DECISION NO: 2 Wakalah Investment

DECISION OF TKBB ADVISORY BOARD

DECISION DATE : 30.06.2018
DECISION NO : 2
DECISION SUBJECT : Wakalah Investment

REFERENCE

REQUEST SUBJECT : Letter dated 24/05/2018 and numbered 43890421-010.03-E.6999
REQUESTOR : BDDK

Draft regulation on making changes in the regulation on principles and procedures regarding the acceptance and withdrawal of deposits and participation funds and the deposits, participation funds, custody, and receivables that have expired (Annex-1)

DECISION:

BDDK's attached regulation draft sent to our board via TKBB was discussed and evaluated.

  1. The majority of the members agreed that it would be more appropriate to replace the expression "expected profit" in Article 3 (1) b with "estimated profit" and the same change be applied to the whole draft.

Sharia Basis:

The phrase "expected profit" connotates a fixed income such as interest.

  1. It was also agreed that it would be more appropriate to remove the phrase "or the amount" at the end of the same paragraph.

Sharia Basis:

The word "amount" connotates a fixed income.

  1. In Article 6 (2), it would be appropriate to add the phrase "made on real projects" before the phrase "agency contract" in the sentence "participation accounts can be opened based on a profit & loss partnership agreement or an agency contractto be concluded with legal person customers".

Sharia Basis:

It would lead to a fixed income, which violates the participation banking principles and standards if wakalah investment were not made on real projects.

  1. As specified in Article 6 (2) of the draft regulation, "Funds from public/private institutions and organisations, funds and legal person customers may be accepted for participation accounts opened based on the wakalah investment agreement. The minimum amount that can be deposited into such accounts is determined with the opinion of Participation Banks Association of Turkey...", it is also considered that it would be appropriate to add a statement to the legislation that would ensure that the maximum fund that a participation bank can transact with a wakalah investment does not exceed a certain percentage of the bank's mudarabah-based profit & loss participation accounts.

Sharia Basis:

Such a limitation would be appropriate to ensure that wakalah investment does not replace the funds transacted through mudarabah and participation accounts, which are the backbone of participation banking, do not disappear to a large extent. The one/third rate, based on international participation banking standards, may be adopted here.

  1. It is also agreed that it would be more appropriate to replace the phrases "proxy" in the draft regulation with "wakalah investments".

Sharia Basis:

The concept of "wakalah investment" defines the process in the draft regulation more clearly.

RESULT:

It has been decided that the "draft regulation on making changes in the regulation on principles and procedures regarding the acceptance and withdrawal of deposits and participation funds and the deposits, participation funds, custody and receivables that have expired (Annex-1)" sent to our Board comply with the participation banking principles and standards under the considerations mentioned above.

Allah knows the best.