Fatwa of the Supreme Council for Sharia Supervision Regarding the Tawarruq Cap

Fatwa of the Supreme Council for Sharia Supervision Regarding the Tawarruq Cap

Addressing the recent financial and economic crises, particularly in Saudi Arabia, which have caused payment suspensions affecting salary disbursements and business sectors, alongside the "corona" crisis that has triggered economic downturns impacting citizens' purchasing power and commercial activities.

The Supreme Council for Sharia Supervision, while issuing this fatwa to address the crisis, has consulted experts and specialists in domestic and economic affairs. It confirms that Tawarruq requires an additional amount (compared to conventional financing) in domestic and economic crises, especially when it affects citizens' purchasing power on essential goods.

Furthermore, based on general principles of Islamic jurisprudence (public necessity overrides prohibition, whether public or private; and necessity is assessed by its extent), and relying on the "Al-Tahqiq" fatwa no. 30 of the Sharia Supervision Board (dated 14/5/1442 AH), along with resolutions from the international Islamic Fiqh Academy, and reviewing scholarly opinions and precedents within the Council's framework, it has reached the following Sharia ruling:

First: There is no religious objection to Tawarruq for individuals who intend to delay payment, provided that the Tawarruq limit does not exceed 1% of their income/salary, fulfilling the conditions of Sharia compliance.

1. The Tawarruq transactions mentioned in fatwa no. 30 of the Sharia Supervision Board (dated 14/5/1442 AH).
2. The involvement of individuals and institutions, fulfilling the underlying Sharia contract.
3. Ensuring a minimum limit of up to 1%.

Second: The necessity and reasons for permitting Tawarruq: There is no religious objection to individuals delaying payment, whether partially or fully, based on the individual's desire and choice during the crisis period, with mutual agreement, one contract, applying the principle "either it is assessed or it is lifted". Because necessity in Tawarruq is an additional amount on the principal, here it is a sale and purchase (Tawarruq) to pay off debt if desired, with the principle "either it is assessed or it is lifted".

Third: The Supreme Council's ruling on ending the Tawarruq period upon ending the corona crisis or by 1/1/2021: Based on "what is permissible for a person with its cause, and the principle: if the cause ceases, the ruling ceases" (Articles 23, 24 of Civil Transactions Law). There is an agreement between the bank and individual; no objection to a 6-month period from contract date (1/1/2021) and payment period not exceeding 18 months, unless the individual requests extension.

Fourth: If the individual requests early settlement, the Sharia Board allows compensation or extending the payment period fully, or the bank compensates the individual for up to 5 years of fees. It cites scholarly opinions on early settlement and debt repayment, noting that the bank's right to compensation is based on Sharia principles, and if the debtor pays early or dies, the heir inherits the right to compensation unless otherwise specified.

Fifth: The Supreme Council's ruling on individuals delaying payments and fulfilling conditions is a matter of individual desire, choice, and consent, without compulsion or excessive fees.

Sixth: The Supreme Council for Sharia Supervision emphasizes that Tawarruq for individuals adheres to the principle: "either it is assessed or it is lifted", because necessity in Tawarruq is an additional amount on the principal, here it is a sale and purchase (Tawarruq) to pay off debt if desired. If there is consensus on this ruling, the Sharia Board's decision stands, and citizens benefit from Sharia-compliant financing without excessive fees. This has been reflected in practical financial applications, considering the crisis state and its assessment, as necessity renders prohibited things permissible, and reducing economic crises in Saudi Arabia aligns with these principles. The Council based its ruling on the following:

1. Allah's saying: ﴿وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا﴾ [Al-Baqarah: 275], which indicates the permissibility of all transactions, and Tawarruq is among permissible commercial transactions, except what evidence indicates otherwise. The word "sale" is general, so the ruling applies to all sales for any price.
2. What is recorded in "Al-Muwatta" and other sources from Abu Sa'id al-Khudri and Abu Hurairah (may Allah be pleased with them) regarding selling a year's supply of dates for immediate payment vs. deferred, and the Prophet's (peace be upon him) permission for this sale type to meet needs without violating contract boundaries, and it is a compensation for the sale's purpose and conditions.
3. Tawarruq is based on the individual, unlike Bai' al-Inah (which has a hidden usury element), because Tawarruq involves two separate transactions, not one.
4. The fourth point regarding the scholar's view on deferred sales (Bai' al-Mu'ajjal) and its validity, citing scholars like Ibn Qudamah, Al-Tusi, etc., on the permissibility of deferred sales and their equivalence to cash sales.
5. The principle in Islamic jurisprudence is permissibility (Al-Asl fi al-'Uqud al-Ibahah), and Tawarruq falls under this, with no evidence restricting it.
6. Islamic jurisprudence aims to remove hardship and benefit the public, applicable across time and place, with primary objectives being preserving religion, life, intellect, lineage, and wealth. In crises, general principles of necessity apply (necessity renders prohibited things permissible, public/private necessity are equal, etc.).