Jurisprudential and Efficiency Analysis of Tawarruq Contract in Interest-Free Banking

Liquidity is one of the most serious needs of economic participators in the world today. In interest-free banking laws this need has been fulfilled throughQardhul-Hasanah, discounting of bills and Salaf contracts. Each one of these contracts has its own limitations, which have been brought under discussion.Tawarruq contract, with its own peculiarities, such as making the free sources available for the customers, can become a subject of attention for the banks and economic firms. Tawarruq is a contract which consists of two sales: one credit and the other cash, and its goal is to arrange liquidity. For some period the mentioned contract is being used in Arabic banks and has become popular among banks and their customers. However, it has also attracted many discussions within Sunni blocks with respect to its jurisprudential and economic aspects.The present article strives to perform a jurisprudential and bankingefficiency study of tawarruq contracts in interest-free banking, based on Shiite jurisprudence. The research method has been library oriented, based on analysis of written works. Assumption of the article is that, first: the tawarruq contract is permissible in Shiite fiqh; second: tawarrruq is one of the banking contractsaiming liquidity for the bank and the customers. Similarly while comparing it with other interest-free banking contracts, we concluded that tawarruq can play a complementary role for Murabaha and Installment sales contracts.