The Application of Al-Tawarruq in Personal Financing: Evidence from Islamic Banks in Malaysia

Authors

  • Muhamad Mu'izz Abdullah Research Centre for Sharia, Faculty of Islamic Studies, Universiti Kebangsaan Malaysia, 43600 UKM Bangi, Selangor, Malaysia
  • Fauzan Abu Hashim Research Centre for Sharia, Faculty of Islamic Studies, Universiti Kebangsaan Malaysia, 43600 UKM Bangi, Selangor, Malaysia
  • Soleh Abd Karim Research Centre for Sharia, Faculty of Islamic Studies, Universiti Kebangsaan Malaysia, 43600 UKM Bangi, Selangor, Malaysia
  • Yazid Hamzah Research Centre for Sharia, Faculty of Islamic Studies, Universiti Kebangsaan Malaysia, 43600 UKM Bangi, Selangor, Malaysia
  • Nik Abdul Rahim Nik Abdul Ghani Research Centre for Sharia, Faculty of Islamic Studies, Universiti Kebangsaan Malaysia, 43600 UKM Bangi, Selangor, Malaysia

DOI:

https://doi.org/10.53840/jmm.v15i2.264

Keywords:

Bai’ al-Tawarruq, Murabahah, Bank Muamalat, Bank Islam, Personal Financing

Abstract

Bay' al-tawarruq is among the Shariah contracts that has become increasingly popular in the modern financing of Islamic banking products. However, the application of this contract among the Islamic banks in Malaysia demonstrates notable variations in practice. Therefore, this study focuses on the implementation of personal financing products involving these contracts and determines their significant challenges. Bank Islam Malaysia Berhad (BIMB) and Bank Muamalat Malaysia Berhad (BMMB) are selected as the sample Islamic Financial Institutions (IFSs) to examine the application of the al-tawarruq contract. This study employs a qualitative approach based on content analysis. The data obtained is then analysed descriptively. This study employs a qualitative approach based on document and content analysis, using product manuals, policy documents, and regulatory guidelines. The findings reveal that both banks extensively use bay’ al-tawarruq in personal financing to ensure Shariah compliance, despite criticisms and operational challenges, such as Shariah alignment, commodity validation, and overreliance on a single contract. The study highlights the need for diversification and continuous improvement in Shariah-compliant financing models to maintain industry credibility and sustainability.

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Published

2025-11-26

How to Cite

Abdullah, M. M., Abu Hashim, F., Abd Karim, S. ., Hamzah, Y., & Nik Abdul Ghani , N. A. R. (2025). The Application of Al-Tawarruq in Personal Financing: Evidence from Islamic Banks in Malaysia. Journal of Management and Muamalah , 15(2), 194-207. https://doi.org/10.53840/jmm.v15i2.264

Issue

Vol. 15 No. 2 (2025): Journal of Management and Muamalah

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Articles

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