Tawarruq is an Arabic word that literally means minted silver (al-wariq) or the act whereby some person seeks silver money. Technically, it is a type of sale contract (bay’) in which a commodity is bought with deferred payment and sold to a third party (a person other than the buyer) for immediate cash. In other words, tawarruq refers to purchasing a commodity on credit and selling it to a person other than the original seller for a cash (spot) price. The term “tawarruq” was commonly used by Hanbalis (Hanbali school of thought or mazhhab). Other schools of thought use different terms such as bay’ al-ajal (deferred payment sale) to denote the meaning of tawarruq.

Tawarruq is permissible under shari’a based on the general permissibility of sale in Quran and the sunnah. It is also permissible based on analogy (qiyas) since it bears resemblance to other contracts of sale which entail by nature the transfer of ownership against the payment of price (or generally badal).