Glossary

Tawarruq

تورق

Definition

A multi-step sale used to raise cash: buying a commodity on deferred payment, then immediately selling it for spot cash to a third party.

Tawarruq is widely used in Islamic banking for personal financing and liquidity management. The buyer ends up with cash and a deferred-payment obligation — economically similar to a conventional loan.

Classical scholars allowed tawarruq under strict conditions. Modern organised tawarruq (where the bank pre-arranges both sides) is controversial; the IFA-OIC ruled it impermissible in 2009 due to its closeness to a fictional sale.