Islamiat MCQ #17650

In Islamic finance, the concept of "Tawarruq" (monetization) has been criticized by scholars because:

Islamiat MCQ #17650

  1. Question 1

    Q1. In Islamic finance, the concept of "Tawarruq" (monetization) has been criticized by scholars because:

    • A) It involves sharing profits with non-Muslim counterparties
    • B) It requires the purchase of gold which inflates commodity prices
    • C) It is only practiced in Gulf states and not recognized internationally
    • D) In its organized form, it may effectively replicate interest-based lending through a series of commodity sales

    Answer: In its organized form, it may effectively replicate interest-based lending through a series of commodity sales

    Explanation: Organized Tawarruq involves a bank purchasing a commodity, selling it to a client on credit, then buying it back at spot price — effectively creating cash liquidity in a structure that mimics an interest-based loan, leading scholars like AAOIFI to restrict it.