The Messenger of Allah (blessings and peace of Allah be upon him) said: “Gold for gold, silver for silver, like for like, same for same, hand to hand. If any of these things are different, then sell however you like, so long as it is hand to hand.” Narrated by Muslim (2970).The scholars of the past, may Allah have mercy upon them, had done some qiyas and included to the list various products which I think is a different issue.
The scholars of our time have included the paper money/fiat currency to gold and silver using qiyas. Based on what I have researched, I believe this is not a right qiyas assuming the qiyas is a source of shariah. This neglects/misses the hikmah of the hadith and perhaps ironically serves as a tool against what is intended by the very hadith, Allahu A’lam.
This hadith should have been taken within its apparent meaning with no qiyas for shari’ rulings, but perhaps for an Islamic ruler the hikmah behind this hadith could have been helpful when he, for instance, had to decide to freeze/stop in the markets certain transactions for the benefit of the ummah on a temporary basis.
Gold and silver had historically been a medium of exchange. And what I have understood from the hadith and my own research is that it is permissible that gold/silver is exchanged for the purpose of loan but not as a transaction such as sale/purchase except when it is like for like, same for same and hand to hand. If we think about it, such sale/purchase transactions would be very rare in comparison with other transactions in the market except when someone needs to change his gold to silver or vice versa, and to convert into smaller silver/gold coins/parts, otherwise there is no much point in changing the same gold/silver to the same, like for like. So, why the Prophet peace be upon him would forbid this? Allah and His messenger know best.
I have the below points for clarification:
i. Current financial system which is based on riba
Paper money/fiat currencies (all that I am aware of) originated using the gold standard which is a monetary system where a country’s currency or paper money has a value directly linked to gold. At the beginning, people believed the paper they hold has value in gold so they had confidence and trust to use them as a medium of exchange. The trend continued until people started to see a value in papers they use (e.g. now), then the countries stopped backing their currencies by gold. As per the hadith, linking paper money to gold as a medium of exchange would have been haram. (?).
After abolishing the gold standard, now governments can print money as much as they want, and nowadays they don’t even have to print, it is just a number to add, although they use fancy words that ordinary people don’t understand such quantitative easing etc. when they refer to printing money. Moreover, releasing money to circulation is based on the riba in the west and other countries including Muslim majority countries.
The hadith indicates that we have to use gold/silver.
ii. Implications of using paper money/fiat currency
This has directly resulted in social injustice and unjust wealth distribution within the nations and across the nations. The value of the paper money can be controlled by the central banks on top of the demand and supply in the market. This is unlike gold/silver where only market conditions would determine the price/value.
In simple terms, even if the market conditions remained unchanged my 100 GBP would not have the same value in a year because the government would decrease its value by their so called “targeted inflation” policy. So, I have to either spend it, invest it or give it as a loan to a riba based bank. The list goes on…
Fiat currency has caused the prices for good/services higher as it is very easy to transact with – you may have billions in your card and you can go anywhere you want and spend in any way you want, which would not be the case with gold/silver. This has also given an opportunity to the greedy to collate more than they could. If they had 100kg of gold they would struggle to keep/preserve it, but with paper money, this is not an issue for them. Other impacts like this which are only known to Allah has created unjust wealth distribution in our times within society.
iii. Imbalance in international political landscape.
Now that governments do not follow the gold standard, they keep foreign currency reserves, in gold and other assets. The US dollar is apparently by far the most important currency in global reserves, accounting for some 66% of the total at the end of 2004 according to the IMF Annual Report 2005. Basically, other countries have to keep USD or other western currencies to take part in the international financial market. As we said these currencies are nothing but a promise for a monetary value (which decreases in value all the time) and can be “printed” as much as the owner government wants (such was the case during Covid in US/EU/UK). These governments may put any country into sanctions list if they want to.. This list goes on too…
As a conclusion, I think, the intention behind the hadith was to keep gold/silver as a medium of exchange. And we seem to have got it so wrong so much so we made something impermissible permissible and moreover put in in the same status as gold/silver unintentionally.
Now based on the above, please let me know if this qiyas – adding paper money to the list of gold/silver- was correct or not, what are the implications of this? I know it is not Muslims who invented the paper money, but we made it permissible for ourselves in the past and now? Muslim nations followed their method in introducing paper money and all of them keep their reserves in riba based western currencies, our central banks follow a monetary system which is again riba based.
Haven’t we got this wrong initially and created unfounded/unnecessary hardship to individual Muslims, although the challenge should be directed to Muslim nations’ leaders/governments for enforcing riba over the ummah? Individual Muslims get their salary/wages in an exchange to their work/products based on the custom now without full story, but if all were aware this issue, that would be the first step…
Before we can go into the application of riba with fiat currencies, we have to first understand the ruling of riba, its types and the reason behind its prohibition.
There are two types of riba which have been prohibited. One is known as riba al-nasi’ah and the second is known as riba al-fadl. Riba al-nasi’ah is prohibited in the Qur’an and is the more commonly known form of interest-based lending. This is when money is loaned for a certain amount of time, and in exchange for the time given the borrower must return more than the amount borrowed. This form of riba is clearly prohibited.
The second type is identified in the hadiths. It is when two same items are exchanged. They must be exchanged on spot and for the same quantity if they meet certain specifications. For example, exchanging 1kg of higher grade dates for 2kg of lower grade dates will be prohibited as 1kg of dates can only be exchanged for 1kg of dates.
This prohibition is seen as a preventative measure against the first type of riba in the sense that if we are prohibited from exchanging different quantities of the same item, even when the grade quality is different, then even more so we have to avoid exchanging in differing amounts when the grade is the same. Hence, in all scenarios when exchanging the same subject the amount should be kept the same regardless of quality or any other factor.
When we look at the hadiths on this issue we see as you have mentioned, that the Prophet (may Allah bless him and give him peace) forbade exchanging gold for gold and silver for silver unless they were exchanged at the same weight. The hadith in Bukhari states:
“Do not sell gold for gold unless equal in weight, nor silver for silver unless equal in weight, but you could sell gold for silver or silver for gold as you like.”
In your question you stated that the scholars carried out qiyas and added further items to the list. It should firstly be noted that the Prophet (may Allah bless him and give him peace) himself added further items to the list. The following hadith can be found in Bukhari:
“Malik bin A’us said, “I was in need of change for one-hundred Dinars. Talha bin ‘Ubaidullah called me and we discussed the matter, and he agreed to change (my Dinars). He took the gold pieces in his hands and fidgeted with them, and then said, “Wait till my storekeeper comes from the forest.” `Umar was listening to that and said, “By Allah! You should not separate from Talha till you get the money from him, for Allah’s Messenger (ﷺ) said, ‘The selling of gold for gold is riba (interest) except if the exchange is from hand to hand and equal in amount, and similarly, the selling of wheat for wheat is riba (interest) unless it is from hand to hand and equal in amount, and the selling of barley for barley is interest unless it is from hand to hand and equal in amount, and dates for dates, is interest unless it is from hand to hand and equal in amount”.
Some other narrations also mention salt. From these narrations we understand that the prohibition of riba is not exclusive to gold and silver but applies to other items also. In the following hadith we see the Prophet (may Allah bless him and give him peace) admonishing Bilal (may Allah be pleased with him) for exchanging dates with dates in different quantities.
The hadith states:
“Once Bilal (may Allah be pleased with him) brought Barni (i.e. a type of dates) to the Prophet (may Allah bless him and give him peace) and the Prophet asked him, “Where have you brought these from?” Bilal replied, “I had some low quality dates and exchanged two saa’ (volume of measure) of those dates for one saa’ of Barni dates in order to give it to the Prophet to eat.” Thereupon the Prophet (may Allah bless him and give him peace) said, “Beware! Beware! This is definitely riba! This is definitely riba! Don’t do so, but if you want to buy (a superior kind of dates) sell the inferior dates for money and then buy the superior kind of dates with that money.”
The question then arises as to whether the rulings mentioned for the six items listed in the hadith are exclusive for those six items or do they apply to other items also. Jurists looked at these items and found common factors within them and deduced that the rulings apply to any product that contains the same factors found within these six, though the jurists differed in what those factors were.
The next point to look at is fiat currencies and how they fit into this discussion. Classically currencies would have either been gold and silver or fulus (copper coins). Contemporary scholars have differed in their application of fiat currencies. Some have considered fiat currencies to be a replacement for gold and silver. This is because today fiat currencies have replaced gold and silver as the medium of exchange and are considered money. Therefore, the rules of trading in gold and silver, according to this group, will also apply to trading in fiat currencies.
The second opinion is that fiat money is the same as fulus (copper money) and therefore adopts its rulings. There are some similarities such as contemporary money being measured by counting just like fulus, as opposed to weight like gold and silver. Also, as they are not natural forms of money and their value can be activated or deactivated based on customary practice as is the case with fulus. According to this opinion the strict rules which apply to gold and silver will not always apply to fiat currencies, rather, there will be some discretion. For example, when trading gold for silver, it is necessary for possession of both gold and silver to take place before the contracting parties disperse, whereas when trading pounds for euros possession only needs to take place on one side.
Based on the above what we understand is that there is no harm in analogising items to gold and silver, as the Prophet (may Allah bless him and give him peace) also applied some of the rules of gold and silver to other items. Hence, these rules are not explicit to gold and silver and as the main premise of the question is based on analogising with gold and silver, this solves that problem. It is also important to note that fiat currencies are a new form of currency, and therefore it becomes necessary to determine a rule for them by way of legal interpretation. As is the case with any legal matter, this will then be open to debate and discussion and there may be different opinions that form. Each one will then have to be looked at based on the evidences provided in support of it.
We do not disagree with you that gold and silver should be the medium of exchange and that there are many harms associated with using fiat currencies, however, this in and of itself does not make fiat currencies unlawful.
صحيح البخاري (3/ 74)
قَالَ رَسُولُ اللَّهِ صَلَّى اللهُ عَلَيْهِ وَسَلَّمَ: «لاَ تَبِيعُوا الذَّهَبَ بِالذَّهَبِ إِلَّا سَوَاءً بِسَوَاءٍ، وَالفِضَّةَ بِالفِضَّةِ إِلَّا سَوَاءً بِسَوَاءٍ، وَبِيعُوا الذَّهَبَ بِالفِضَّةِ، وَالفِضَّةَ بِالذَّهَبِ كَيْفَ شِئْتُمْ
صحيح البخاري (3/ 101)
أَنَّهُ سَمِعَ أَبَا سَعِيدٍ الخُدْرِيَّ رَضِيَ اللَّهُ عَنْهُ، قَالَ: جَاءَ بِلاَلٌ إِلَى النَّبِيِّ صَلَّى اللهُ عَلَيْهِ وَسَلَّمَ بِتَمْرٍ بَرْنِيٍّ، فَقَالَ لَهُ النَّبِيُّ صَلَّى اللهُ عَلَيْهِ وَسَلَّمَ [ص:102]: «مِنْ أَيْنَ هَذَا؟»، قَالَ بِلاَلٌ: كَانَ عِنْدَنَا تَمْرٌ رَدِيٌّ، فَبِعْتُ مِنْهُ صَاعَيْنِ بِصَاعٍ، لِنُطْعِمَ النَّبِيَّ صَلَّى اللهُ عَلَيْهِ وَسَلَّمَ، فَقَالَ النَّبِيُّ صَلَّى اللهُ عَلَيْهِ وَسَلَّمَ عِنْدَ ذَلِكَ: «أَوَّهْ أَوَّهْ، عَيْنُ الرِّبَا عَيْنُ الرِّبَا، لاَ تَفْعَلْ، وَلَكِنْ إِذَا أَرَدْتَ أَنْ تَشْتَرِيَ فَبِعِ التَّمْرَ بِبَيْعٍ آخَرَ، ثُمَّ اشْتَرِهِ»
Ifta Research Fellow
Checked & Approved by:
Mufti Abdul Rahman Mangera
Mufti Zubair Patel