This document discusses the concept of al-Tawarruq, an Islamic financing structure. It begins with an overview of Bank Islam Malaysia and its Shariah governance bodies. It then defines al-Tawarruq as the buying of a commodity on deferred payment and selling it for cash to a third party. The document outlines arguments for both prohibiting and permitting al-Tawarruq, and discusses issues around its operationalization. It concludes with trends showing growing use of al-Tawarruq products in Malaysian Islamic banks.

1. AL-TAWARRUQ
Presented by:
 Sananee Kuna @ Rosnani Muhammad
ZP01455
 Zihan Mohamed Jailabdeen ZP01454
 Wan Mohammad Saupee bin Wan Yusoff
(ZP01467)

2. CONTENT
CORPORAT PROFILE
BOARD OF DIRECTORS
SHARIAH SUPERVISORY COUNCIL
PRODUCTS AND SERVICES
PROPERTY FINANCING-I (TAWARRUQ)
DEFINITION
PARTICIPANT IN TAWARRUQ
TYPES OF TAWARRUQ
ARGUMENTS ON PROHIBITED
ARGUMENT ON PERMISSIBILITY
ISSUES ON TAWARRUQ
TAWARRUQ & BAY AL-’INAH
INDUSTRY TRENDS

3. CORPORAT PROFILE
Bank Islam, established in 1983, is Malaysia’s
maiden Shariah-based institution.
First Islamic bank- Islamic Bank Act 1983
vision to be “A Global Leader in Islamic Banking”.
Bank Islam parades a comprehensive list of more
than 70 innovative and sophisticated Islamic
banking products and services, comparable to
those offered by its conventional counterparts.

4. CORPORAT PROFILE (cont.)
Introduction of Interest Free Banking & Islamic
Banking Window.
Arrival of new competitor, Bank Muamalat
Establishment of Islamic Banking Subsidiary
for conventional bank.
Establishment of Islamic Banking Subsidiary
for conventional bank.

5. BOARD OF DIRECTORS
Chairman of Bank Islam Malaysia Berhad
Dato’ Zamani Abdul Ghani
Managing Director, Bank Islam Malaysia
Berhad
Dato’ Sri Zukri Samat
Non-Independent Non-Executive Director
Abdullah Abdulrahman Abdullah Sharafi
Dato’ Paduka Ismee Ismail
Johan Abdullah

6. SHARIAH SUPERVISORY
COUNCIL
Ustaz Dr. Ahmad Shahbari @ Sobri Salamon
Chairman
Executive Chairman
Ustaz Mohd Bakir Haji Mansor
Member
Distinguished Shariah Research Fellow
Sheikh Dr. Ahmed Mohieldin Ahmed
Member
Head of Research and Development Department

7. PRODUCTS AND SERVICES
4.
Wealth
Management
&
Bancatakaful
3.
Financing
Products
2. Bank
Islam
Card-i
1.
Deposit
product

8. PROPERTY FINANCING-I (TAWARRUQ)
1. Baiti Home Financing
This product is a financing facility provided by
the Bank to assist customers to finance the
purchase of a residential property.
2. Wahdah Home Refinancing
This product is a financing facility provided by
the Bank to assist customers to refinance a
completed residential property

9. FINANCING BY CONTRACT
Bai Bitaman Ajil, 50.1%
Ijarah, 2.0%
Ijarah Muntahiah
Bit Tamleek,
0.2%
Mudharabah
0.1%
Murabahah
9%
At- Tawarruq, 26.7%
Bai Al-Inah, 10.2%
Istisna', 1.7%,
0%
0%
Sales 2011 (RM14,563,795)

10. FINANCING BY CONTRACT
Bai Bitaman Ajil
50.6%
Ijarah
2.7%
Ijarah Muntahiah
Bit Tamleek
0.1%
Mudharabah
0.1%
Murabahah
9.1%
At- Tawarruq
20.9%
Bai Al-Inah
13.6%
Istisna'
2.9%
Sales 2010 (RM12,271,585)

11. Al - Tawarruq

12. DEFINITION
Literal Meaning
- root word of tawarraqa
wariq
- Dirham that is manufactured from Silver
- Any silver that was issued to be as a medium of
exchange
Technical Meaning
- buying a commodity on differed payment basis and
selling it on cash basis to a person other than the buyer

13. DEFINITION(cont.)
Sale for cash of item purchased by instalment
One party buys as asset from a vendor for
deferred payment and then sells is to a third
party for cash at a price that is lower than the
deferred price
IFI- Customer purchases an item from bank on
a deferred payment plan, then sells it
immediately to third party for obtain cash

14. PARTICIPANT IN TAWARRUQ
The Broker A or Seller A
Islamic financial Institution or the intermediate person
The Client or cash seeker
The Broker B or Seller B
TYPES OF TAWARRUQ
Classical Tararruq The Client or cash seeker
Organized Tararruq (Tawarruq Al-Munazzam)

15. Classical Tawarruq

16. Organised Tawarruq

17. ARGUMENTS ON PROHIBITED
Imam Ahmad ibn Hanbal – Prohibited (Haram)
Imam Muhammad bin Hasan Al-Shaibani
(Hanafee) – Discourage (Makruh)
Imam ibn Taimiyyah – exceptional dealing
(permitted only in the case of necessity
(Dharurat)

18. ARGUMENTS ON PROHIBITED (cont.)
“Ali (r.a) has stated: Ibn Musa has said that this is
what we have been told by Hushaim. The prophet
PBUH has said ‘A time is certainly coming to
mankind when people will bite each other and a
rich man will hold fast what he has in his
possession (his property), though he was not
commanded for that. Allah the almighty said:
(and do not forget liberality between yourself)
and those who are forced will contract sale while
the prophet PBUH forbade forced contract, one
which involves some uncertainty and the sale of
fruit before it is ripe’”

19. ARGUMENT ON PERMISSIBILITY
“Allah has permitted sale and prohibited riba”
(Al-Qur’an – 2:275)
Hanbali and many other scholars permitted Al-Tawarruq
Dr.Rafik Yunus al-misri
- If all the three parties involved have known that the main
objective of the customer fro entering the tawarruq transaction
is to obtain the cash money, then all of them are sinful.
- if the two of the parties have known that the seller has used
the transaction for get the cash, both of them are sinful.
However, if they do not know the real intention of the
seller, then they are not sinful.
- A person is allowed to do tawarruq in the case of necessity.

20. ARGUMENT ON PERMISSIBILITY
(cont.)
Majma Fiqh Islami
15th Meeting – Permitted
17th Meeting – Prohibited
Latest Decision – Classical Tawarruq is allowed
Organized tawarruq is not allowed
Shari’ah Supervisory Council of ABC bank – approved
tawarruq for liquidity purposes.
Tawwarruq is permitted,
Syeikh Abdullah b.Sulaiman al-mani, Dr. Musa Adam
Isa, Dr.Usamah Bahr, Dr.Sulaiman Nasir al-Ulwan

21. ISSUES ON TAWARRUQ
1. Fundamental Issues:
Real Sale or Hilah???
Subject matter of the contract – commodity or
cash?
OIC Fiqh Academy ruled – Organized Tawarruq
(al-Munazzam/al-Masrafi) as “not
permissible” because it’s mirrored al-’inah.
Classic Tawarruq (al-Fardh) - allowed

22. ISSUES ON TAWARRUQ (cont.)
2. Operational Issues:
Financial reporting in Balance sheet & Income statement –
commodity trading (buy/sell) transactions, transfer of
ownership, delivery evidences.
Auditing – trail of audits till
Profit – financing or trading?
Do Broker 1 and Broker 2 exist?
Physical commodity exchange hands? Stamp Duty for transfer of
property should be accrued. Who pays?
Transparency – can we know how much bank’s cost and profit?
Early settlement – ibra`, deferred & accrued profits, locked-in
period/penalty
Default – ta’widh (compensation)
Commodity market – volatile and fluctuate

23. Commodity
Financial
Obligation
Cash
Financial
Obligation
PERMISSIBLE
FORBIDDEN
Al-Bay’
Interest bearing
loan

24. TAWARRUQ & BAY AL-’INAH
SIMILARITY
No. Tawarruq Bay’ al-’inah
1. To acquire cash
DIFFERENCES
No. Tawarruq Bay’ al-’inah
1. 3 parties 2 parties
2. Original seller does not have
relationship with Final buyer
Original seller and Final buyer are
same
3. Mutawarriq is free to sell to
anybody for cash
Is a buy-back arrangement

25. INDUSTRY TRENDS
1. Tawarruq Products & Services:
Personal financing
Asset purchase financing i.e. house, property
Cash facility i.e. credit card, overdraft
Deposits (investment accounts) – commodity
murabahah & financing (51st SAC; 2005)
Financial liquidity management – ijarah sukuk as
underlying assets but must be backed by tangible
asset not financial asset (58th SAC; 2006)

26. INDUSTRY TRENDS (cont.)
2. Financing, Advance & Others in B/S (Tawarruq)
`RM Billion’
2012 2011 2008
Bank Islam 7.530 3.904 0.167
Maybank n/a 0.223* n/a 0.394* n/a 0.005*
Bank Muamalat 1.979 1.301 0.339
Bank Rakyat N/A 0.393 0.011
* “Others” specifically no mention about tawarruq
BANK ISLAM: Increased by 4,408 percent in 5 years!!!
2nd after BBA!