Discussions on Tawarruq - Islamic Economic Forum

 1304


Summary of the Discussions on Tawarruq
held in Islamic Economic Forum
Started on 24 March, 2017


Brief Introduction to Islamic Economic Forum:
The Group with the title of “Islamic Economic Forum” is for Islamic Economic Professionals – Sharia Scholars, Economists, Professors/Researchers and IF Practitioners for the purpose of positive discussions on various issues and challenges, facing the Islamic Economic Industry in order to explore ideas and solutions, pertaining to Islamic Economic from an economic as well as Sharia perspective. Since there are already various forums devoted to Islamic Economic, this forum is expected to have more emphasis on critical analysis as well as up to date information with the latest market movements, analysis, and research. The ideas generated will be for the benefit of the Islamic Economic Industry globally.
Administrative Committee of the Forum:
 -  Dr. Aznan Hassan (Head of Committee)
 -  Dr. Abdul Bari Mashal (Head, Arabic Group)
 -  Dr. M. Burhan Arbouna
 -  Sheikh Ashraf Gomma Ali (Head, English Group)
 -  Dr. M. Iman Sastra
 -  Sheikh Ibrahim Musa Tijani
 -  M. Khalid Hasani (Founder of the Forum)
 -  Sheikh Siraj Yasini
 -  Sheikh Abdul Razzak Kaba

 

Preface:

Definition of Tawarruq:
Monetization refers to the process of purchasing a commodity for a deferred price determined through Musawammah (Bargaining) or Murabahah (Mark-up Sale) and selling to third party
for a spot price as to obtain cash.
Source: AAIOFI Shariah Standard 2015

Tawarruq consists of two sale and purchase contracts. The first involves the sale of an asset by a seller to a purchaser on a deferred basis. Subsequently, the purchaser of the first sale will sell the same asset to a third party on a cash and spot basis.
Sources: Bank Negara Malaysia (BNM) Shariah Standard and Operational Requirement

Literally: from wariq: silver; also dirhams, which are coined from silver. Awraqa: to become rich. Technically: Hanbalis used the term tawarruq to refer to the process of purchasing a commodity for a deferred price and selling it to a third party for a spot price in order to obtain cash. Although non-Hanbalis may not use the term, they have discussed the issue under the rubric of ‘inah sales. The majority of jurists agree that tawarruq is legal, whereas Ibn Taymiyyah and Ibn al-Qayyim prohibited it because they saw it as harmful and a legal trick.
Source: ISRA Compendium for Islamic Finance Terms

Appendix
Rulings on Tawarruq (Pg 58)
List of IEF Group members contributed in the Discussion (Pg 60)

Islamic Economics Forum Dialogue:
The discussion was initiated by Dr. Humayon Dar's statement:
I am writing a book to be entitled "Problem With Interest-free Banking", which takes a diagonal view to respected Sheikh Dr. Daud Bakar on the matter of Islamic banks and their functions of financial intermediary. If Islamic banks do not do "real" trading but rather are involved in "financing" of trade activities in such a way that they use an interest rate mechanism (LIBOR, KIBOR etc.), then the proponents of Islamic banking and finance, including Shari'a community, admit that interest rate mechanism is the best/efficient process for price finding and its determination. The use of an interest-based benchmark along with "non-competition" with the "real" economic players is also a soft way of saying that Islamic banking and finance has nothing (or very little) to do with the real economy. If that is the case, then all those (including me) who have been writing about superiority of Islamic banking and finance on the basis of its possible contribution to the real economy and hence it being more stable than conventional banking and finance, have been faking. The pure fiduciary role based banking model has all the hallmarks of an interest-based financial system, and I am sure this is not what the early advocates of Islamic banking and finance intended to see.
wa Allah a'alam bi al-sawab


 

user_id not set
bool(true)
string(1) "1"

 

Unfortunately your account does not have the necessary access level to continue. We would like to suggest that you upgrade account to enjoy more benefits on this website.


Comments

( No comment has been added. )

 

ADVERTISEMENT