Tawarruq (also spelled as Tawarruk and Teverruk) selling is buying a goods on credit and selling it to a third person in cash. Teverruk is a financial method which has been known and applied for years. In literature, in earlier times, it had been accepted in beyu’l-ine, it has been an independent contract later on. Today, unlike previous times, it has been put in a form of financial product package, complex and composed of many processes. Teverruk can be defined as accepted commonly:”Teverruk is selling a goods in cash cheaply to get ready money, after buying it on credit and taking over.”
Most important difference between Tawarruq and beyu’l-ine which accepted by many of the fiqh experts as illegal is that in Tawarruq , selling goods to other out of seller; but in beyu’l-ine, selling goods to directly or turning back to seller with coming into a third person,indirectly.
There are mainly two types of Tawarruq today. These are : a) Indivudial (canonical) Tawarruq , b) Organized Tawarruq .
Indivudial Tawarruq is a process in which a goods is bought on credit and sold to a third person out of seller at a cheaper price, in cash, to get ready money.
Organized Tawarruq is a tawarruq process acted by a seller or a capital owner and person who demands cash and in a way of system they formed on agreement ,together. Organized tawarruq is divided into two groups:
A- ) Bank Tawarruq : Bank tawarruq is acted generally between a person who is in need of cash and the bank.
B- ) Inverse Tawarruq : Inverse tawarruq is generally acted between great-valued capital owners and financial enterprises on purpose of investment or liquidation. In indivudial and bank tawarruq, aim is to get ready money, but in inversetawarruq, aim is to put extra money into the bank in return of definite income. Indivudial tawarruq is acted between people, but organized tawarruq is a financial market product.
Application of bank tawarruq: This is a method generally applied for people who want to supply cash needs of persons or companies and to pay for the debts to the banks. The customers provide cash need, and pay for their debts and they start to pay for their debts in an appointed time intervals.
Application of inverse tawarruq : This is a new and a sophisticated financial product which has been formed by financial engineers today by combining independent contracts such as selling, vedia (thing depozited or given into safekeeping), vekalet (a being an agent or representitive of another), murabaha (usury), va’d (to fulfill one’s promise), and “make discount and take it in cash”. It is an improved type of traditional tawarruq. In traditional tawarruq, this method was used by people in need of cash, but today, people and financial establishments who have extra money use this method as a product of income-earning. Besides, in general, it is a financial instrument which is applied by financial institutions which were established for interest-free banking for liquidation purposes.