Possible applications of Tawarruq (commodity Murabaha) as a<br data-src=
May 28

Possible applications of Tawarruq (commodity Murabaha) as a
cash financing tool in Islamic Banks Institutions in Somalia

Islamic banking has grown in popularity since its introduction to the financial landscape in the
In the 1970s, it is now one of the most prominent participants in the banking services market.
Between 2014 and 2019, the Islamic finance sector grew at a quick rate of 7.8% each year
(Alpen Capital, 2021). Different sectors of Islamic finance, including Islamic insurance
(takaful), Sukuk, and Islamic funds, contributed to the rise, particularly through electronic modes
in all products and services. In recent decades, Islamic banking has grown to
become a fast-growing financial services sector and a global phenomenon. Despite the claim that
Islamic banking is merely a subsystem of a traditional financial system, the facts reveal that
Islamic banking has its own history and course, as well as its own set of norms and principles
(Haron et al., 2020). Islamic banking is sometimes referred to as an interest-free business strategy“Allah has allowed trade and has prohibited riba (usury)” (Al-Baqarah: 257).

Looking back to the beginning of 1970, not all Islamic banking instruments and models have
been fully developed, including tawarruq (also known as commodities Murabaha), which is a
relatively new product in Islamic banking. It was first introduced in Saudi Arabia in 2000, then
later in other GCC nations and Asian countries, including Malaysia, which is one of the most
developed countries in the Islamic financial sector. However, other Muslim countries, such
as Somalia, have yet to implement tawarruq, particularly tawarruq cash financing. Musse et
al. (2019) claimed that tawarruq is required as a means of cash financing because the Islamic
banking industry is experiencing a shortage of cash financing options.

Artcle by 1 Galad Mohamed Barre, 2 Razali Haron

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