Examining the Practice of Tawarruq Credit Financing in Malaysian Credit Co-operatives

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Hassan R., Hamidi H.

International Conference on Business and Technology (ICBT), İstanbul, Turkey, 6 - 07 November 2021, vol.487, pp.259-269 identifier identifier

  • Publication Type: Conference Paper / Full Text
  • Volume: 487
  • Doi Number: 10.1007/978-3-031-08084-5_20
  • City: İstanbul
  • Country: Turkey
  • Page Numbers: pp.259-269
  • Keywords: Tawarruq, Commodity Murabaha, Credit co-operatives
  • Middle East Technical University Affiliated: No


Credit co-operatives are one of the co-operatives that contribute to Malaysia's economic development and progress. These co-operatives have provided credit facilities to their members, either individually or institutionally. Nowadays, credit co-operatives have applied an Islamic contract known as Tawarruq. However, there is limited research and literature on the practices of Tawarruq in this sector. Many studies only focused on the Tawaruq practices of Islamic Banking Institutions (IBs). While Tawarruq practices in IBs face some issues, the question is whether the same issues apply to the credit co-operatives. Therefore, this study focused on the application of Tawarruq practised by the credit co-operatives. This study was conducted qualitatively by compiling data and information from interviews with the management and observations on the process and other related documents. This study revealed that credit co-operatives contain two modes of Tawarruq arrangements or transactions. The first arrangement is credit co-operatives acting as principals, while the second arrangement is credit co-operatives acting as agents. Hopefully, the findings will provide a good understanding of Tawarruq practices in this sector.