Takaruz Account Based On Solidarity For Participation Banks
The Solidarity Based Takaruz Account (YDTH), which will be the first in the world if implemented, is designed with the dual pool/funds structure
The global uneven income distribution causes many social injustices. In the Islamic economic model, which prohibits the collection of wealth in certain hands, the issue of infaq is the leading application for the solution of this issue (Al-Hashr 59/7). In the Islamic economic model based on solidarity and competition, the fact that zakat is obligatory and the enthusiastic encouragement of charity cause a profound resource transfer from the rich to the low-income (Sancar, 2021: 10).
To increase the effectiveness of the social contribution that emerged as a result of this money transfer, the practice of lending with the qard hassan (benevolent loan) method, as well as zakat and alms, has been used from history to the present day (Sancar, 2021: 10). Qard (loan) is the giving of a good which is depleted by being used, from one side to the other, to repay its precedent later (Religious Concepts Dictionary, 2010: 361).As in the verse “Who will lend to Allah a benevolent loan which Allah will multiply many times over? It is Allah 'alone' who decreases and increases 'wealth'. And to Him you will 'all' be returned.” and from many other verses, it can be understood that a significant spiritual gain is promised to those who give qard al hasan (al-Baqara 2/245). Again; “On the night of Mi'raj, I saw "charity is rewardedten times, where as debt is met with eighteen times " was written on the heaven's door. I asked Angel Gabriel why lending is superior to charity to which Angel Gabriel replied, 'because the beggar begs even when he has what he needs. However, a person who asks for a loan only borrows because he is in need." is stated in the hadith and it is clearly understood that qard hassan is much more beneficial/efficient than giving alms. Therefore, the qard hassan transaction not only benefits the borrower and the society but also allows the lender to gain great spiritual benefits. Spiritual gains make this financial action, which is not very rational for "homo economicus", a sensible choice for the Islamic economic individual/homo Islamicus. (Sancar, 2021: 76-77). In terms of economics, qard hassan is the alternative income, which is likely to be obtained by operating the capital given during the qard (loan) period, donated by the lender to the needy for the sake of Allah. Because of this sacrifice, this transaction has been called “benevolent loan”. With this practice, it has been possible to increase the efficiency of the money given as a loan by reusing it again and again. In addition, it paves the way for the money to be used as a micro-entrepreneur loan or consumer loan, which can be instrumental in earning his sustenance, rather than aid that the person in need consumes at once, such as charity (Sancar, 2021: 10).
There are situations where charity should also be used in the fight against poverty, such as the incapacitated masses and meeting urgent needs. However, today, it is seen that qard hassen is used with a capacity far below its potential. In this context, today, there are few applications of qard hassen in both participation banks and microfinance applications, but they are quite insufficient. It is seen that a few Islamic microfinance institutions such as Akhuwat or IKSAR in the world and our country provide microcredit based entirely on qard hassan. However, since qard hassan is not a direct income-generating financial product, the number of these institutions has remained relatively limited. A concept like qard hassen, which can contribute positively to today's uneven income distribution and poverty problems, needs to be presented with an appropriate financial set-up so that large masses can benefit from it. In this direction, the proposal of the "Cooperation Based Takaruz Account" (YDTH), which will be created in addition to the three existing fund collection methods in participation banks, can pave the way for the widespread use of the qard hassan application.
With YDTH, it is aimed to create a social finance account in which infaq, qard hassan and takaruz (mutual loans) applications are used together. With the account, a fund collection and disbursement account is targeted that can:
- generate income and therefore be sustainable for the bank,
- provide microcredit to poor entrepreneurs without the difference of inflation, thus minimising the burden on their shoulders,
- deposit money as qard hassan for regular bank customers (who can give zakat), in a way that protects the inflation difference (to protect their purchasing power) and can borrow money as qard hassan with the inflation difference when they need it,
- Develop the technical, administrative and economic perspectives of poor entrepreneurs positively with versatile training and turn them into active elements in the society's fight against poverty,
YDTH, which will be the first in the world if implemented, is designed as a structure with two pools/funds. In addition to mutual cooperation (taawun) and mutual loan (takaruz) pools/funds; microcredit fund, investment fund, takaful fund, grant fund, education, coaching and patronage, management and supervision/reporting units will also accompany.
In the model, takaruz fund is the unit in which bank customers mutually give qard while maintaining the value of their money. On the other hand, the taawun fund constitutes the unit where donations such as charity and zakat are collected, and microcredit and related services are given.
Funds of individuals who want to make deposits will be accepted into the takaruz fund, which constitutes the fundraising part of YDTH. While 70% of the money to be accumulated in the fund will be used for the mutual loan, 20% of the fund will be transferred to the investment fund and 10% to the microcredit fund as qard hassan. The fact that the money invested in the fund is indexed to inflation will protect the purchasing power of the money, thus guaranteeing the mutual rights of the beneficiary and the lender. Since this fund has the potential to be the cheapest financing source, it will not be surprising that the demand for financing from the fund is higher than the supply. In this direction, prioritisation will be made among those who request credit from the fund by using a scoring system. Collateral and guarantor will be requested from the users of qard hassan. Takaful/microtakaful (3-4%) will be used against possible sunk creditsin both takaruz and taawun funds. The income obtained by operating the money coming to the investment fund will constitute the income of the participation bank. The fund, which will be evaluated in highly liquid instruments, will be activated for customers who want to withdraw money from the takaruz fund in case there is not enough cash in the takaruz fund. If this fund is insufficient either, than the demand will be met by borrowing qard hassan from the takaful fund to the takaruz fund. In addition, an article will be added to the text of the agreement created with YDTH customers that the withdrawal of their money in the takaruz pool can be extended to a 3-month maturity in extraordinary situations. The 10% tranche extended to the microcredit fund will constitute the primary source of microcredits to be provided to poor entrepreneurs. Even though the tekaruz fund is based on the principle of cooperation among the society, such as the golden day or the ROSCA system, it contains some differences. First of all, in the ROSCA system, fundamentally the logic iswhat you get at the end of the day is what you give.. In the takaruz fund, on the other hand, 70% of the fund is made available to customers, and some of it goes beyond the classical takaruz logic and is made available to the poor for charity purposes. In addition, potentially individuals who deposit money into the fund have the option of withdrawing less or no qard at all from the fund that they are entitled to. Microcredits for poor entrepreneurs and expenses for training to be provided will be covered from the taawunfund. The income items of the fund consist of charity/donation, zakat (which will not be used as qard hassan) and loans for microcredit from the takaruz fund. The individual model will be followed in the microcredit fund, where collateral and guarantors will be requested from the microcredit users. The aim is never to use the collateral and guarantor, if possible, but to prevent malicious approaches. Loans will be short-term (up to 1 year), starting in small amounts and increasing in volume as debt repayments are successfully completed. Microcredit transactions will be recorded as they occur, and a scoring system with the institution's own credit history will be created. The cost of service, microtakaful premium payments, inflation differences of the resources from the takaruz fund and bad loans which can not be paid back by themicrotakaful fund will be covered by the grant fund. In addition, 5% mandatory savings will be requested for the habit of saving, and the accumulated money will be deducted from the last instalment payment of the loan. The grant fund will also undertake the urgent needs of poor entrepreneurs that may arise during the training related to the work they want to do. The scoring system to determine those who will use qard hassan from the takaruz fund will be calculated on a scale of 100. On the scale, the scores of the customers are determined according to parameters such as; "duration of money held in the fund", “(volume of money in the fund x duration)/(debt demanded x duration)”, "date of the last barrowing/period of borrowing", "whether there is any disruption in the repayment of the previously received debt", "ratio of the borrowed debt to the total money in the fund". Participation banks can implement a new fund collection and fund disbursement account with the proposal of the Solidarity Based Takaruz Account (YDTH). Thus, for the first time globally, a double-pool fundraising and disbursement account type based entirely on qard hassan will be put into service within the participation banks. While the customers on the takaruz fund side will perform qardamong themselves, microcredit will be provided to the poor entrepreneurs where they can reach toan economically self-sufficient level, on the taawunfund side. This type of account does not offer an alternative to existing current accounts but provides an option that can attract customer groups to participation banking that cannot be reached by existingparticipation accounts . Just as participation accounts are not an alternative but a complement to current private accounts, it will be possible to reach a broad customer base that has not been achieved until today, with YDTH. With this account type, a strong trump card will be gained against the criticisms that participation banking is similar to the conventional system. . With this account, the mass, which we can be defined as homo Islamicus, will be able to gain both material and spiritual gains, and at the same time, an instrument that generates income for participation banks will be brought to participation banking system.
Mustafa A. Sancar
TKBB Advisory Board Specialist