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Abstract

International Islamic religious authorities have commented negatively on the application of baiʿ al-ʿīnah (same-item sale-repurchase) in the Malaysian banking industry. These authorities include the Islamic Fiqh Academy of the Organisation of Islamic Cooperation (OIC) and Accounting and the Auditing Organisation for Islamic Financial Institutions (AAOIFI). They conclude that the application represents a prohibited ruse to legitimise usury through a sale transaction. This article examines the possible use of classical tawarruq as an alternative to baiʿ al-ʿīnah in the Malaysian banking industry, especially for retail financing. Several modes of classical tawarruq are considered. This research supports the application of classical tawarruq as an effective, viable and marketable Islamic financing arrangement.

In: Arab Law Quarterly