BAY’ AL-

TAWARRUQ
BY : NUR HASANAH BINTI ISHAR
 Literal meaning :
Minted silver, seeking silver money

DEFINITION Technical meaning :

 A transaction where one party buys some
OF BAY’ AL- goods on credit at a marked-up price and sells
the same at a lesser value for the purpose of
TAWARRUQ getting cash (i.e. the spot value of the goods).
 In other word, Tawarruq means converting an
asset into ‘wareq’ money.
 The purpose of this transaction is not to possess
of the goods, but to get a cash or liquidity.
 Certain scholars believe that the transactions
aren’t shariah compliant because the intention
of the commodity purchases is not for the
purpose of ownership.

 But some scholars who accepted this contract

as valid contract because tawarruq consists of
two legal contracts (murabahah + sales).
 ILLUSTRATION OF BAY’ AL-TAWARRUQ
1) Company A has a problem with their CASE 1
account receivable and they fail
critically short of cash to run business
Company sells the building to Ahmad
operations smoothly and approach
bank to provides them liquidity (RM1, RM 1, 000 000
000, 000) to overcome the difficulty. Ahmad
2) The bank offers the company a contract The
company
to buy a building for RM1, 000, 000 and Bank Islam
to sell it to the company in instalments
with 12% markup. RM 1, 120 000
The company buys a building from the bank
3) The company sells the building to the
third party (Ahmed) for cash at cost
price.
 Original
Final buyer
seller

PILLARS OF
TAWARRUQ
Wariq Commodity
 CONDITIONS OF TAWARRUQ
 Ownership of commodities
The seller must own the commodity before selling it to the buyer

 Commodity is specified
The seller has to explain the details of the commodity to the buyer

 Possession of commodities
The commodities which are normally used in the contract of
organized tawarruq can be transferred from place to place and this
kind of commodity is called a transferable commodity (manqulat) eg
: metals, cement and cars.
 CONDITIONS OF TAWARRUQ
 Avoiding Bay’ Al-’Inah
The majority of jurists consider that Bay’ al-’Inah sales is prohibites according
to Islamic Law. Therefore, the financial institutions must avoid buying the
commodities again from the same client. It is because financial institution
have already sold the commodities to the client by instalment payments for
more than what they normally pay to acquire the commodities. If they were
buy the commodities from the clients for less than what the client had paid,
the contract is considered as Bay’ al-’Inah.

 Details of the time of payments

Generally, the contract between the financial institution (seller) and the
client (buyer) is based on the deferred sales.
 CONDITIONS OF TAWARRUQ
 Avoiding usury
The contracting must be careful not to deal with commodities
which it is not permissible to exchange for deferment (ribawi
item)

 Delivery is immediate
The contract of tawarruq is based on deferred or instalment
payment, so the delivery must be immediate if not the contract
would then be a sale of debt-for-debt which is prohibited in
Islamic Law.
THANK YOU