Resolution No.(307)(15/2021): By The Board of Iftaa', Researches and Islamic Studies:
"Organized Banking Tawarruq is Forbidden from the Perspective of the Maqasid of Sharia"
Date: (25th of Jumada Al Oula, 1443 AH), corresponding to (30/12/2021 AD).
In the name of Allah, Most Gracious, Most Merciful
All perfect praise be to Allah, the Lord of the Worlds; may His blessings and peace be upon our Prophet Mohammad and upon all his family and companions.
On its sixteenth meeting held on the above date, the Board of Iftaa`, Research, and Islamic Studies reviewed the issue of organized banking Tawarruq* or what is sometimes called "Personal Finance" offered by some Islamic banks.
After careful consideration, the Board decided the following:
Unlike conventional banks, Islamic banks rest on meeting the Maqasid of Sharia (The higher objectives of Sharia) as well as observing its rulings. For this, their transactions, in essence, are based on supporting the real economy and applying the methods of investment, which comply with the rules of Sharia.
From the perspective of Sharia, in contracts, intentions and meanings, not words and structures, as well as outcomes shall be taken into consideration, so dealing with organized banking Tawarruq is prohibited based on the maxim "Prohibition of what may lead to sins", which is, in this case, Riba (Usury/interest). This is in addition to emphasizing that the difference between Islamic and conventional banks isn`t a mere difference of form. Moreover, this Tawarruq will have a negative impact of the Islamic economy because there is no real growth nor rotation of the economic sectors; consequently, many Fiqh academies, Fatwa houses, and the majority of the scholars issued Fatwas prohibiting organized Tawarruq.
During its 19nth meeting/2009 AD, the International Islamic Fiqh Academy issued a resolution prohibiting the organized banking Tawarruq or what is called "The Personal Financing." The reason for this is that there is explicit, implicit, or customary collusion between the financier (Bank) and the customer whereby the latter gets instant cash for a higher amount that he/she owes to the bank, and this is usury per se. We can add that this has been confirmed by the Iftaa` Board of Jordan through Resolution No.(3/2012) which considered organized Tawarruq as a form of circumventing Riba because the real objective is obtaining instant money in return for paying extra amount to the bank.
In conclusion, we confirm this Resolution and rule that Islamic banks must abide by the Sharia-compliant investment methods that achieve the higher objectives of Sharia. And Allah The Almighty Knows Best.
Chairperson of Iftaa` Board,
Grand Mufti of Jordan,
Dr. Abdulkareem al-Khasawneh
Dr. Mohammad al-Khalayleh
Prof. Mahmoud al-Sartawi/ Member
Dr. Majed al-Darawsheh/ Member
Sheikh Sa`eid Al-Hijjawi, Member
Judge Samer Al-Khobbaj/ Member
Prof. Adam Nooh Al-Qhodaat/Member
Prof. Amjad Rasheed/Member
Dr. Jamil Khatatbeh/Member
Dr. Ahmad al-Hasanat/ Member
Dr. Mohammad Younis Al-Zou`bi/ Member
* Tawarruq means a sale contract in which the buyer obtains merchandise on credit and then sells it at a loss to the original seller for cash. And Allah Knows Best