What is the ruling on taking out a loan through tawaruq (monetization), by selling a commodity to the bank and then authorizing it to sell it and collect its price in cash, knowing the type of commodity without receiving or seeing it?

The scenario described is not a genuine Tawarruq; rather, it is a form of deception and manipulation. The International Islamic Fiqh Academy has issued a statement declaring the impermissibility of modern banking Tawarruq, in which the bank sells a commodity to the client (mustawriq) for a deferred price, then undertakes to sell it on his behalf to a third party for an immediate cash price, and delivers the cash price to the mustawriq.

Reasons for impermissibility: 1. The seller's (bank's) commitment to act as an agent in selling the commodity makes it similar to the prohibited 'Inah transaction. 2. This transaction leads to a violation of the conditions of valid legal possession (qabd). 3. It is based on providing cash financing with an increment from the bank through, in most cases, fictitious buying and selling transactions.

The permissible, genuine Tawarruq, according to jurists, is different. It is based on a real purchase of a commodity that enters into the ownership and possession of the buyer, who then sells it himself. The bank does not intervene to generate an increment on the financing through fictitious transactions. The Academy advises banks to avoid prohibited transactions and to rely on genuine Sharia-compliant transactions.