Monetization (Tawarruq) — practice questions

Correct answer: D. Clause 2: Monetization is the purchase of a commodity for a deferred price, determined by Musawamah or Murabahah, and its sale to a third party for a spot price to obtain cash. ’Inah is the purchase of a commodity for a deferred price and its sale for a lower spot price to the same party from whom it was bought. Clause 4/5 therefore requires that the commodity be sold to a party other than the original seller and not return to the seller by prior agreement, collusion or custom.

Correct answer: B. Clause 4/1: The requirements of a deferred sale (Musawamah or Murabahah) must be met, with due regard to Shari’ah Standard No. (8); there must be a real commodity owned by the seller before sale; any binding promise must be from one party only; and the commodity sold must not be gold, silver or any type of currency, since their deferred sale would violate the rules of Sarf. Clause 4/3 adds that local commodities are preferable.

Correct answer: A. Clauses 4/2 to 4/4: The commodity must be well identified so as to be distinct from the seller’s other assets, by separating it or recording the numbers of its identifying documents such as storage certificates. If it is not available at signing, the client must be given a full description or sample indicating its quantity and storage location so that the purchase is real, not fictitious; local commodities are preferable. The buyer must actually or constructively receive the commodity, with no further condition or procedure remaining.