What is the issue of tawarruq and what is its ruling?
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The questioner : The questioner, Ahmad from Riyadh, asks: What is the issue of tawarruq and what is its ruling? May Allah reward you with good.
The Shaykh : The issue of tawarruq is called al-dayn (debt) in some regions. When they say, "So-and-so took a loan from so-and-so," they mean he dealt with him through tawarruq. It is also called al-wa'dah or al-wa'dah in some regions, meaning a promise.
It is when a person needs money.
The questioner : Yes.
The Shaykh : He has nothing and cannot find anyone to lend to him, so he goes to someone and buys a commodity from him worth ten thousand for twelve thousand over one year, or for fourteen thousand over two years. The longer the term, the greater the profit. When he buys it, he sells it and benefits from the money. This is the issue of tawarruq. It is called tawarruq because the person does not intend anything in this transaction except the paper, meaning the money. Therefore, it is called tawarruq from the verb tafa'ala, meaning to seek something.
The scholars have differed on its ruling. Some said it is disliked, some said it is permissible, and some said it is forbidden. Among those who said the latter is Shaykh al-Islam Ibn Taymiyyah (may Allah have mercy on him). He said it is narrated from 'Umar ibn 'Abd al-'Aziz (may Allah have mercy on him) that it is like riba, but it is riba through a scheme. Ibn al-Qayyim (may Allah have mercy on him) said that the question was repeated to his Shaykh (may Allah have mercy on him), Ibn Taymiyyah, regarding this issue, and he refused to say anything other than that it is forbidden. People have expanded greatly in this today, so a man comes to a person and buys bags of cardamom, sugar, rice, or the like from him for a deferred price that is higher than the spot price. Then the borrower sells it, sometimes selling it back to the one who first sold it to him. This is the issue of 'inah, and there is no doubt in its prohibition.
Sometimes he sells it to another person for less than what it is worth in cash today. In this case, the borrower is defeated in two ways. The first way is the increase that occurred from the seller.
The second way is the decrease that occurred from the buyer of the commodity. They sell this commodity before taking possession of it and before moving it from its place. The Prophet (peace and blessings be upon him) prohibited selling commodities where they are bought until the merchants take them to their homes.
Because of the expansion in this, people have become careless about debt. You will find a man taking a loan to buy non-essential things that are not his status, so debts accumulate on him. When the due date arrives and he does not pay, he goes to borrow again or to do tawarruq again. When the debt comes due a second time, he does tawarruq a third time, and so on, until many debts accumulate on the person without him realizing it.
Therefore, we advise our Muslim brothers to avoid dealing in this transaction, especially those who take on debt, for they are defeated and bankrupted because of these debts that were made easy for them, and they become bound by them. Yes.
The questioner : May Allah bless you.
The Shaykh : The issue of tawarruq is called al-dayn (debt) in some regions. When they say, "So-and-so took a loan from so-and-so," they mean he dealt with him through tawarruq. It is also called al-wa'dah or al-wa'dah in some regions, meaning a promise.
It is when a person needs money.
The questioner : Yes.
The Shaykh : He has nothing and cannot find anyone to lend to him, so he goes to someone and buys a commodity from him worth ten thousand for twelve thousand over one year, or for fourteen thousand over two years. The longer the term, the greater the profit. When he buys it, he sells it and benefits from the money. This is the issue of tawarruq. It is called tawarruq because the person does not intend anything in this transaction except the paper, meaning the money. Therefore, it is called tawarruq from the verb tafa'ala, meaning to seek something.
The scholars have differed on its ruling. Some said it is disliked, some said it is permissible, and some said it is forbidden. Among those who said the latter is Shaykh al-Islam Ibn Taymiyyah (may Allah have mercy on him). He said it is narrated from 'Umar ibn 'Abd al-'Aziz (may Allah have mercy on him) that it is like riba, but it is riba through a scheme. Ibn al-Qayyim (may Allah have mercy on him) said that the question was repeated to his Shaykh (may Allah have mercy on him), Ibn Taymiyyah, regarding this issue, and he refused to say anything other than that it is forbidden. People have expanded greatly in this today, so a man comes to a person and buys bags of cardamom, sugar, rice, or the like from him for a deferred price that is higher than the spot price. Then the borrower sells it, sometimes selling it back to the one who first sold it to him. This is the issue of 'inah, and there is no doubt in its prohibition.
Sometimes he sells it to another person for less than what it is worth in cash today. In this case, the borrower is defeated in two ways. The first way is the increase that occurred from the seller.
The second way is the decrease that occurred from the buyer of the commodity. They sell this commodity before taking possession of it and before moving it from its place. The Prophet (peace and blessings be upon him) prohibited selling commodities where they are bought until the merchants take them to their homes.
Because of the expansion in this, people have become careless about debt. You will find a man taking a loan to buy non-essential things that are not his status, so debts accumulate on him. When the due date arrives and he does not pay, he goes to borrow again or to do tawarruq again. When the debt comes due a second time, he does tawarruq a third time, and so on, until many debts accumulate on the person without him realizing it.
Therefore, we advise our Muslim brothers to avoid dealing in this transaction, especially those who take on debt, for they are defeated and bankrupted because of these debts that were made easy for them, and they become bound by them. Yes.
The questioner : May Allah bless you.