Fatwa on the Payment of Zakat using Dinar and Dirham (Part 8 – Questions on Zakat)

21 Sep

The Issues with Paper Money
The Question of Dayn

By ignoring the true nature of Riba an-nasiah, modernist and constitutionalist scholars have avoided confronting the issue of paper money. Let us look at this issue which the modernists have missed. Paper money can be considered as ‘ayn or as dayn.

A] If we accept the fact that paper money is dayn, it means that it is an obligation to pay a certain amount of ‘ayn. Then paper money cannot be used in exchange and it is forbidden in two practices:

1) Dayn cannot be exchange for dayn. Paper money for paper money is a debt for a debt, which is prohibited. Malik said:

‘[the disapproved transaction] Delay for delay is to sell a debt against another man for a debt against another man.’

2) Dayn based on gold and silver cannot be exchanged against gold or silver, because that is against the fundamental command related by Imam Malik:

‘Yahya related to me from Malik from Nafi’ from Abu Sa’id al-Khudri that the Messenger of Allah, may Allah bless him and grant him peace, said, “Do not sell gold for gold except like for like and do not increase one part over another. Do not sell silver for silver, except like for like and do not increase one part over another part. Do not sell some of it which is not there for some of it which is.””

B] If we accept that paper money is ‘ayn, its value is the weight of the paper, not what is written on it. If the value of the paper is increased by compulsion, the value is corrupted and the transaction is void according to Islamic Law. Paper money is used by the State as an (illegal) tax and it cannot be presented as an Islamic means of payment.

Understanding Riba an-nasiah is fundamental to being able to understand our position regarding paper money. The reason why the modernist ulema took their twisted position on Riba was clearly to validate the unthinkable: banking. This justification later turned into Islamic banking. The principle of darurah combined with the elimination of Riba an-nasiah has allowed them to justify the use of paper money and in turn to justify fractional reserve banking which is the basis of the modern banking system.

A proper understanding of Riba an-nasiah reveals paper money to be a form of Riba in itself, because it is intended to be used in a way that is not permitted.

The Question of Jurisdiction

Allah says in the Qur’an:
And amongst the People of the Book there are those who, if you were to entrust them with a treasure (qintar), he would return it to you. And amongst them is he who, if you were to entrust him with a dinar would not return it to you, unless you kept standing over him. Qur’an (3,75)
Qadi Abu Bakr Ibn al-Arabi, the greatest authority on Qur’anic Law wrote in his famous “Ahkam al-Qur’an” about this ayat:
“The benefit that can be taken from this is the prohibition of entrusting the People of the Book with goods”.
Qadi Abu Bakr said: “The question concerning entrusting property is legislated by the text of Qur’an.” This means that the ayat is a legal judgement of absolute validity and of the greatest importance to the deen.
Entrusting wealth to non-Muslims is not allowed, but furthermore, taking a non-Muslim as a partner outside Dar al-Islam (where we stand over them) is extremely restricted, because they might be unjust or might use our wealth in forbidden transactions.

Since paper-money is a promise of payment, can it be permitted to trust the issuers while they hold the payment (our property) outside our jurisdiction? History has also demonstrated repeatedly that paper money has been a permanent instrument of default and cheating the Muslims. In addition, Islamic Law does not permit the use of a promise of payment as a medium of exchange. This means that foreign paper money cannot be accept as a means of payment, let alone, to be used as a reserve for our own issuing of paper money.

The Question of Legal Tender

Any Law that restricts imposes a particular medium of exchange has no basis in Islam. The Laws of Legal Tender are alien to Islam. The present paper money has its value only because of legal compulsion and this has no basis in Islam. All transactions must be conducted as Allah mentions in Qur’an:
‘Ya ayyuha allathîna amanû la ta/kulû amwalakum baynakum bialbatili illa an takûna tijaratan AAan taradin minkum wala taqtulû anfusakum inna Allaha kana bikum rahîman.’
“Eat not up your property among yourselves in vanities by let there be amongst you trade by mutual good will.”
Qur’an 4, 29

The Tafsir al-Jalalayn says,

‘O you who believe, consume not your goods between you wrongly, unlawfully according to the Law, through usury or usurpation, except it be trading (tijaratan, also read tijaratun), so that the goods be from trade effected, through mutual agreement, through mutual good-will: such [goods] you may consume. And kill not yourselves, by committing what leads towards destruction on account of some affiliation, be it in this world or the Hereafter. Surely God is ever Merciful to you, when He forbids you such things.’
The Tafsir Ibn Abbas

‘(O ye who believe! Squander not your wealth among yourselves in vanity) through transgression, usurpation, false testimony, lying in oath or through other unlawful means, (except it be a trade by mutual consent) except if there is mutual agreement between you in the course of buying and selling or in abating the price in selling (Muhabat), (and kill not one another) without justified right. (Lo! Allah is ever Merciful unto you) when He forbade you to kill one another without such a justification.
Trading has to happen by mutual consent. Therefore the Law Legal Tender is not acceptable in Islamic Law.

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Posted by on September 21, 2011 in Uncategorized


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