Tawarruq 4y1y1

TAWARRUQ PRESENTER BY: HATTA MAWI NAZIR RAFI

CONTENT 

Definition of Tawarruq

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Polemics of Tawarruq

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Type of Tawarruq

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Modus Operandi

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Major Prohibited Element

 

Issue in Tawarruq Conclusion

DEFINITION OF TAWARRUQ  A tawarruq is an Islamic financial product which allows clients to raise money quickly and easily, in theory without breaking Muslim bans on interest.  A customer buys an easily saleable asset from an Islamic bank at a marked up price, to be paid at a later date, and quickly sells the asset to raise cash.  document offer to purchase (otp) seller n buyer.pdf  LO for Consumer Restructuring OD - 110809 - Copy.doc Participant :  Bank  Customer  Broker A - Seller/Buyer  Broker B - Seller/Buyer

POLEMICS OF TAWARRUQ OIC Fiqh Academy 1st Opinion (September 1998) • Permited tawarruq with a condition that customer does not sell the commodity to its original seller 2nd Opinion (December 2003) • Distinguish between tawarruq haqiqi (real/classical) and tawarruq munazzam or masrafi (organised). The latter is disallowed as deemed to be synthetic and similar to `inah. 3rd Opinion (April 2009) • Reinforce

it’s position on disallowing Organized Tawarruq as well as Reverse

Tawarruq since the transactions are deemed to contain element of riba.

Hanafi School’s Abu Yusuf, Shafiis’ and Hanbalis’view • Allowing tawarruq mainly arguing that the presumption that the parties intended to circumvent riba was quite remote due to its tri- partite nature Ibn Qayyim and Ibn Taimiyyah (from Hanbalis) • Disallowed tawarruq and dismissed it as a legal trick (hilah) similar to bay` al`inah Shariah Advisory Council of Bank Negara Malaysia and Securities Commission  Following the Shafi`is opinion in allowing both bay al-`inah and tawarruq.  Questioning the validity of companion’s report on nullifying bay al-`inah.  Arguing that not all hilah is permitted; only that denies the right of people or involve in falsehood (bathil) or demeaning the religion.  Based on public interest consideration (maslahah), which is to overcome the problem of liquidity shortage in the country, without resorting to conventional riba-based liquidity instruments and transactions.

Type of Tawarruq  Classical Tawarruq defined as the purchase of a commodity possessed owned by the seller for a delayed payment, whereupon the buyer resell to the commodity for cash other than the original seller in order to acquire cash.  Organized Tawarruq

is the transaction that a person (mustauriq) buys

commodity from local or international market at a deferred price. Simultaneously, he (mustauriq) will ask the financier in his own capacity or through his agent or by special agreement with mustauriq to rearrange the sale transaction usually at a lower spot price

MODUS OPERANDI CLASSICAL OF TAWARRUQ

1 1 A

3 3

B

4 4

2 2

5 5

MODUS OPERANDI ORGANISED OF TAWARRUQ 7 7 B

5 5 2 2

6 6

4 4

3 3

1 1 A

ISSUES IN TAWARRUQ  Issues pertaining to commodities  Issues pertaining to possession & delivery  Issues pertaining to Bay’ al- ’Inah  Issues pertaining to agency