Question

EXPLAIN THE 10 SIMILARITIES OF BAY AL-INAH AND TAWARRUQ CONTRACTS IN CONTEMPORARY ISLAMIC FINANCING PRODUCTS

Answer 1

Almost all features of BAY AL-INAH AND TAWARRUQ CONTRACTS are same. A Bay-al Inah is very similar to tawarruq, but in tawwaruq there will be a third party that is involved in this type of Islamic finance as an intermediary.

1. Both acheive the purpose of creating liquidity

2. Create effective forward transactions

3. Both have a validity of purpose issue

4. Both charge a delivery process fee

5. The Bank acts as a dual agent in both

6. Both seem like a Hilah (trick) to charge interest

7. Both encourage the proliferation of debt into the economy

8. Accounting risk - huge risk of no one booking the transaction in their books

9. Barrier to true risk sharing

10. Both has permissibility issues

Answer