Commodity murabaha and tawarruq
The structure behind most Gulf personal finance and deposit products — and the most contested contract in common use.
How it works
The customer needs cash. The bank buys a commodity — typically metal traded on an international exchange — and sells it to the customer at a deferred mark-up. The customer immediately sells it back into the market, usually through the bank acting as agent, and receives spot cash. The customer ends the morning with money now and a larger fixed debt later.
Once you recognise the shape you see it everywhere in the region: personal finance, credit cards, interbank liquidity, and the profit paid on a deposit account.
The disagreement
Classical tawarruq — buying on credit and selling to an unrelated third party — is permitted by most of the schools. What is disputed is organised tawarruq, where the bank arranges both legs, appoints itself agent for the resale, and the commodity never meaningfully moves. The International Islamic Fiqh Academy resolved in 2009 that organised tawarruq is impermissible, on the reasoning that the two sales are agreed in advance and the commodity is a device. AAOIFI permits tawarruq only within conditions that a good deal of retail practice does not satisfy.
It remains in wide use because nothing else substitutes as readily for a cash loan. Sahn does not resolve this, and no one should present it as settled: it is the clearest case in ordinary Gulf banking where common market practice and the strongest scholarly bodies disagree, and anyone signing one of these contracts is entitled to know that beforehand.