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Islamic Credit Cards
Countries:United Arab Emirates101Malaysia88Saudi Arabia111Pakistan8Indonesia10Qatar38All countries

Glossary

Tawarruq

Buying something on credit and selling it on for cash, so you end up with money now and a bigger bill later without paying interest.

تورقtawarruq

Tawarruq, which AAOIFI translates as monetization, is a chain of sales used to raise cash. AAOIFI Shariah Standard No. 30 permits it under strict controls, including that the commodity is real, identified, genuinely received, sold to a third party, and not sold on the client's behalf by the bank or its agent. The OIC International Islamic Fiqh Academy, in Resolution No. 179 (5/19) of April 2009, prohibited the organised and reverse forms as collusion to obtain cash now for a larger debt later, which it called riba. Cards built on tawarruq sit in the middle of that disagreement.

This is also a card contract structure

The bank sells you a commodity on credit at a marked-up price, you sell that commodity to somebody else for cash, and the cash becomes your spending limit.

How Tawarruq works on a credit card

Related terms

Bai' al-InahSelling something to someone on credit and buying it straight back for less cash, so they get money now and owe more later.MurabahahA sale where the seller tells you what the goods cost and what profit is being added, and you pay later.Bursa Suq Al-Sila'A Malaysian commodity trading platform built so banks can carry out the commodity buying and selling that tawarruq contracts require.RibaAny extra amount a lender gets back on top of what was lent, which Islamic law forbids.

Sources

  • AAOIFI Shariah Standard No. (30); IIFA Resolution No. 179 (5/19)

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