hussein assisted to viral a serious allegation to presume the Islamic banking version of dividends and bonus were paid with new deposits.
Such allegations should not be done casually but backed by evidence and substantive arguments.
It is accusing a reputable and globally recognised non-bank Islamic financial institution of flouting laws governing its operation for more than half a century.
LTH was established under an act of Parliament. It operates under its own act and does not fall under the supervision of Bank Negara Malaysia.
Section 22(3) a states that Tabung Haji cannot declare Hibah if its liability is more than its realisable assets. The fact that it declares Hibah means the realisable assets are more than its liability.
Otherwise, the management and members of the Board of Directors have contravened the law and face the consequences.
The Act specifically requires that Tabung Haji maintain two types of reserves. One is distributable reserves, which comprise retained earnings and current year realised profit or loss.
The other type of reserves is undistributable reserves, which comprise fair value reserves arising from marked to market changes on available for sale assets which are unrealised and can change until those assets are being sold.
It is unsure how ES Shankar read his accounts, whether he got the year right, how he derived the reserves and whether he understoond the items in the accounts, but the reserves are positive!
Tabung Haji accounts are audited by the Auditor-General and reported to Parliament every year. It is a public document and hard to hide any possibility of reserve turning negative.
In case, ES Shankar or the Facebooker is unaware, Tabung Haji is renown for its most stringent and almost puritanical compliance to syariah.
The syariah principles only allow realised distributable assets to be considered for Hibah distribution to depositors. Unrealised profit or loss cannot be considered as it is “gharar” (i.e. uncertain of final position until it is realised or in easier term, considered speculative).
LTH does not have equity in its balance sheet. Based on Section 15 of the Act, the source of funds is basically from the depositors’ fund.
The current year profit that is distributed as Hibah will be credited to the depositors’ balance as part of post balance sheet events entries as the announcement normally being made early in the following year but before the accounts being signed off.
Since it is credited into the depositors account, it is also the reason the distributable reserves get reflected in the liability side. It has nothing to do with ES Shankar’s presumption that it was window dressing to boost the depositors’ fund.
In essence, all Hibah paid in any one year is paid into the depositors account thus becomes depositors fund.
For the purpose of ascertaining whether the assets are higher than liabilities which are due depositors’ funds, Tabung Haji would establish what is the realisable asset value.
If the net worth adjusted is still positive, after deducting all liabilities from the realisable asset value, then the maximum amount Tabung Haji can pay will be that excess amount.
ES Shankar questions the ability of Tabung Haji to “consistently” pay dividends because he claims that this “cannot happen in a public-listed company or private limited company”. Without making any effort to find out, he presumes Tabung Haji has a peculiar calculation to pay dividend.
Is the method peculiar, complicated and hiding numbers?
If he had bothered to investigate further the investment portfolio of Tabung Haji, he would not have jump to the conclusion that LTH has been operating imprudently to just make depositors happy and fool the common folks – the Pak Ciks and Mak Ciks.
ES Shankar’s comment does not deserve a reply in a column but since he sounded as though he is conversant in accounting and attracted comments, there will be those who might believe his false claims and even assist in spreading it.
To the question, who is ES Shankar?
Whoever he is, he is an Old Fart who presumes things, draws a conclusion and makes an accusation without any ounce of responsibility and critical for the sake of being critical. Old Fart is still polite and not likely to offend him.