Tawliyah - ijaraCDC

Tawliyah

Choosing Tawliyah As Your Islamic Finance Option

Bayu-Al-Amanah  is a type of fiduciary sale in the Islamic finance world. There are three different types of Bayu-Al-Amanah that can be employed depending on the financial situation at hand and one of these is Tawliyah, which represents a sale at cost.

In order to understand what Tawliyah is, you have to understand what Bayu-Al-Amanah is. It is a term used in Islamic finance that refers to a fiduciary sale, which is broken down depending on what type of sale is being conducted for the purpose of a Muslim mortgage. When you are in the process of taking out a Muslim mortgage, it is important for you to consider the three Bayu-Al-Amanah vehicles so that you can choose the right type of sale to meet your needs.

These types of Bayu-Al-Amanah essentially describe how the seller is treated during the fiduciary sale. For example, with Murabaha, the seller gains something in the sale. With Wadiah, on the other hand, the seller is taking a specified loss during the sale. When it comes to the Tawliyah version of Bayu-Al-Amanah, however, the sale is made at cost which is going to mean that there is neither a loss nor a gain on the behalf of the seller. This type of sale applies not only to Muslim mortgage agreements, but to other types of sales as well including installment sales. Islamic banks and lending institutions can use these different structures in order to provide the right type of financing for their clients, providing them with the ability to make credit purchases and credit sales.

Tawliyah is a relatively broad concept in nature. It defines a type of transaction, but aside from the basis that the sale is made with neither a loss nor a gain, there is not much more to this type of transaction. It defines how the bank or the lending institution handles the sale, but there are a variety of ways that a Tawliyah sale can be handled as part of Bayu-Al-Amanah depending on the individual buyer and seller at play.

As a borrower who is working with an Islamic finance company or a Muslim borrower who is working with any finance company around the world, it is important to consider the three types of Bayu-Al-Amanah especially when it comes to Tawliyah. It is beneficial to look at each type of Bayu-Al-Amanah and the specifics that they offer to the buyer and the seller in order to determine which type of sale is going to meet your needs in the most effective manner. Also, it’s important to consider how each type of Bayu-Al-Amanah is going to impact the seller, the bank or the lending institution.

Islamic finance does not work quite in the same way as finance in other countries, and so you need to have a thorough understanding of the ins and outs of Islamic finance and Muslim mortgage rules prior to making a purchase in this arena.