Tawatu (pre-arrangement)
A prior understanding between parties about how linked transactions will unfold, which can change how they are judged.
Tawatu means a pre-arrangement or prior understanding between parties, especially one under which a later transaction is agreed in advance. Bank Negara Malaysia's compilation of Shariah resolutions defines it as pre-arrangement and records the classical view that a sale and repurchase was acceptable only where there was no pre-arrangement to repurchase. AAOIFI's tawarruq standard similarly says that the commodity must not return to the seller through prior agreement or collusion. Whether linked steps were pre-arranged is therefore a central question in reviewing tawarruq and sale-and-repurchase structures.
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This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.