The Formation of Tawarruq Security Alternative to Bonds for Fiscal Policy

Abstract

With regard to the prohibition of Riba in Islam, it is important to find an alternative to bonds that would be effective for financing the government deficit. In this case securities based on loan contract have been introduced that are not a proper substitute for bonds because these securities are faced with restrictions to be investigated in this paper. The present research explains the formation of Tawarruq securities as a proper alternative to bonds in five steps, and by comparing different securities in Islamic countries comes to the conclusion that based on interest free financial instruments, Tawarruq securities can be suitable substitutes for bonds. Therefore, as it is legitimate and relevant to the real market, it is also a proper tool for fiscal policy.

Keywords

• Ttawarruq Contract
• Interest Free Banking
• Tawarruq Security
• bonds
• Provide Liquidity