Most banks in practicing their operation still have the element of usury. Some banks operation involved in the carried out usury and transactions to be not clean and become forbidden in Islam.
Tawarruq is from word tawarraqa, the word means coin of silver. In technical terms, tawarruq mean that buying a Commodity on Deferred payment basis and then selling it on cash basis to a person other than the buyer.
Parties involve in tawarruq transaction
1. Seller (muwarriq) or creditor;
2. Buyer (mustawriq or mutawarriq), i.e. the one who is looking for liquidity; and
3. Subject matter: Commodity.
View of Tawarruq
There are various opinions about the tawarruq. There are two major views, the first is to allow it in practice by the Islamic bank, and the second opinion is not allowed. The opinion states that tawarruq are prohibited because it involve with riba. It is similar with the transaction in practicing bai Inah, majority of scalars’ is disagree of the practicing of bai Inah.
The Differences between Taqwarruq and Bai Inah
Bai inah is defined as the sale of commodity on credit and repurchasing it for a lesser amount in cash. Bai inah is a fake sale, which is used as a means of usury (interest), and not to conclude a genuine sale. In fact, bai inah is a loan with interest, which is offered by the first seller.
The Issue
The parties said of tawarruq is prohibited are contradicted with the opinion from parties that allowing the practices of tawarruq. The opinion allows the practices of modern tawarruq, stated that tawarruq is different from bai Inah and it is not the trick of riba. This is because, in practice tawarruq, it involve third party. Where, the first party buys an item from the second party with deffered payment, and sells it to the third party with cash at a lower price.
Its means that the purchased of item is does not return to the second party. If the commodity just goes back to the second party with the different prices, a new transaction is said to fall into the riba and it most like bai Inah. They stated further that, in practice there is no element of riba in tawarruq because there are no additions or surplus money in the one transaction. However, there are conditions in practicing the modern tawarruq. If it is carried out tawarruq by organize, then it is prohibited.
The practices of modern tawarruq are allowed because it involves the purchase of commodities with the deferred and the buyer becomes the owner of the commodity. Selling of ownership of property for cash with a lower price is allowed and not involved with riba. Organized tawarruq occur when a person buys a commodity from Islamic bank on credit. He then makes the bank his agent to sell this commodity for him, which he has not received.
Sometimes, the bank commissions the seller of the commodity to sell the commodity for the benefit of the customer, by which the price will be directly given to the customer. In most transactions, organized tawarruq is done on local commodities, like iron, rice, mechanical tools, motor vehicles and so on.
The Differences of Organized Tawarruq and Real Tawarruq
The difference between organized tawarruq and real tawarruq is that the customer in the organized tawarruq does not receive the commodity and is not engaged in selling it, but the customer of the real tawarruq has the choice to either keep the commodity or to sell it by himself in the market, because he has already taken the commodity with him, in which he can do whatever he likes with it.
Conclusion
Tawarruq is widely used as a financing and liquidity management tool but sharia jurists differ on its permissibility. I agreed with opinion that allow the real tawarruq and prohibited the organized tawarruq. And I also agreed with the majority of the scholars, modern tawarruq that practicing in Islamic bank is legally permissible based on that the origin of things is permissibility and Allah says, “Allah has allowed trade and has prohibited riba” (surah Al-Baqarah: 275). In this sale of tawarruq, no riba is intended and the general concept of modern tawarruq does not look like riba.
References
1.Tawarruq in The banking System, Dr. Said Bouheraoua, International Shariah Research Academy International Islamic University Malaysia (IIUM)
2.Tawarruq, its Essence and its Types, Prof. Dr. Wahbah Al-Zuhaili, Damascus University.
3.Tawarruq, Its Concepts, Its Practice and Its Economics Implcation on its Promotion by Islamic Bank, Dr. Abdur Rahman Yusri Ahmad, Alexandra University Egypt.
4.Tawarruq, its Reality and Types, Prof. Dr. Ibrahim Fadhil Dabu, Kingdom of Bahrain
5.Verdicts on At-Tawarruq and its Banking Applications, Muhammad Taqi Uthmani, Dar al-Ulum, Karachi
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