🌙Takadao Shariah Board Meeting Report 6

Date: 7 January 2024 / 14:00 PM KSA / GMEET

ATTENDEES

Record of Attendance: Reza, Hamid, Akram, Morrad, Sharene, Leila, Dr Hany, Mufti Billal Omarjee

AGENDA

- Takaful structure

- Tokenisation

Meeting Summary

During the meeting, participants exchanged greetings and introductions. Mufti Billal Omarjee discussed his background and expertise, mentioning his involvement with various organizations and projects in the DeFi space. The Takasure business model was discussed, including concerns about capital redistribution in the Wakalah-Mudharabah model. The issue of surplus calculation and distribution was explored, with Hany Helmy explaining the flexibility in dealing with surplus and the possibility of redistributing it back to the insured. Concerns were raised about the ownership and value of the token, as well as the representation of the Takaful Fund. The participants proposed limiting voting rights to staked participants with live insurance contracts. In case of liquidation, the surplus would be redistributed and the initial amount of the fund would go back to the participants. The creation of multiple funds and the use of technology for fund management were discussed. The existence of Tabarru' Muqayyid and its basis on various principles were confirmed.

1. Introduction

• Introduction and background information about Dr Hany and Mufti Billal.

2. Takasure Business Model

• Dr Hany Helmy mentions the use of AAOIFI Shariah standard number 26 for Takasure and the need for a clear standard.

• Mufti Billal raises a concern about the potential problem with redistributing capital in the Wakalah-Mudharabah model.

• The concern is raised about the issue of capital redistribution if the AAOIFI standard is implemented. The problem is that the capital must be given away to another charity pot and cannot be re-given to the investors.

• Dr Hany Helmy explains that all the premiums paid by participants are accepted as a donation by the Takaful Fund, and any surplus left can be redistributed back based on various methods according to the standard 26.

• Dr Hany Helmy further explains the flexibility in dealing with surplus and the distribution is not a promise but a consequence of the behavior of the fund.

• Sharene Lee explains the option for token holders to cash out their tokens when there is a surplus, and the distribution of surplus depends on the availability of surplus.

3. Surplus Calculation and Distribution

• The surplus calculation is an annual practice in Takaful companies worldwide.

• In some jurisdictions, the Takaful operator is responsible for distributing the surplus based on Shariah Board guidance.

• The surplus can be distributed with a certain formula or kept in the fund to make it bigger and better.

• The discussion explores different methods of redeeming tokens based on surplus calculation, either on-demand or on an annual basis.

• The concept of surplus, ownership, and distribution is further discussed, including the conditions for policy expiry and the ability to sell tokens after policy expiry.

4. Discussion on the nature of tabarru' and tokenization

• Sharene Lee expressed concern about the ownership of the token and how it could affect the tabarru concept.

• Dr Hany Helmy explained that the token is based on a Shariah contract, which involves receiving something in return for a donation.

• Mufti Billal Omarjee raised concerns about justifying the ownership of the token and how it relates to the overall structure.

• Mufti Billal Omarjee discussed the value and rights attached to the token, including voting rights and potential value in the DeFi space.

• Participants expressed concerns that if the Taka token is perceived as valuable, people might disregard the tabarru' aspect of it.

5. Discussion on representation of the Takaful Fund

• The participants proposed that the participants should have voting rights to decide on the distribution of returns from the fund's investments.

• The participants discussed that the fund would carry on and there would not be any issues with capital.

6. Discussion on voting rights attached to the Taka token

• The participants clarified that the voting rights attached to the Taka token are only on the Takaful Fund and not on the entire ecosystem.

• The participants proposed the idea of limiting voting rights to staked participants with live insurance contracts to prevent people from buying the token just for the sake of voting rights.

7. Liquidation of the Fund

• In case of liquidation, the surplus is redistributed, and the initial amount of the fund goes back to the participants.

• The capital amount of the fund is eaten by claims, expenses, and investment returns. If there is anything left, it can be distributed proportionally.

• If the fund cannot be given back to participants, it can be sent to charity.

8. Creation of Multiple Funds

• Multiple funds can be created, such as funds for teachers, firemen, and kids. They can be managed collectively or separately, with a treasury management system handling investments.

• The use of technology is mentioned as a possibility for managing the fund.

9. Tabarru' Muqayyid

• Dr Hany Helmy explains that the standard related to Tabarru' Muqayyid is based on research and papers from Maliki scholars.

• The participants confirm the existence of Tabarru' Muqayyid and discuss its basis on Maliki Madhab, and other principles.