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BAY' AL-TAWARRUQ

VIEWS: 78 PAGES: 12

									MAHYUDDIN KHALID      emkay@salam.uitm.edu.my
                              CONTENT
                 DEFINITION
 DEFINITION
                 EVIDENCES
  EVIDENCES      PILLARS OF BAY’ AL-TAWARRUQ
                 TYPES OF BAY’ AL-TAWARRUQ
    PILLARS
                 CONDITIONS OF BAY’ AL-TAWARRUQ
        TYPES
                 MODERN APPLICATION

CONDITIONS



APPLICATION




    2
                                      DEFINITION
                 Literal:
 DEFINITION
                    Minted silver; seeking silver money
  EVIDENCES      Technical:
                    Buying a commodity with deferred payment and
    PILLARS          selling it to a person other than the buyer for a lower
                     price with immediate payment.
        TYPES       Purchasing a commodity on credit and selling it to a
                     person other than the initial seller for a lower price on
CONDITIONS
                     cash
                 Tawarruq is a term commonly used by Hanbali
APPLICATION       school of law
                 Other school mention the form of tawarruq under
                  the rubric or bay’ al-ajal and bay’ al-’inah
    3
                                    EVIDENCES
                 Qiyas:
 DEFINITION
                   Permissible based on analogy, the contract is
  EVIDENCES
                    similar to other sale and purchase contracts i.e. the
                    transfer of ownership is taken place
    PILLARS



        TYPES



CONDITIONS



APPLICATION




    4
                      PILLARS OF BAY’ AL-TAWARRUQ
                 Original seller
 DEFINITION
                 Final buyer
  EVIDENCES      Mutawarriq
                 Wariq
    PILLARS
                 Commodity
        TYPES



CONDITIONS



APPLICATION




    5
                FLOWS OF BAY’ AL-TAWARRUQ

 DEFINITION
                                         CUSTOMER
                                        (Mutawarriq)
  EVIDENCES

                                    1     3       5     6
    PILLARS



        TYPES                              BANK

CONDITIONS
                                    2         4

APPLICATION
                  Original seller                 Final buyer



    6
                           TYPES OF AL-TAWARRUQ
                TAWARRUQ AL-FARDH
 DEFINITION
                • Define by OIC Fiqh Academy as the purchase of commodity possessed
                  and owned by the seller for a delayed payment, whereupon the buyer
  EVIDENCES       will resell the commodity for cash to other than the original seller in
                  order to acquire cash.

    PILLARS     TAWARRUQ AL-MUNAZZAM

                • The process handle by the saller by which cash is acquired for the
        TYPES     mutawarriq (seeker of cash). He does so by selling a commodity to him
                  for a delayed payment, he then sells it on behalf for cash by taking the
                  payment from the buyer and handling it over to themutawarriq.
CONDITIONS
                TAWARRUQ AL-MASRAFI

APPLICATION     • Process where the IFI formally organises the sale of a commodity (other
                  than gold/silver) between an international commodity market and the
                  mutawarriq, 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

    7
                                      TYPES OF TAWARRUQ
                            TAWARRUQ                                        TAWARRUQ
 DEFINITION                   AL-FARDI                                   AL-MUNAZZAM

  EVIDENCES     Original seller does not play any role in the   The original seller act as an intermediary by
                resale of the commodity and has no relation     selling the commodity for cash on behalf if
                             with the final buyer                             the mutawarriq
    PILLARS


                 The cash will be taken by the mutawarriq        The mutawarriq receives the cash from the
        TYPES    directly from the final buyer without the      original seller, to whom he owes the delayed
                            seller being involved                                    price

CONDITIONS
                                                                 The original seller might agree beforehand
                The original seller has not information and     with the final buyer that he will purchase the
APPLICATION            relation with the final buyer                             commodity



                 Accepted by majority of jurists (Hanafi,        Rejected by majority of jurist. But accepted
                Maliki and Hanbali) and Majma’ al Fiqh al        to be practice by current fiqh scholars and
                                Islami                                  IFI Shariah Advisory Council
    8
                   CONDITIONS OF BAY’ AL-TAWARRUQ
                Ownership of the commodities.
 DEFINITION
                 • The seller must own the commodity before selling it to the buyer.

  EVIDENCES
                Commodity is specified.
                 • The seller has to explain the details of the commodity to the buyer.

    PILLARS     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
        TYPES
                   transferable commodity (manqulat). Examples include metals, cement, rice and
                   cars.
CONDITIONS      Avoiding ‘inah sales.
                 • As has been mentioned, the majority of jurists consider that ‘inah sales are
                   prohibited according to Islamic law. Therefore, financial institutions avoid
APPLICATION
                   buying the commodities again from the client because they have already sold
                   them to the client by installment payments for more than what they normally pay
                   to acquire the commodities. Consequently, if they were to buy the commodities
                   from the clients for less than what the client had paid, the contract would be an
                   ‘inah sale.
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                   CONDITIONS OF BAY’ AL-TAWARRUQ

 DEFINITION
                 Details of the time of payments.
                 • The contract between the financial institution as the seller and the
                   client as the buyer is based on the contract of installment sales or
  EVIDENCES
                   deferred sales in general and one of the conditions of the both
                   contracts is that it must explain in detail the manner of payment.
    PILLARS
                 Avoiding usury
         TYPES
                 • The contracting parties have to be careful not to deal with
                   commodities, which it is not permissible to exchange for deferment,
                   otherwise, they would be involved in the usury by way of
CONDITIONS         deferment (riba al-nasi’a).
                 Delivery is immediate.
APPLICATION
                 • As indicated previously, the contract of organized tawarruq is based
                   on deferred or installment payment so if the delivery is deferred, the
                   contract would then be a sale of debt-for-debt and this kind of sale is
                   prohibited in Islamic law.
    10
                                    APPLICATION
                  Tawarruq or commodity murabahah as one of the
 DEFINITION
                   popularly used principles to structure various
                   Islamic financial instruments. Below list of some
  EVIDENCES
                   common Islamic financial instruments that are
    PILLARS
                   structured based on tawarruq:
                      Commodity murabahah deposit facility and placement
         TYPES        Personal financing
                      Asset financing
CONDITIONS            Cash line facility
                      BNM Islamic Accepted Bills (IAB)
APPLICATION
                      Islamic Private Debt Securities (IPDS)



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                 END OF CHAPTER

 DEFINITION



  EVIDENCES



    PILLARS



         TYPES        
CONDITIONS



APPLICATION




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