The Issue of At-Tawarruq

Question :

We hear from those who study in the Masjids that selling and buying interest payment is forbidden. So, what is your opinion concerning someone who buys some item, pays its value and takes possession of it from its (original) owner, then the other man comes to him and buys it back for more than its value to be paid back at the end of a year's time?

Answer:

Selling possessions for payment to be made later at a price more than its current price is known among the people of knowledge as the issue of At-Tawarruq. The preferred view among the Hanabilah (followers of the Hanbali Mathhab) is that it is permissible. Shaykhul-Islam Ibn Taimiyyah said, "If the oneThe Book of Sales Transactions who buys the product has no need of gold and silver, he buys the product to sell it for that which he needs. If the product returns to the original buyer, then that is that which there is no doubt concerning its forbiddance. If he sells it to other than the original buyer in a complete sale and it does not return to the first person in any way, the Salaf have differed concerning its dislike, and they call it At-Tawarruq. 'Umar bin 'Abdul-'Aziz disliked it and he said that At-Tawarruq is the brother of Riba. Iyyas bin Mu'awiyah allowed it. There are two different opinions recorded from Imam Ahmad about it." He (Ibn Taimiyyah) also said, "Whoever takes a loan from a man, there are three aspects to it:

The first: That there is a secret verbal or understood agreement between them that the person buys the product from the owner of the store, then the buyer sells it and it returns back to the owner of the store. That is not permissible.

The second: That he buys the product from him then he returns it to him. This is not permissible due to the Hadith of slave woman of Zaid bin Arqam.

The third: That he buys the product from him in a confirmed sale, then secondly, he sells it to a person who is seeking a loan so that one of them can sell it. This is called At-Tawarruq, because the intent of the buyer is to get money. So he takes 100 and he owes 120, for example. The Salaf disputed over this. The strongest view is that it is prohibited. Umar bin 'Abdul-'Aziz said, 'At-Tawarruq is Riba.' For verily, Allâh has forbidden taking dirhams for more dinars on delayed payment. This is due to what that contains of harm for the person in need and devouring his wealth in falsehood. This meaning is present in this form of dealing, and actions are only according to the intentions. And that which Allâh allowed is selling and business." This ends the statement of Shaykhul-Islam.

However, if the intention of the buyer is to use up the item that he bought or he intends to do business with it, then it is permissible for him to sell it on credit for more than its current price, if that is after the seller has possessed it. And success is from Allâh. May Allah send blessings and peace upon our Prophet Muhammad, his family and his Companions.

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