---
title: "What is Tawarruq? | IslamicOpenFinance™"
description: "Buying an asset on deferred payment and selling it to a third party for cash, to raise liquidity. Its organised form is contested."
url: https://islamicopenfinance.com/glossary/tawarruq/
lang: en-GB
source: "IslamicOpenFinance"
---

[Glossary](https://islamicopenfinance.com/glossary/) / [Sale-based contracts](https://islamicopenfinance.com/glossary/#sales)

Sale-based contracts

# Tawarruq

Buying an asset on deferred payment and selling it to a third party for cash, to raise liquidity. Its organised form is contested.

Tawarruq consists of two sales: an asset is bought on deferred payment and then sold to a third party for cash, so that the buyer obtains liquidity. Bank Negara Malaysia regulates tawarruq in a dedicated policy document with requirements on the sequence of the sales and on ownership and possession in each leg. The International Islamic Fiqh Academy, in a resolution of its nineteenth session, accepted classical tawarruq but held organised and reverse tawarruq impermissible, so its use depends on the jurisdiction and on the institution's Shariah board.

## Sources

- [Bank Negara Malaysia, Tawarruq policy document, 2018: definition and Shariah requirements](https://www.bnm.gov.my/documents/20124/938039/pd_reissuancetawarruq_dec2018.pdf)
- [International Islamic Fiqh Academy, Resolution No. 179 (19/5) on tawarruq, 2009 (Arabic)](https://iifa-aifi.org/ar/2302.html)

This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.

## Related terms

[**Commodity murabaha** Interbank and treasury deals in which commodities are bought and sold on deferred payment to place or raise short-term funds.](https://islamicopenfinance.com/glossary/commodity-murabaha/) [**Murabaha** A sale at cost plus an agreed, disclosed profit; the seller must own the asset first. Payment is often deferred in instalments.](https://islamicopenfinance.com/glossary/murabaha/) [**Tawarruq-based term deposit** A fixed-return term placement in which the customer sells a commodity to the bank on deferred payment.](https://islamicopenfinance.com/glossary/tawarruq-deposit/) [**Musawamah** A negotiated sale in which the seller does not disclose its cost; the price is simply agreed between the parties.](https://islamicopenfinance.com/glossary/musawamah/)

**Sale-based contracts**

1. [Murabaha](https://islamicopenfinance.com/glossary/murabaha/)
2. [Musawamah](https://islamicopenfinance.com/glossary/musawamah/)
3. [Bay al-muajjal (deferred-payment sale)](https://islamicopenfinance.com/glossary/bay-muajjal/)
4. [Salam](https://islamicopenfinance.com/glossary/salam/)
5. [Istisna](https://islamicopenfinance.com/glossary/istisna/)
6. [Bay al-sarf (currency exchange)](https://islamicopenfinance.com/glossary/bay-al-sarf/)
7. [Murabaha to the purchase orderer](https://islamicopenfinance.com/glossary/murabaha-purchase-orderer/)
8. [Hamish jiddiyyah (security deposit)](https://islamicopenfinance.com/glossary/hamish-jiddiyyah/)

[All 221 terms](https://islamicopenfinance.com/glossary/)