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Islamic Contract Principles: Tawarruq & BBA

The document discusses three types of Islamic financing contracts: 1) Ijarah - A sale or buyback agreement where the seller finances the purchase of an asset. It involves two separate contracts. 2) Tawarruq - A sale of an asset for deferred payment that includes a profit margin. It involves three or more parties. Some scholars have questioned whether it fulfills the purpose requirement. 3) Bai Bithaman Ajil (BBA) - A sale or purchase of an asset for deferred payment based on a price including profit. It is approved if it does not involve uncertainty and complies with Shariah terms, but results in larger financing debts over time compared to conventional

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Aniisa Athirah
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285 views1 page

Islamic Contract Principles: Tawarruq & BBA

The document discusses three types of Islamic financing contracts: 1) Ijarah - A sale or buyback agreement where the seller finances the purchase of an asset. It involves two separate contracts. 2) Tawarruq - A sale of an asset for deferred payment that includes a profit margin. It involves three or more parties. Some scholars have questioned whether it fulfills the purpose requirement. 3) Bai Bithaman Ajil (BBA) - A sale or purchase of an asset for deferred payment based on a price including profit. It is approved if it does not involve uncertainty and complies with Shariah terms, but results in larger financing debts over time compared to conventional

Uploaded by

Aniisa Athirah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Principles of Contract

IN PERSONAL FINANCING FACILITY

INAH TAWARRUQ BAI BITHAMAN AJIL

An agreement to acquire an A sale or purchase of an


Sale or buyback agreement
asset on a deferred payment asset for deferred payment
DEFINITION by the seller of an asset with
basis and then sell the asset based on a price that includes
different price
to a third party for cash a profit margin

1. Classical Tawarruq
TYPES No specific types
2. Organizational Tawarruq
No specific types

Used in working capital,


Used in deposit financing, Used in house or term
financing, and Islamic credit
APPLICATION card such as CIMB Islamic
Bursa suq Al-Sila', and financing and vehicle or
Sukuk equipment financing
Bank Berhad

CONTRACT Two parties which are bank Three or more parties such Two parties which are
and customer only as bank, customer, vendor, banking institutions and
PARTY and broker customers

APPROVE BY Not approved because it is Approved because it is Approved if it does not apply
MUSLIM considered as prohibited due permissibility by law and has gharar and complies with
to the open door of riba legal evidence Syariah terms
SCHOLAR

Impacts

INAH TAWARRUQ BAI BITHAMAN AJIL

The BNM requires two separate As a sale contract, Tawarruq as A disadvantage due to the latter's
contracts with different time it is performed in Malaysia does over-dependency on fixed-rate
periods, which involves close not fulfill the validity of purpose asset financing
supervision and may frustrate the requirement.
customer When compared to a
The financier taking advantage conventional loan with the same
Through those contracts, obtaining
of the client's need for liquidity, monthly payment, a BBA contract
legal possession of a property and
whether it is an individual or an always results in the customer
transferring ownership from the
institution, to charge interest having a bigger financing debt at
bank to the customer and back to
implicitly by offering liquidity any given time
the bank is complicated

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