Bay' al tawarruq

definition
Infinitive (masdar) of the verb tawarraqa (to eat leaves); can be used as tawarruq al haywan
(that is, the animal ate the leaves).
Wariq - Dirhams minted from silver.
The word is used by early generations to seek silver money, while now the word is used to
seek paper money.

legality
Quran - Allah s.w.t had generally legalized
sales contract
Contract concluded on the basis of mutual
consent

conditions
Tawarruq Al Fardh
Ownership of the commodities
Commodity is specified
Possession of commodities
Avoiding ‘inah sales
Details of the time of payments
Avoiding usury
Delivery is immediate
Tawarruq Al-Munazzam
Defined by OIC Fiqh Academy - purchase of
commodity possessed and owned by the
seller for a delayed payment, whereupon the
buyer will resell the commodity for cash to
other than the original seller in order to
acquire cash.
Original seller does not play any role in the
resale of the commodity and has no relation
with the final buyer.
The cash will be taken by the mutawarriq
directly from the final buyer without the seller
being involved.
The original seller has no information and
relation with the final buyer.
Accepted by majority of jurists (Hanafi, Maliki
and Hanbali) and Majma’al Fiqh al Islami.
The process handled by the seller by which
cash is acquired for the mutawarriq (seeker
of cash).
The original seller acts as an intermediary by
selling the commodity for cash on behalf of
the mutawarriq.
The mutawarriq receives the cash from the
original seller, to whom he owes the
delayed price.
The original seller might agree beforehand
with the final buyer that he will purchase the
commodity.
Rejected by the majority of jurists. But
accepted to be practiced by current fiqh
scholars and IFI Shariah Advisory Council.

Tawarruq Al Masrafi

Process where the IFI formally organises the sale of

a commodity (other than gold/silver) between an
international commodity market and the mutawarriq,
Types for a delayed payment on a binding condition that
may be stipulated in the contract or to the custom
and norms guiding such a commodity.

supporter rejector
Tawarruq is a type of sales Repeated sales in tawarruq is to procure immediate
cash
Mutual consent between the parties

VS
Leads to the same result as Riba'
No harmful effect
Tawarruq transaction same with Inah which was
No elements of riba' prohibited by many scholars

Tawarruq as to avoid usury without Not a replacement for currency-based financing

Hilah
commodity exchange may either be a mere document
thas has been subjected tu Murabahah transaction

Example Applications

Personal financing

Asset financing

Cash line Facility

BNM Islamic Accepted Bills (IAB)

Islamic Private Debt Securities (IPDS)