Bay' al-Tawarruq
Upcoming SlideShare
Loading in...5
×

Like this? Share it with your network

Share
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
No Downloads

Views

Total Views
7,108
On Slideshare
7,107
From Embeds
1
Number of Embeds
1

Actions

Shares
Downloads
452
Comments
0
Likes
4

Embeds 1

https://twitter.com 1

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. MAHYUDDIN KHALID  emkay@salam.uitm.edu.my
  • 2. CONTENT  DEFINITION DEFINITION  EVIDENCES EVIDENCES  PILLARS OF BAY’ AL-TAWARRUQ  TYPES OF BAY’ AL-TAWARRUQ PILLARS  CONDITIONS OF BAY’ AL-TAWARRUQ TYPES  MODERN APPLICATIONCONDITIONSAPPLICATION 2
  • 3. 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 onCONDITIONS cash  Tawarruq is a term commonly used by HanbaliAPPLICATION school of law  Other school mention the form of tawarruq under the rubric or bay’ al-ajal and bay’ al-’inah 3
  • 4. 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 TYPESCONDITIONSAPPLICATION 4
  • 5. PILLARS OF BAY’ AL-TAWARRUQ  Original seller DEFINITION  Final buyer EVIDENCES  Mutawarriq  Wariq PILLARS  Commodity TYPESCONDITIONSAPPLICATION 5
  • 6. FLOWS OF BAY’ AL-TAWARRUQ DEFINITION CUSTOMER (Mutawarriq) EVIDENCES 1 3 5 6 PILLARS TYPES BANKCONDITIONS 2 4APPLICATION Original seller Final buyer 6
  • 7. 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-MASRAFIAPPLICATION • 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
  • 8. 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 priceCONDITIONS The original seller might agree beforehand The original seller has not information and with the final buyer that he will purchase theAPPLICATION 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
  • 9. 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 avoidAPPLICATION 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. 9
  • 10. 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 ofCONDITIONS 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
  • 11. 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 financingCONDITIONS  Cash line facility  BNM Islamic Accepted Bills (IAB)APPLICATION  Islamic Private Debt Securities (IPDS) 11
  • 12. END OF CHAPTER DEFINITION EVIDENCES PILLARS TYPES CONDITIONSAPPLICATION 12