Borrowing from the bank through tawarruq

Question:
May Allah prolong your life, Shaykh. I want to inquire about a matter. I am in financial distress and I want to borrow from the bank—Allah knows best—through shares or something like that. I do not know if it is permissible and lawful, or if it contains a doubt and riba (usury or interest), God forbid?

Answer:
This, my brother, is not a loan; it is a sale and purchase. If you want to meet your need and you cannot do so except through debt, there is no harm in performing tawarruq. The issue of tawarruq is that you buy an existing commodity that you can see. You buy it, and it must be in the possession of the seller before he sells it and contracts with you. The seller—whether the bank or someone else—owns this commodity, and you buy it from him. Then you take possession of it, transfer it, and sell it elsewhere to someone other than the creditor, and you benefit from its price. Then you repay the creditor when the debt comes due. This is called the issue of tawarruq. There is scholarly disagreement regarding it, but the majority hold it permissible due to dire necessity, if one cannot find someone to lend him a benevolent loan. Yes.

The presenter:
Thank you, my noble brother. May Allah bless you.