TAWARRUQ

HOME
FINANCING
BY : NUR AMEERAH
&
RAJA FARAH
Outline

1. The name and Description of the product

2. The Shariah Concept or Contract used in the
product
3. The modus operandi of the product
4. The features of the product
5. The rights and obligations of the customers
and the bank
1. Name and Description of
the product
• Name of the product:
Tawarruq home financing. This financing facility is to assist our
customers in financing the purchase of a residential property. It is an
alternative to BBA Home financing.
• Description of the product:
It is an arrangement between three or more parties for the purpose of
obtaining cash through sale mechanism involving commodities. In
tawarruq home financing, there consists of two sale and purchase
contracts:
1. The first involves the sale of a commodity by the bank to the
customer at a ( cost + profit) to a purchaser, payable on a deferred
basis by purchaser.
2. Subsequently, the purchaser of the first sale will sell( via sales
agent) the same asset to a third party ( commodity buyer) on a
cash and spot basis.
• Description of the product:
It is an arrangement between three or more
parties for the purpose of obtaining cash through
sale mechanism involving commodities:
1. In tawarruq home financing, there consists of
two sale and purchase contracts:

The first involves the sale of a commodity by the

bank to the customer at a ( cost + profit) to a
purchaser, payable on a deferred basis by
purchaser.

Subsequently, the purchaser of the first sale will

sell( via sales agent) the same asset to a third
party ( commodity buyer) on a cash and spot
basis.
2. The financing amount arises from the sales of proceeds to the
customer.
3. A financial obligation is created via sale of commodity ie: bank
sell commodity to customer for a deferred sales price.
4. The Bank’s Sale Price is derived based on the Ceiling Profit Rate
(CPR), which is fixed throughout the tenure.
5. However, the Effective Profit Rate (EPR) is calculated on a
variable rate basis and the facility is secured against the property to
be financed.
6. Security such as guarantor, etc may be requested depending on
the credit assessment
 In the Tawarruq arrangement (it contains 3 Islamic
contracts i.e. Wakalah, Murabahah and Musawamah):

1. Musawamah - The bank purchase commodity from

2. The Shariah commodity banker. Bank pays the purchase price for
the commodity, the ownership transfer to the bank
Concept or upon payment of the purchase price.
Contract Used
2. Murabahah - The bank sell the commodity to the
customer at cost + profit payable on deferred basis.

3. Wakalah - The bank acts as an agent to buy and

dispose the commodity to commodity buyer. The
banks as an agent remits the commodity sales
proceeds to the customer.
2. The Shariah 4. “Commodity”- means any commodity acceptable to the
Bank and is Shariah compliance e.g. palm oil, plastic resin,
Concept or rubber, cocoa beans, soybeans, timber and metal
(excluding gold and silver) traded at any commodity
Contract Used trading platform approved by the Bank.
3. Modus Operandi
 7. Pays financing on deferred basis

2. Request financing from bank

4. Sells commodity to customer

Customer/ Bank
Buyer

1.Executes SPA
for a house

5. Sells
commodity on 3. Purchase
customer’s behalf commodity,

6. Proceeds of the
Developer/ sale is used to settle Commodity Commodity
Seller payment of property Buyer Seller
on customer’s behalf