'Sukuk alternate solution to tawarruq'
In its basic form, tawarruq allows the sale of an asset on a
deferred payment basis. Picture: BT file
Debbie Too
BANDAR SERI BEGAWAN
Sunday, March 14, 2010
ISLAMIC financial institutions looking into tawarruq, a controversial
Islamic financing structure, should instead consider sukuk ijarah, or
Islamic bonds, when looking at options to raise cash, a study said.
In
its basic form, tawarruq allows the sale of an asset on a deferred
payment basis. The purchaser then sells the asset to a third party to
get cash. But so-called organised tawarruq has divided scholars who
debate whether allowing such transactions via banks still meet syariah
laws.
In a paper, Shochrul Romatul Ajija, an Indonesian student
taking her Master of Economics at the International Islamic University
Malaysia, said tawarruq is gaining popularity in Malaysia and has been
established as syariah-compliant. "It helps people who need cash on
short notice ... it is not a loan," she said.
She said should
Brunei wish to start providing tawarruq financing, it can be done to
help people who are in need of cash in the short term.
But in
her paper, Shochrul said that if Islamic financial institutions need an
alternate solution to prevailing liquidity management challenges, they
can turn to sukuk ijarah, or Islamic bonds.
Sri Anne Masri, a
local Islamic business consultant, said, "The Islamic banking industry
must seriously differentiate itself from the conventional banks, not
just by replicating conventional products." She added that tawarruq is
being used today as either a liquidity facility (inter bank placement)
or a credit facility (credit financing) as it is a highly profitable
business.
The First Global Investments, an Islamic investments
firm, defines tawarruq as, reverse murabahah. "As used in personal
financing, a customer with a genuine need buys something on credit from
the bank on a deferred payment basis and then immediately resells it
for cash to a third party. In this way, the customer can obtain cash
without taking an interest-based loan," it said.
Shochrul said
that the use of tawarruq came under scrutiny because people were
finding it difficult to find other brokers to sell their tawarruq to,
and that was when the banks started to arrange buyers and sellers in
order to make the sale, which is prohibited in the syariah context.
"This is what is called organised tawarruq and it is not
syariah-compliant," she said.
In her paper, she said that should
Islamic financial institutions decide to use tawarruq, they should note
that it should "only be used in extreme cases where no option is
available, to avoid interest".
She said that widespread use of
tawarruq is harmful to the industry in the long run, stressing syariah
boards have to "strictly monitor all tawarruq-based transactions".
The
Organisation of Islamic Conference Fiqh Academy, an Islamic studies
academy in Jeddah, Saudi Arabia, in April 2009, ruled that organised
tawarruq was "impermissible" due to the arranged nature between the
Islamic financial institutions and the people.
The Brunei Times
http://www.bt.com.bn/en/business-national/2010/03/14/sukuk-alternate-solution-tawarruq
Shochrul Rohmatul AjijaMaster Student of EconomicsInternational Islamic
University Malaysia(+6014-9306816)"Ya Muqollibal qulub tsabbit qolbi 'ala
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