Tawarruq
تورق
Pronunciation: tah-WAR-rook
A monetization arrangement involving the purchase and immediate resale of a commodity to obtain cash.
Definition
A monetization arrangement where a buyer purchases a commodity on deferred payment terms from a seller, then immediately sells the same commodity to a third party for cash at the current market price. The net effect provides the buyer with immediate cash and a deferred payment obligation to the original seller.
Widely used in personal financing and treasury management in Malaysia and the Gulf. Controversial among scholars — AAOIFI's Shariah Board resolved in 2009 that organized tawarruq (where the commodity trading is pre-arranged) is impermissible, while individual tawarruq (where the client independently finds a third-party buyer) may be permitted.
Related Terms
Bai' al-Inahبيع العينة
A sale-and-buyback arrangement used to generate cash flow.
Commodity Murabahaمرابحة السلع
A Murabaha transaction using commodities (often metals) as the underlying asset to facilitate cash financing.
Murabahaمرابحة
A cost-plus sale where the seller discloses the original cost and adds a transparent, agreed-upon markup.
Ribaربا
Interest or usury — the most strictly prohibited practice in Islamic finance.
Further Reading
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Quick Answer
Tawarruq (تورق) — A monetization arrangement involving the purchase and immediate resale of a commodity to obtain cash. A monetization arrangement where a buyer purchases a commodity on deferred payment terms from a seller, then immediately sells the same commodity to a third party for cash at the current market price. The net effect provides the buyer with immediate cash and a deferred payment obligation to the original seller.
Key Takeaways
- A monetization arrangement involving the purchase and immediate resale of a commodity to obtain cash.
- Category: Contracts
- Related: Bai' al-Inah, Commodity Murabaha, Murabaha, Riba
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Last reviewed: 2026-03-06
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