Ḥīlah of tawarruq: a fundamental analysis of its adaptation in Islamic financial services

• Main Authors: Mohamad Ghazali, Nasrun, Md. Sawari, Mohd. Fuad, Ghalia, Bouhedda, Syed Jaafar Alhabshi, Syed Musa
• Format: Article
• Language: English
• Published: IIUM Press 2023
• Subjects: BP321.7 Tawarruq – Murabahah; BPH589.2 Riba - Interest; HG3368 Islamic Banking and Finance; KBP639 Muʻāmalāt
• Online Access: http://irep.iium.edu.my/106533/1/106533_%E1%B8%A4%C4%ABlah%20of%20tawarruq.pdf; http://irep.iium.edu.my/106533/; https://journals.iium.edu.my/al-fiqh/index.php/al-fiqh/article/view/303

This paper aims to critically review the application of tawarruqin Islamic financial services. On one hand, it is proclaimed as a Sharīʽah-compliant mode, while on the other hand, it has also been deemed non-compliant. In terms of the aspect of ḥīlah, this review intends to examine the basic mechanism of financial tawarruq and compare it with ʽīnah and ribā jāhiliyyah arrangements in order to outline the borderline of permissibility and prohibition. This paper applies the doctrinal methodology specified in Sharīʽah law, with cross reference to the contemporary Sharīʽahresolutions; whereby the observations, documents and records will be comparatively reviewed for establishing a critical evaluation. The review identifies areas that require further clarification regarding the adaptation of tawarruq into the modern financial system. The results indicate that the tawarruq mechanism differs slightly from ʽīnah, which possess the most similarity with the ribā jāhiliyyah attributes. In certain aspects, tawarruq could be considered a permissible ḥīlah or makhraj, particularly within the current financial and economic landscape, provided that certain parameters are observed. These findings are crucial for harmonizing different Sharīʽah views, facilitating the adaptation of the concept, and ensuring its effective implementation at the operational level. This is necessary to address the current situation of Islamic financial services in the dominance of conventional finance.