What is tawarruq?
Posted: Wed Mar 25, 2015 8:54 am
What is tawarruq?
Tawarruq is where the financial institution (or person), either directly or indirectly, will buy an asset and immediately sell it to a customer on a deferred payment basis.
The customer then sells the same asset to a third party for immediate delivery and payment, the end result being that the customer receives a cash amount and has a deferred payment obligation for the marked-up price to the financial institution.
Tawarruq is where the financial institution (or person), either directly or indirectly, will buy an asset and immediately sell it to a customer on a deferred payment basis.
The customer then sells the same asset to a third party for immediate delivery and payment, the end result being that the customer receives a cash amount and has a deferred payment obligation for the marked-up price to the financial institution.