Permissibility of tawarruq is based on the general principles of a typical contract of sale and the absence of any modicum of interest in this transaction.

Question

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Tawarruq is considered permissible in Islamic finance because it adheres to the principles of a typical sale contract without involving interest (riba), which is prohibited in Islam. This transaction involves buying an asset on deferred payment and selling it at a lower price for immediate cash, without engaging in interest-based transactions.

Permissibility of Tawarruq Is Based on the General Principles of a Typical