What Is the Stance of the Shafi’i Madhhab on Tawarruq?

Answered by Shaykh Muhammad Carr

Question 

What is the stance of the Shafi‘i Madhhab on Tawarruq? Tawarruq is an arrangement where an individual needing liquidity purchases a commodity on credit at a higher price and then promptly sells it at a spot price to obtain cash.

ِAnswer

In the Name of Allah, the Most Merciful and Compassionate.

I pray you are in good faith and health. Thank you for your question.

Tawarruq is deemed permissible according to the Shafi‘i Madhhab. Imam Nawawi asserts, “It is permissible to sell a commodity at a spot price and immediately buy it at a higher credit price” [Nawawi, Rawd al-Talibin].

The Shafi‘i Madhhab, which allows ‘Ina, would consequently permit tawarruq with even greater reason.

Definition of Monetization and Its Distinction from Bay‘ al-‘Ina

Monetization [Tawwaruq] refers to purchasing a commodity for a deferred price determined through Musawama (Bargaining) or Murabaha (Mark-up Sale) and selling it to a third party for a spot price to obtain cash.

Meanwhile, ‘Ina’ refers to purchasing the commodity for a deferred price and selling it for a lower spot price to the same party from whom the commodity was purchased. [AAOIFI, Shari‘a Standards]

The view of the earlier scholars is that the transaction is permissible without any dislike. However, later scholars, including Shaykh al-Islam Zakariyya and his students, hold that it is permissible but disliked.

The esteemed scholar Ibn Hajar al-Haytami (Allah have mercy on him), explicitly stated that every sale that involves a semblance of deceit to circumvent usury is disliked. He said, “A sale may be disliked—such as the sale of ‘ina—and any sale that has differing opinions regarding its permissibility, like the legal tricks used to escape from usury.” [Tuhfat al-Muhtaj, 4.323]

I pray this is of benefit and that Allah guides us all.

[Shaykh] Muhammad Carr
Checked and Approved by Shaykh Muhammad Abu Bakr Badhib

Shaykh Muhammad Carr has dedicated his life to studying and transmitting our beautiful deen. His studies have taken him around the globe, where he has benefitted from many luminaries. Under the guidance of his teachers – Shaykh Taha Karan, Shaykh Yaseen Abbas, Shaykh Muadh Ali, and many others – Shaykh Muhammad has grown to appreciate the beauty and benefits of diverse scholarship. He completed his memorization of the Qur’an at Dar al-Ulum Zakariyyah in September 1997 and received an Alimiyya Degree in 2006 from DUAI (Darul Ulum al-Arabiyyah al-Islamiyyah). He is also affiliated with Masjid Auwal in Bo Kaap, Cape Town (the oldest mosque in South Africa), where he serves as a co-imam, and Dar Al-Safa, where he has taught since 2018. As a teacher, he imparts the wisdom of our heritage and tradition by opening the door for students. As an imam, he has the unique opportunity to serve his community in daily life.

In addition to his roles as a teacher and imam, Shaykh Muhammad Carr has contributed significantly to the administrative and advisory aspects of Islamic institutions. Since 2023, he has served as the Administrative Director at The Imam Kurani Institute, contributing to the institution’s growth and development. He continues to pursue traditional Islamic Sciences, possessing a keen interest in Islamic Contract Law and Finance. Shaykh Muhammad has been a Shari’ah Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.