Tawarruq (تورق) refers to the process of buying a commodity on a deferred payment basis and then selling it on a cash basis to a third party (i.e., a person other than the seller- who is the creditor or muwarriq) at a lower price, in order for the buyer-cum-seller (mutawarriq/ mustawriq) to obtain liquidity to satisfy his financial needs (consumption, debt settlement, etc.)
On the other hand, tawreeq (توريق) constitutes the process of issuing certificates that represent debts and loans (generally any type of obligations). The issued certificates (or securities) can be traded in financial markets like stocks and bonds. In this sense, the underlying debts and loans are actually traded as assets. The securitization process need not be limited to debts, but rather it can be undertaken to divide ownership of tangible assets, usufruct (manfa’ah) or both into units of equal value, and then to issue securities representing their values.
Despite the common root of the two Arabic terms, tawarruq and tawreeq are two different concepts and do not relate to each other in any manner.
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