Real-world scripted dialogue showing exactly how a commodity Murabahah (Tawarruq) transaction plays out between a bank branch manager and a customer, exposing the mechanical nature of organized Tawarruq.
In-Depth Analysis
Pursuant to elucidating the stringent conditions for the utilization of Tawarruq in an exceptional situation in the last article, the author now divulges how it is actually practiced in a day-to-day manner in some Islamic banks in certain jurisdictions for all financing purposes. The following script would enable readers to comprehend what the author is trying to convey: a. Customer: Hello, I have a salaried account with the bank and also enjoy a car financing facility from you. Now I am in need of US$100,000. b. Branch manager: Alright. For how long? c. Customer: For five years. What is your rate? d. Branch manager: Well, we charge 6% flat. e. Customer: Agreed. How soon can I get the money? f. Branch manager: Let me check your account in the system. (After sometime) You qualify to get this funds based on your satisfactory account history and credit score. g. Customer: Oh, thank you so much. Please go ahead and complete the process as I need the money urgently. h. Branch manager: Will you please sign this document? i. Customer: What is this document? j. Branch manager: This is a promise to purchase by you to the bank. k. Customer: Purchase what? l. Branch manager: You are promising the bank that you will purchase palladium from the bank on a five year deferred payment basis at 6% profit for the bank. m. Customer: Hold on. What is palladium and why should I purchase it from the bank? n. Branch manager: Hey calm down. Do you need money? o. Customer: Yes, of course. That is why I am here. p. Branch manager: Well, in that case just follow my instruction. You will get the money provided you put your signature whenever I am telling you to. The analysis of the said discussion is that as per both Shariah and legal requirements, a contract between any two parties can be entered into verbally as well as written. Here, the verbal contract between the Islamic bank and the customer for 'borrowing money at 6% interest' was entered into between the Islamic bank and customer starting from item (a) to (g). Contrary to car Murabahah where the customer was actually in need of a car, the customer is not in need of the metal. The practice of purchasing metal by a bank is mostly dubious and that at best it is confined to moving a few documents here and there without the involvement of any metal.
What You Need to Know
- 1Real-world dialogue exposes how Tawarruq mimics conventional lending in practice
- 2Customer verbally agrees to 'borrow at 6% interest' before any Islamic contract is mentioned
- 3Palladium (or other commodity) is never seen, needed, or wanted by the customer
- 4The entire process is a paper exercise to create the appearance of a Shariah-compliant sale
- 5Verbal agreement for cash at a rate constitutes the real contract — commodity trade is pretense
- 6Scholar aptly quipped: if Islamic banking is all about Tawarruq, who would not want conventional?
Key Statistics
U.S. Market Relevance
This dialogue is a powerful tool for US Muslim consumer education. It demonstrates exactly why some 'Islamic' personal financing products that use commodity Murabahah should be scrutinized carefully. If the substance is identical to a conventional loan, the form alone does not make it halal.
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