The Difference Between Tawarruq and Types of Riba (Usury)
✍ Written by: Saudi Fatwa Committee (Fatāwā al-Lajnah ad-Dā'imah)
Riba (usury) refers to excess in exchange when dealing with the same category of goods. This is known as Riba al-Faḍl, such as:
✔ Exchanging one measure of a commodity for two measures of the same (e.g., one sā‘ of wheat for two sā‘), or
✔ Exchanging two dirhams for one, whether done on the spot or on credit.
If the transaction is credit-for-credit (i.e., both sides deferred), then it involves both Riba al-Faḍl and Riba al-Nasī’ah.
→ Example: Exchanging dirhams for dirhams with an increase — this is Riba al-Faḍl, whether done immediately or on credit.
The concept of Tawarruq has no connection with the above forms of riba.
Tawarruq means:
➤ Purchasing a commodity on credit, and then selling it — on the same day or after a few days — to someone other than the original seller, for cash.
✔ According to sound opinion and general Shariah evidences, this is permissible, as it provides ease and fulfills needs, such as for marriage or other financial necessities.
If a person sells the item back to the same seller from whom he had purchased it, then this is not permissible. This is called Bay‘ al-‘Īnah, and it is haram, because it is a disguised form of riba.
→ In Bay‘ al-‘Īnah, the commodity is merely used as a cover for an exchange involving increase in the same currency, whether the transaction is on credit or in cash — this constitutes riba.
✔ It involves purchasing a commodity (e.g., food grain, vehicle, land, etc.)
✔ For a fixed price, to be paid after a set term,
✔ Then selling that commodity for cash to someone else (not the original seller),
✔ So that the person can fulfill his needs (e.g., marriage, debt, business, etc.).
(Reference: Ibn Bāz – Majmūʿ al-Fatāwā wa al-Maqālāt, 19/245)
✍ Written by: Saudi Fatwa Committee (Fatāwā al-Lajnah ad-Dā'imah)
✦ Difference Between Tawarruq and the Two Forms of Riba: Riba al-Faḍl and Riba al-Nasī'ah
Riba (usury) refers to excess in exchange when dealing with the same category of goods. This is known as Riba al-Faḍl, such as:
✔ Exchanging one measure of a commodity for two measures of the same (e.g., one sā‘ of wheat for two sā‘), or
✔ Exchanging two dirhams for one, whether done on the spot or on credit.
If the transaction is credit-for-credit (i.e., both sides deferred), then it involves both Riba al-Faḍl and Riba al-Nasī’ah.
→ Example: Exchanging dirhams for dirhams with an increase — this is Riba al-Faḍl, whether done immediately or on credit.
✦ What is Tawarruq?
The concept of Tawarruq has no connection with the above forms of riba.
Tawarruq means:
➤ Purchasing a commodity on credit, and then selling it — on the same day or after a few days — to someone other than the original seller, for cash.
✔ According to sound opinion and general Shariah evidences, this is permissible, as it provides ease and fulfills needs, such as for marriage or other financial necessities.
✦ What Is Prohibited: Bay‘ al-‘Īnah
If a person sells the item back to the same seller from whom he had purchased it, then this is not permissible. This is called Bay‘ al-‘Īnah, and it is haram, because it is a disguised form of riba.
→ In Bay‘ al-‘Īnah, the commodity is merely used as a cover for an exchange involving increase in the same currency, whether the transaction is on credit or in cash — this constitutes riba.
✦ Summary of Tawarruq
✔ It involves purchasing a commodity (e.g., food grain, vehicle, land, etc.)
✔ For a fixed price, to be paid after a set term,
✔ Then selling that commodity for cash to someone else (not the original seller),
✔ So that the person can fulfill his needs (e.g., marriage, debt, business, etc.).
(Reference: Ibn Bāz – Majmūʿ al-Fatāwā wa al-Maqālāt, 19/245)
