Sale buyback (bai' al I'na) and buy sale-back (tawaruq) are often confused and most independent Shariah councils/boards strongly recommend to avoid these rather fictitious legal tricks.

1. Islamic finance
Sale buyback (Bai’ al
I’na ) & buy sale back
(tawaruq) simplified
Tariqullah Khan

2. needs cash Client
but has an asset
ARRANGEMENT
Sale-Buyback (Bai’ al I’na)
Sell on cash – buyback on
installments

3. Step-2 Step-3
Step 1 Sale of car buyback of car
to the bank on deferred
for payment
Cash
$100
Receivables
$105

4. needs cash Client
but has no asset
ARRANGEMENT
Tawaruq (buy-sale back)
Buy on installments & sale
back on cash

5. Step-2 Step-3
Step 1 Buy the car Sell the car for
on
installments
cash $100
Purchase
and sale
back master
agreement
Receivables
$105

6. needs cash Client
but has no asset
ARRANGEMENT
Tawaruq (buy-
Murabahah & sale back)
Buy–murabahah installments
& sale back on cash
3rd Party

7. Step-2 Step-3
Step 1 Buy the car Sell the car for
on
Murabahah
cash $100
installments
Murabahah
purchase
and sale
back master
agreement
Receivables
rd $105
3 Party Step-4 sale back car to 3rd party

8. Client needs cash
Asset exists on balance sheet of the client
Bai’ al I’na- Sale buyback; Sale on cash –
buyback on installments
Asset exists on balance sheet of the bank
Tawaruq: Buy sale back; Buy on installments &
sale back on cash
Asset exists on balance sheet of 3rd party
Tawaruq: Buy–murabahah installments & sale
back on cash

9. Final word – all
independent Shariah
Councils strongly
recommend to avoid
these instruments of
legal arbitrage.