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in Home Financing
Derived from the word al-warq or al-waraqa
minted dirham, or
silver that issued to serve as a medium of
Surah Al-Kahfi : 19
Allah says in the Quran Now send one of you,
with this, your silver coin unto the city

The purchasing of a commodity on credit by the
mutawarriq (seeker of cash) and selling it to a
person other than the initial seller (3rd party) for
a lower price on cash
Tawarruq is a sale contract, whereby a buyer
buys an asset from a seller on deferred payment
and subsequently sells the assets to the third
party for cash, with a price lesser than the
deferred price.
Classical Tawarruq
The purchase of a commodity possessed owned by the
seller for a delayed payment, whereupon the buyer
resell the commodity for cash to other
than the original seller in order to acquire cash
Al-Tawarruq at-Fardi
Organized Tawarruq
The transaction that a person buys commodity from
local or international market at a deferred price.
Simultaneously, he will ask the financier in his own
capacity or through his agent or by special agreement
with seller to rearrange the sale transaction usually at a
lower spot price.
Al-Tawarruq at-Fardi
An Nisa (4) : 29
O you who have believed, do not consume one another's
wealth unjustly but only [in lawful] business by mutual consent.
And do not kill yourselves [or one another]. Indeed, Allah is to
you ever Merciful
A farmer came to Prophet (saw) and gave him dates which
were in high quality. The Prophet asked him whether all dates
from Khaybar were in good quality. The farmer then answered
in negative and said that he need to exchange from 2 portions
of lower quality dates to get a portion which is in better
quality. He sometimes even need to exchange with 3:1 portion.
The Prophet prohibited him to do such transaction. Instead, he
was advised to sell all those lower quality dates to gain cash
(silver back then) and use it to buy a good quality dates.
Issues arise
1. The existence of the commodity or subject
The subject matter exists by way of legal

In the forms of
Commodity Contract
Sale and buy of
transactions take place
within the banking
internal system.
Usually by Treasury Department of the Bank
Managed administratively by the Bank
The reason transaction managed by the internal
treasury of the Bank is because:

It is supposed to take place at Bursa Malaysia, to
comply with the financing process of trading that
requires a trading platform such as Bursa Malaysia.

The Bank then follows the trading process flow of
Bursa Malaysia in its internal process by having the
commodity, commodity supplier, commodity buyer,
2. The Ownership of The
The commodity which is normally used in the
contract can be transferred from place to
place (transferable commodity).

When Bank manages the transaction, the
commodity will not be in the possession of
the Customer and the Bank.
The commodity will be in the
possession of the third party when
the transaction is done.

It is because the commodity is
involving the crude oil, metal etc
which are not easy to transfer
from one party to another.

3. The existence of Contract
Has the underlying contracts.
Cannot stand on its own without underlying
Underlying Contracts under
Tawarruq Home Financing

Tawarruq Main
Terms of Financing
and Process Flow
Terms of
underlying asset.
Eg: how the sale
and purchase of
the commodity is
Underlying Contracts under
Tawarruq Home Financing
Application Form
MOA Acceptance
signed by
Tawarruq Facility
Tawarruq Agency
Agreement (Wakalah)
Security Documents