Tawarruqfrom Theory to Practice OUTLINES The Concept of Commodity Murabahah (Tawarruq) Tawarruq Vs Ba’i al- ‘Inah The Applications of Tawarruq: 1. 2. 3. Islamic money market Personal financing Swap Costs and Benefits Analysis of Tawarruq Means have much dirham • Al-Tawarruq is taken from this which means lots of Money . trade for money.LINGUISTIC MEANING Taqarruqa • tawarruq comes from “masdar” the verb taqarruqa is said Tawarruqa al-hayawan: the animal has eaten the leaves of trees • فابعثوا احدكم بورقكم هذه الى المدينه Wariq Awraqa (Al-Kahfi: 9) • “So send one of you with this silvery coin of yours to the town • Dirham that is manufactured from silver • Plural of waraqah: paper . albeit at a lower price than the deferred price Shafi’is • tawarruq means selling something on postponed payment and purchase it back in spot payment at a lesser price Hanafis Hanbalis • tawarruq is ba’i al.SCHOLARS DEFINITIONS Malikis • tawarruq means selling something on deferred basis and then buying it back in cash.Inah using a third party • tawarruq is the need for cash. buying the equivalent of thousands and more to expand its price . CLASSICAL TAWARRUQ • Buy commodity from Trader on cash at (x) & sells it on deffered basis at (x+y) BANK CUSTOMER • Sells the commodity to Trader on cash payment at (x) • Sells the commodity from customer to Bank at (x) by cash TRADER . ORGANIZED TAWARRUQ Diagram 1 1. so it call organized TAWARRUQ Source: Fahmy et. Sell commodity on deferred price @ (x+y) 6. Transfer commodity ownership 5. Transfer ownership CUSTOMER *In practice.all (2008) . the customer will appoint the bank as his agent to sell the commodity to Trader B on cash basis in the commodity market. Purchase commodity on cash @ x Trader A BANK 2. Transfer commodity ownership Trader B 4. Sell commodity* on cash @ x 3. transfer of possession throughout the procedure is only held to materialise constructively Seems to have envisaged the two basic sales giving rise to complete transfer of possession physically after each contract .CLASSICAL VS ORGANIZED ORGANIZED TAWARRUQ CLASSICAL TAWARRUQ Four-parties arrangement (may also be three parties) Three-parties arrangement Involves unilateral promise to purchase by the client (mutawarriq) Involves no promise to purchase Involves additional purchase prior to the two basic sales Involves only two basic sales Involves signing of an overall agreement / memorandum of understanding delineating the procedure to be followed No signing of such an agreement Involves the client appointing the bank as his agent to carry out the second basic tawarruq sale The client will sell the commodity on his own Transfer of possession is only limited to signing of the contracts of sale that includes clauses on transfer of rights and liabilities pertaining to the items. Thus. TAWARRUQ IN BANK ISLAM Diagram 2 Source: Bank Islam (2009) . TAWARRUQ Vs ‘INAH How can I borrow RM100.000 Source: Dusuki (2008) .000 RM100.000 to get married? RM 150. To facilitate cash and liquidity shortage. Parties 4. Concept A sale contract with immediate buy back by the seller 2. Subject Matter 10 . Two parties involve for two transactions Three parties (at least) involve for three transactions Return back to the original seller. then sell it to third party other than seller for cash but at lower price from initial price 1.CONT… NO. Purpose To facilitate cash and liquidity shortage. Transferred and possessed by third party. ITEMS AL-‘INAH AL-TAWARRUQ Buying a commodity at deferred. 3. tawarruq is form of trade or sale which is permissible by Shariah. 2. Basic ruling of Muamalah is al Ibahah “Allah has allowed trade and has prohibited riba” (Surah: AlBaqarah: 257). which leads to riba. 2.The PROPONENTS’ VIEW The majority of scholars allowed tawarruq because: 1. ‘Inah is prohibited because the commodity is sold back to the person from whom it was purchased . 1. tawarruq is different from ‘inah. and he does not have any choice . Tawarruq is sale of a forced person (ba’i talji’ah) which is something is enforced on a person to do it. but the intention is to sell money with money 3.The OPPONENTS’ VIEW Some Jurists such as Umar bin Abdul Aziz. Tawarruq is a trick of riba. Ibn Taimiyah.Shaibani disallowed tawarruq because: 1. because the intention is not the sale itself. pain and so on. 2. Ibn al-Qoyim and al. The similarity with ‘Inah. deceiving. the riba is actualized in tawarruq with additional cheating. TAWARRUQ IN FINANCING Dusuki(2010) . TAWARRUQ IN DEPOSIT Dusuki(2010) . Bursa Malaysia’s Suq al-Sila’ developed mechanism which is a random selling and buying as following: .ISSUES IN TAWARRUQ When broker A and broker B is the same company. To solve that problem. the organized murabahah is there. as similar with tripartite al Inah which is unacceptable. according to Organization of Islamic Conference (OIC) Islamic Fiqh Academy conference. COMMODITY MURABAHAH IN PERSONAL FINANCING . 000 1 2 Broker A RM35.000 deferred 3 4 Broker B RM20.Commodity Murabahah Employed in Tawarruqbased Credit card RM20.000 4 Custome r 5 Special Account Merchant . 000 Deferred .000 2 Electrical Appliance 3 1 Electrical Appliance Worth RM200.000 RM200.Commodity Murabahah (Tawarruq) Employed in Model of Home Financing Property 4 RM200.000 RM350.000 RM200. Commodity Murabahah Deposit-i 1 $10 million 2 Customer 3 Broker A $10 million+ profit on deferred $10 million 5 Broker B 4 . Analysis of The Costs and Benefits to Each Party In Commodity Murabahah . com. Client/ Investee Bank (Mutawarriq) Get liquidity Higher deferred payment Transaction costs 3.PARTIES BENEFITS COSTS 1. Commodity Supplier/ Broker A Fees around $40 per $1 million of transaction value (www.proxcelglobal.com.proxcelglobal. 2011) The opportunity cost of the commodity being used for productive purposes 4. Commodity Buyer/ Broker Fees around $40 per $1 B million of transaction value (www. Financier/ Investing Bank (Muwarriq) Earn price of cost plus profit Earn fixed return 2. 2011) Transaction costs Risk related to the commodity . Brokerage fees Legal & Jurist costs Delivery fees Sales Tax Transaction Costs Clearance fees Stamp duty Registration fees .
Report "13 MPI - Tawarruq Theory to Practice [Repaired]"