The Acceptability of Tawarruq as a Product for Financing within the
Islamic Banking System
E.F. Ahmad, M. Shihama, S.M. Jibril, S.I. Djama, A. Muneeza. 2017. International Journal of Management and Applied Research Vol. 4 (Iss. 1), pp. 31-43.
Assoc. Prof. Dr. Aishath Muneeza: "The purpose of this paper is to study the application of Tawarruq in the Malaysian Islamic banking system."
The outcome of this research revealed that there are contradictory views on the usage of Tawarruq.
While some jurists standby the view of its permissibility, others view it as an invalid product of Islamic banking.
It is necessary for Islamic financial institutions (IFIs) to understand that Tawarruq arrangement should be used in accordance with guiding principles of Shari'ah while the industry should continue to find a lasting solution for the liquidity management.
In conclusion, Islamic financial institutions should strive hard for better alternatives and adhere strictly to the Shari’ah guidelines and the resolutions by both the OIC Fiqh Academy and AAOIFI on the application of Tawarruq. Otherwise, IFIs will appear as practitioners of merely copying the conventional system, with their functions and operations essentially no different from the conventional space except in their use of Islamic terms to disguise riba and avoid other Shari’ah prohibitions.
AAOIFI issued a draft standard aiming to update guidance on Murabaha contracts, which intended to cover all deferred-sale contracts but opted to develop separate guidance on commodity-based Murabaha, also known as Tawarruq. Read more here: http://sco.lt/6pWQHR
Tuesday, 4th April 2017
Time: 11.00 AM - 12.30 PM
Venue: Computer Lab 2
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