money and its usage - an analysis in the light of shariah - final version
TRANSCRIPT
1
MONEY AND ITS USAGE:
An Analysis in the Light of Shariah
Author: Moulana Dr. Asmatullah
Traslator: Omar Javaid
Editor: Erum Surfraz
2
Table of Contents
PREFACE .......................................................................................................... 9
CHAPTER-1: MONEY – AN INTRODUCTION .....................................................11
CHARACTERISTICS OF MONEY ......................................................................... 13
1. A medium of exchange ................................................................... 13
2. Wide acceptability .......................................................................... 14
3. A measure of value ......................................................................... 14
4. A means to store value ................................................................... 14
THE NATURE OF MONEY ............................................................................... 15
OPINION OF ISLAMIC SCHOLAR ON THE NATURE OF MONEY ................................. 18
FORMS OF MONEY ....................................................................................... 23
Importance of Gold and Silver ............................................................ 24
Difference in Money and Wealth ........................................................ 25
DIFFERENCE BETWEEN MONEY AND CURRENCY ................................................. 25
EVOLUTION AND USAGE HISTORY OF MONEY .................................................... 26
THE COMMODITY MONEY SYSTEM .................................................................. 26
THE RISE AND FALL OF METALLIC MONEY SYSTEM ............................................. 26
The evolution of money at a glance: .................................................. 33
VARIOUS STAGES IN THE HISTORY OF MINTING .................................................. 35
HISTORY OF FULOOS ..................................................................................... 38
LEGAL RIGHTS TO MINT COINS ....................................................................... 39
FUNCTIONS OF MONEY IN SHARIAH AND ECONOMICS ......................................... 40
As a Means of Exchange ..................................................................... 40
Standard of Value ............................................................................... 41
Store of Value ..................................................................................... 41
Standard of Deferred Payments ......................................................... 41
INFLATION AND DEFLATION ............................................................................ 43
CHAPTER-2: RIBA (INTEREST/USURY) .............................................................45
SYNOPSIS OF EVIDENCE ON IMPORTANCE OF RIBA .............................................. 45
TYPES OF RIBA ............................................................................................ 47
Riba An-Nasiyah ( ہرباالنسيـ ) .................................................................. 47
Riba Al-Fadl (الفضل) ............................................................................. 48
3
RIBA AL-FADL ............................................................................................. 52
DEFINITION OF ILLAH .................................................................................... 53
Extract of Definitions of Illah: ............................................................. 53
Hikmah (Wisdom): .............................................................................. 54
The Difference Between Illah and Hikmah ......................................... 55
INVESTIGATION OF ILLAH ON RIBA IN THE FORM OF MONEY ................................. 57
1st
Verdict ............................................................................................ 57
2nd
Verdict ........................................................................................... 59
3rd
Verdict ........................................................................................... 60
ILLAH OF RIBA AL-NASIAH ............................................................................. 60
1st
Benefit of Extended Scope of Ruling of Riba .................................. 61
2nd
Benefit: Difference Between Riba AL-Nasiyah ( ہرباالنسيـ ) AND Riba An-
Nasa (انساء) .......................................................................................... 62
WHAT IS SAMANIAT (ثمنيت)? ......................................................................... 63
CHAPTER-3: CURRENCY NOTES AND FULOOS .................................................65
CURRENCY NOTES ........................................................................................ 65
PAPER NOTE AS A CERTIFICATE OF DEBT. .......................................................... 66
Justifications Favoring the Viewpoint ................................................. 66
Contradictions of this Viewpoint with Principles of Jurisprudence ..... 67
Analysis ............................................................................................... 68
PAPER NOTE AS A FORM OF ASSET OR GOODS................................................... 69
Justifications Favoring this Viewpoint ................................................ 70
Contradiction with Principles of Jurisprudence ................................... 72
Analysis ............................................................................................... 73
PAPER NOTES AS A SUBSTITUTE FOR GOLD OR SILVER ......................................... 74
Justifications Favoring this Viewpoint ................................................ 74
Implications while Implementation .................................................... 75
Analysis ............................................................................................... 75
PAPER NOTE AS A ‘CUSTOMARY PRICE’ AND ITS TREATMENT AS FULOOS ................ 76
Justifications Confirming this Viewpoint............................................. 80
STATUS OF PAPER NOTES IN JURISPRUDENCE: ................................................... 82
CHAPTER-4: FULOOS ......................................................................................84
SUMMARY OF THE EVOLUTION OF FULOOS ....................................................... 84
DIFFERENCE OF OPINION ON FULOOS BEING SAMAN IN JURISPRUDENCE ................ 85
4
The Opinions of the First Group .......................................................... 86
The Second Group: Imam Abu Hanifa and Imam Abu Yousuf (RA):.... 93
Opinion of Scholars of Hanbali School of Thought ............................. 95
CHAPTER-5: MONEY EXCHANGE ( رفص بيع ) .....................................................97
TERMINOLOGICAL MEANING OF BAY’ SURF ...................................................... 98
Muratla ............................................................................................. 103
Mubadala ......................................................................................... 103
Surf ................................................................................................... 103
BAY’SURF AND ITS CONDITIONS .................................................................... 104
Significance of Stated Conditions ..................................................... 105
SOME IMPORTANT ISSUES IN EXCHANGE OF GOLD, SILVER AND JEWELRY .............. 118
BARTER OF GOLD AND SILVER JEWELRY WITH RAW GOLD AND SILVER .................. 122
Practical Implications: ...................................................................... 124
TRADING JEWELRY WITH CRYSTALS WITH GOLD OR SILVER ................................. 126
SOME CRITICAL ISSUES ................................................................................ 126
SOME ALTERNATES OF OBJECTIONABLE TRANSACTIONS ..................................... 127
Sale and Purchase of Gold Mixed Sand ............................................ 128
Exchange of Old Jewelry with New ................................................... 128
ADVANCE CONTRACT WITH SPOT PAYMENT .................................................... 129
THE ISSUES OF MATERIAL USED IN WELDING .................................................. 130
Wastage ........................................................................................... 130
SOME CONTEMPORARY MODES OF TRADING GOLD AND SILVER ......................... 132
The Role of the Company in this Trading: ......................................... 132
Spot Trading ..................................................................................... 133
Future Trading .................................................................................. 134
ANOTHER MANNER OF COMMODITY EXCHANGE .............................................. 135
CHAPTER-6: EXCHANGE OF CURRENCY OR FULOOS ..................................... 136
BAY’SURF AND FULOOS............................................................................... 136
DOES EXCHANGE OF CURRENCY NOTES QUALIFY AS BAY’SURF? ......................... 141
1st
Group of Scholars ......................................................................... 142
2nd
Group of Scholars ........................................................................ 143
3rd
Group of Scholars ........................................................................ 145
4th
Group of Scholars ........................................................................ 146
CURRENCY EXCHANGE OR TRADE .................................................................. 148
5
A Contemporary and Erroneous Verdict on Currency Notes ............. 148
THE ISSUE OF POSSESSION IN CURRENCY EXCHANGE ......................................... 150
EXCHANGE OF CURRENCY NOTES AS CREDIT .................................................... 152
RULE OF HUNDI IN CURRENCY EXCHANGE ....................................................... 152
THE DEFINITION OF SUFTAJA ........................................................................ 153
Suftaja in Context of Shariah and Jurisprudence .............................. 153
Shariah Rulings on Suftaja ................................................................ 154
Summary of the Viewpoint of the First Group .................................. 154
Illah of Prohibition of Suftaja ............................................................ 155
Exemptions ( ات استثناء ) ....................................................................... 155
Viewpoint of the Second Group ........................................................ 156
Analysis and Debate ......................................................................... 157
MONEY ORDER ......................................................................................... 158
EXCHANGE OF CURRENCY OF DIFFERENT COUNTRIES ........................................ 161
Opinion of Hanafia Scholars ............................................................. 161
Opinion of Malikia Scholars .............................................................. 162
Opinion of Shafi’i and Hanbali Scholars ............................................ 162
RULES PERTAINING TO HUNDI IN CURRENCY EXCHANGE .................................... 162
Some Misconceptions and Clarifications .......................................... 163
SALE OF CURRENCY AT A RATE DIFFERENT THAN THE OFFICIAL RATE .................... 166
CREDIT SALE OF CURRENCIES OF DIFFERENT ORIGIN ......................................... 166
‘TWO WAY PROMISE’ IN INTERNATIONAL CURRENCY TRADE .............................. 168
Analysis and Preference of the Second Viewpoint ............................ 174
Effects of Penalty in a two way promise ........................................... 175
A NEW INTERNATIONAL MODE OF CURRENCY TRADE ....................................... 176
CHAPTER-7: VALUE OF MONEY .................................................................... 179
TYPES OF FLUCTUATION IN VALUE OF MONEY ................................................. 180
FORFEITURE OR INQITA’-E-ZAR ..................................................................... 180
Opinions of Jurists of Different Schools on Implications of Forfeiture on Trade
.......................................................................................................... 181
Maliki School of Thought: ................................................................. 184
Opinion of the Shafi’i Scholars: ......................................................... 185
Opinion of Hanbali Scholars: ............................................................ 185
DEPRESSION ............................................................................................. 186
Opinion of Maliki and Shafi’i Scholars .............................................. 190
6
Opinion of Hanbali School of Thought .............................................. 192
SUMMARY ................................................................................................ 194
INFLATION ................................................................................................ 196
Characteristics of Inflation ................................................................ 196
Common Types of Inflation ............................................................... 197
The Reasons for Fluctuation in the Value of Money ......................... 197
DEFLATION ............................................................................................... 199
IMPLICATIONS OF FLUCTUATION IN THE VALUE OF MONEY ................................. 199
Effect on Different Forms of Loans ................................................... 199
Effect on Wages or Salaries .............................................................. 199
INFLATION AND DEFLATION ACCORDING TO SHARIAH ....................................... 200
Opinion of Scholars on the Effect of Inflation on Trade Contracts.... 200
Verdict of Imam Abu Yousuf’s (RA) School of Thought: .................... 203
Correct Elaboration of the Verdict of Imam Abu Yousuf (RA): .......... 206
PRICE INDEX ............................................................................................. 208
Process of Calculating Price Index .................................................... 208
Selection of Items for the Index: ....................................................... 211
Estimation of Weight of Items: ......................................................... 211
Estimation of Prices of Selected Items: ............................................. 212
LINKING DEBT PAYMENTS AND WAGES TO THE PRICE INDEXATION SYSTEM ........... 213
A) Linking Debt Payments with Indexation System ...................... 213
B) Linking Wages with Price Index ............................................... 217
CHAPTER-8: CREDIT MONEY ......................................................................... 220
CREDIT MONEY ......................................................................................... 221
Basic Characteristics ......................................................................... 221
EVOLUTION OF CREDIT MONEY .................................................................... 223
PROS OF CREDIT MONEY ............................................................................. 225
Eliminates the Requirement to Carry Cash: ...................................... 225
Instrument of Credit: ........................................................................ 225
Benefits of Checks: ............................................................................ 225
Benefits of Bills of Exchange ............................................................. 226
CONDITIONS WHICH AUTHENTICATE CREDIT MONEY ........................................ 226
USING CREDIT MONEY................................................................................ 227
Legal Means of Endorsement ........................................................... 228
Types of Endorsement ...................................................................... 228
7
CHAPTER-9: FINANCIAL INSTRUMENTS ........................................................ 230
BACKGROUND OF DISCUSSION ...................................................................... 230
Sale of Debt for Debt ( ين بيع ين الد بالد ) .................................................. 230
Sale of Debt to Debtor ( ين بيع ين عليہ ممن الد الد ) ..................................... 231
Sale of Debt to Non-Debtor ( ين بيع ين عليہ من غير من الد الد ) .................... 232
HAWALA (TRANSFER OR ASSIGNMENT) .......................................................... 236
Terminologies ................................................................................... 236
Method ............................................................................................. 237
Conditions ......................................................................................... 237
Types of Hawala ............................................................................... 237
Rules of Hawala ................................................................................ 238
BANK CHECK ............................................................................................. 238
Difference between a Check and Bill of Payment ............................. 239
Types of Checks ................................................................................. 239
Bank Check in the Light of Shariah ................................................... 240
BILL OF EXCHANGE ..................................................................................... 243
Requirements of Bill of Exchange ..................................................... 245
Common Types of Bill of Exchange ................................................... 245
Preparing a Bill of Exchange ............................................................. 246
Discounting of Bill of Exchange ........................................................ 247
Analysis of Bill of Exchange in the Light of Shariah .......................... 247
The Rule of Discounting .................................................................... 248
PROMISSORY NOTE .................................................................................... 252
Viewpoint in Shariah ......................................................................... 253
Difference Between a Promissory Note and Bill of Exchange ........... 253
Difference Between a Promissory Note and a Bank Check ............... 254
PLASTIC MONEY ........................................................................................ 254
Credit Cards: ..................................................................................... 254
Debit Cards: ...................................................................................... 255
Charge Cards: ................................................................................... 255
The Shariah Verdict on the Use of Different Forms of Plastic Money255
BANK DRAFT ............................................................................................. 257
PAY ORDER .............................................................................................. 257
BOND ...................................................................................................... 258
Bonds Covertible to Shares ............................................................... 259
8
Government Bonds ........................................................................... 260
Shariah Standpoint on Bonds ........................................................... 260
CERTIFICATES ............................................................................................ 261
Shares Certificates ............................................................................ 264
Bonus Shares .................................................................................... 265
WARRANTS .............................................................................................. 266
OPTIONS .................................................................................................. 267
Popular Types of Options .................................................................. 268
SHARIAH RULINGS ON OPTIONS AND WARRANTS ............................................. 269
BAY’-AL-DAIN ........................................................................................... 269
GLOSSARY OF TERMS ................................................................................... 271
INDEX ........................................................................................................... 275
9
PREFACE
There is little doubt that Islam is the most comprehensive religion today. It is a
fully integrated philosophy which offers solutions and guidance for every aspect
of life regardless of changing times and circumstances. The religion has
resolutions for problems and issues related to all aspects of personal and
community living. Similar is the case with Islamic rulings on monetary issues.
It won’t be wrong to say that money is and has been the backbone of societies
since earliest times when cattle, including cows, sheep and camel, are known to
have been its oldest forms. With agriculture, this barter or exchange of services
and resources for mutual advantage, took on the form of grains and vegetables
during the course of history.
The role of money, including its earliest form of barter, has hence been pivotal in
a sense that it flows like blood in the veins of a society maintaining social order
and relationships between services and people. Much like healthy blood
guarantees a healthy body; a healthy monetary flow guarantees the health of
society and social order. However this monetary flow in the social order has not
always been healthy and has been subjected to various illnesses over the course
of its evolution through the ages. Though a lots of ‘illnesses’ related to money
have been resolved, many more still persist, unresolved.
The most glaring conflict of interest between the conventional money
management and monetary management as dictated by Islamic law has been
over interest or Riba. In Pakistan specifically, though the Pakistan Supreme Court
has passed a resolution for a transition from an interest based economy to one
that is aligned with rules dictated by Islam, practical work is yet to be seen for the
establishment of a purely interest free economic system in the country. Interest
based economies are condemned by Islam as they are seen to be the bane of a
healthy social order and the root cause of widespread social injustices.
Theoretically it won’t be wrong to say that Supreme Court rulings on the issue
consistently fail to be implemented on the required level because the academic
work related specifically to the topic, either in English or Urdu, remain
10
insufficiently comprehensive and limited in scope, failing to incorporate within its
boundaries the bulk of the problems related to monetary issues in Islam. If any
work does stand out in this regard, it has been done by Arab scholars whose mass
research encompasses a greater bulk of rulings on Islamic monetary system as
enforced by Islam. This is despite any differences of opinion which might exist
between the scholars. Needless to say, what makes the task of drawing concrete
solutions from the bulk of this research highly tedious is their scattered dispersal
through the academia and lack of concentration in one place.
This book include inquiries into the exact nature of the monetary unit, the
number of problems created by the monetary inflation such as the hyperinflation
in Afghanistan and Zimbabwe, bonds, financial certificates and similar other
instrument of monetary exchange, and the validity and Islamic lawfulness of
owning bank checks. This book Insha’Allah aims to thoroughly discuss the above
stated and other related issues.
The original manuscript of this thesis is in Urdu, however since this topic is of
international concern, therefore the significance of its translation into English
language cannot be overemphasized. In this regards efforts of Brother Omar
Javaid and Sister Erum Surfraz are indeed plausible, who have made their earnest
effort to translate and edit this book, respectively. Assistance of Mufti Shakir and
Mufti Zahid Sangharwi, to make-the work and coordination-among team
members faster and smoother, are also commendable.
Despite all the care and hard work by all team members, it is possible that some
errors and mistakes would have been left. We anticipate that the readers of this
book will pin-point those mistakes and inform the concerned so that necessary
corrections are made in the forth coming editions.
Yours Sincerily
Ismatullah Teacher and Member Darulifta, Darululoom Karachi 15
th July, 2011
11
CHAPTER-1: MONEY – AN INTRODUCTION
The term ‘Zarr’ or money is referred to as ‘Naqd’ in the Arabic language.
‘Naqood’ is the plural of the word. A study of ancient jurisprudence reveals that
neither ‘Naqd’ nor ‘Naqood’ have been treated in a manner quite completing
their real essence by contemporary economists in the modern era. What has
further complicated the issue has been the introduction of three different
opinions on ‘Naqd’ in jurisprudence literature.
1st
Opinion: The term ‘Zarr’ can refer only to silver or gold whether in the form of
minted coins such as dirham or dinar or in the form of gold bars or utensil etc.1
2nd
Opinion: Only minted coins such as dirham or dinar may be classified as
money. No other form of silver or gold, including utensil of gold or silver or gold
bars, etc2 may be classified as money. Both these opinion exclude ‘Fuloos’, or
ثیشود ،( انؾلی انضیهؼی ػهی ث ػضب كخشانذی االيبو) انضیهؼی انذهبئن کض ؽشػ انؾوبئن رجیی ---------------------1 - داسانکزت
(۳/ ")انخ ؽذیذ او ثبنوذ انشاد وھو كنخ او رھت يؼذ وعذ ارا یؼی:" ئ، اول هجغ ، انؼهیخ
ي ءی اب كی کب: "انشثب ثبة كی ، سؽیذیہ يکزجہ کوئٹہ( انھبو ث انواؽذ ػجذ ث يؾذ االيبو)، انھبو اث ،انھذایخ ؽشػ انوذیش كزؼ
( ۵۱/ ") انخ ثبآلخش اؽذھب ثیغ یغوص انوذی ؿیش ي ءی االب كلی ، اآلخش ي وصب اکضش اؽذہب كنخ او رھت او ؽذیذ واؽذ عظ
،
In the context of discussion utensils of gold and silver has also been categorized as cash and here also
the same point is being established.
بالمضروب ہوتخصيص ، مضروبين غير ولو والفضة الذھب ای والنقد( : الشافعی الھيتمی الحجر ابن العالمة) ، انھیزی انؾزبط رؾلخ
(٧٢/ ")الفقہاءالخ عرف فی مھجور
ہج ۴ ۰ اول طبع ، دارالقلم دمشق،( النووی شرف بن يحی الدين محی) ، النووی التنبيہ الفاظ تحرير 2
(۴ص" )والدنانير الدراھم" النقد" ،
" نقود( ج) النقدان لھما ويقال والفضة الذھب من العملة:" ، حبيب ابو ،سعدی واصطالحا لغة الفقہی القاموس
12
the coins minted from metals other than gold or silver such as copper, from the
definition of money. Hence only the mentioned items in the two opinions are
considered to be money.
3rd
Opinion: Though gold and silver are the real, accepted forms of money,
certain other items such as Fuloos 1 may be considered the medium of exchange.
However according to this opinion, only the items which fail to conform to the
primary conditions necessary for qualifying as ‘money’ are excluded from the
definition of money.
Islamic jurists at present are divided between these three opinions. The first
opinion incorporates within the definition of money all items which are made of
gold and silver whereas the second opinion limits this definition to dirham and
dinar only. Finally, Fuloos, coins made with bronze and copper and not gold and
silver, are also included in the definition presented in the third opinion. However,
modern economists are only interested in the definition presented in the third
opinion.
المصوغ بيع ليدخل" بثمن ثمن بيع: " قولہ علی يقتصر ولم االثمان جنس من: قال وانما: " الصرف باب ،فی الھمام ابن القدير، فتح
(۵٢/٦")الخ النقد او بالمصوغ
The above statement indicates that dirham and dinars are the only exclusive forms of cash.
ولو وفضة ذھب نقد فی الربا ای وحرم:" دارالفکر بيروت ،( الدسوقی، عرفہ محمد) ، ،الدسوقی الکبير الشرح علی الدسوقی حاشية
( ۰/ ")الخ بالمسکوک خاص النقد الن اولی کان"عين فی“: قال
تراجم احد علی االسنوی اعترض وقد:" اول ،طبع ، الصديق ،مکتبة الطائف( ، الجعيد ثواب بن ستر)النقديةالجعيد، االوراق احکام
عبر فلو خاصة والفضة الذھب من المضروب ھو النقد ان اعلم: اذيقول الفريق لھذا موافقتہ منہ يفہم بما النقد زکوة باب المنھاج
(ص" )الخ عبر کم بھما المصنف : ھج۰ اول طبع ، ، سعيد ايم ايچ ،کراچی،( الکاسانی ابوبکر عالءالدين العالمة)الکاسانی شرائعال ترتيب فی الصنائع بدائع 1
کا متفاضال بجنسھا بيعھا يجوز فال ، اثمان الفلوس ان( ۔۔۔عصمت متفاضال بجنسھا الفلوس بيع جواز بعدم محمد م االما ای: )قولہ وجہ"
،(۰۵/۵)“۔ والدنانير لدراھم
فی السلم اری ال: قال احمد فان: " ھج۴ ، ض الريا مکتبة ، السعودية( قدامة بن ہلل عبدا)القدامة، ابن الکبير، لشرحوا المغنی
(۵/ ۵) ۔"والدنانير کالدراھم بھا الشرکة فجازت ثمن النھا ، ثور وابی الحسن بن محمد قول وھذا الصرف يشبہ النہ الفلوس
بالفلوس الفلوس کرھا انھما وربيعہ سعيد بن يحی عن سعد بن الليث عن وھب ابن”( الجعيد ثواب بن ستر) ،الجعيد النقدية االوراق احکام
،( ۴ص)۔“ والدراھم الدنانير سکة مثل سکة صارت انھا: وقاال نظرة، او فضل بينھما
ذلک من المنع واالظہر” ھج۰ ، اول ،طبع ض الريا مطابع ،السعوديہ،( تيميہ بن احمد االسالم شيخ) تيميہ، ابن الفتاوی مجموع
(۴٦۰/ ٢)۔“ الناس الموال معيارا وتجعل عليھا يغلب النافقة الفلوس فان
13
Islamic experts have differing views on the subject. According to Mufti Taqi
Usmani, ‘Anything which is specifically used as a medium of exchange, is
measureable, and can store value is called Zarr”1. Professor Crowther also states,
‘A monetary unit is any object used openly as a medium of exchange and is
capable of measuring and storing value. Only then can it serve the purpose of
Money.’ 2 Within the same context Dr. Khalid Adnan Turkamani says, ‘Any object
can be termed as Zarr which is commonly used as a medium of exchange and can
be used as a yardstick to determine prices; it can be anything and in any form”3.
Kawal Krishen states, ‘Money may be defined as the means of valuation and of
payments as both the unit of account and the generally accepted medium of
exchange.’4
CHARACTERISTICS OF MONEY
Though the above opinions, definitions and expert views on money differ, they
share certain common characteristics related to money or Zarr. Primarily money
or Zarr is:
1. A MEDIUM OF EXCHANGE Mankind always had certain needs not all of which could be fulfilled by the items
in their possession. These needful items may be owned by others who may not
want to exchange these items with things that the other party has in the form of
commodities. Hence a generally accepted medium of exchange was required in
societies. Therefore Allah SWT created gold and silver as the medium of
exchange; an attraction to these precious metals has also been instilled in man by
Allah SWT. Gold and silver have hence been prized since the inception of human
societies as a medium of exchange. Over time, gold and silver exchange evolved
into paper money, checks and credit cards. This in turn has widened the concept
of Zarr as well.
1 Islam and Contemporary Economics and Trade, Idara Al-Ma’rf 14, 1st Ed, 1419 Hijri 2 “Introduction to Money and Banking” by Sheikh Mubarak Ali, Research Scholar, Oslo University,
Norway, Rahber Publisher Karachi, 1st Ed, 1991 ھج۴٢ اول ،طبع الرسالة سسة¿مو ، بيروت( الترکمانی خالد عدنان الدکتور)الترکمانی االسالم فی والمصرفية النقدية السياسية 3 4 “Modern Economic Theory”, by Dewett Kewal Krishan, Delhi, India, 18th revised edition, 1983. Page-
409
14
2. WIDE ACCEPTABILITY Since it is established that societies have always required a medium of exchange,
it is imperative that this medium of exchange also has a wide acceptability in
order to be fully functional and effective. This functionality and effectiveness is
related to the willingness of the masses to conveniently exchange goods and
commodities with this medium or monetary unit.
3. A MEASURE OF VALUE Money or Zarr constitutes a yardstick to establish the value of commodities since
in the absence of any such yardstick; this value would be left to the personal
judgment of every other person according to his or her advantage. It is hence
imperative to have a standard ‘measure of exchange’ to accurately value
commodities in comparison with other items.
4. A MEANS TO STORE VALUE
The value of all commodities depreciates with age and it is not possible to
exchange them for the same value over time. On the contrary, monetary units
are a secure means to store value, apart from depreciation from falling or rising
currency rates, as compared to other commodities. Therefore the use of money
ensures a security of value and despite monetary inflation, it can be used to
obtain any required commodity.1
To summarize the discussion so far:
1 ---------------- ------------------------------------------------------------------------ الفقہ فی والتجارية النقدية االوراق احکام
An Introduction to Money and Banking
Islam and contemporary Economics and Trading
ہفتم۔ طبع ، العربية دارالنھضة بيروت، ، شافعی زکی محمد والبنوک،الدکتور النقود فی مقدمة
Contemporary Debates on Jurisprudence, by Moulana Mujahid ul Islam Qasmi, Karachi Idarahtul-
Quran ul Uloom, ul Islamia, Vol-2
The Theory of Money and Credit.Mises, Ludwig Von Mises
ھج۴٢ ، الرسالۃ مؤسسۃ بيروت ،( الترکمانی خالد عدنان الدکتور) ،الترکمانی االسالم فی والمصرفيۃ النقديۃ السياسيۃ
ھج۴ ، اول طبع ، دارالمدنی ،، جدہ ،( الحسنی احمد حسن احمد الدکتور) الحسنی ، االسالميۃ الشريعۃ ضوء فی النقود تطور
15
1. Economists and jurists unanimously accept gold and silver to be a form
of money.
2. Certain class of economists views gold and silver to be medium of
exchange only in the form of dinar or dirham.
3. Certain jurists accept all forms of gold and silver as money.
4. Certain jurists accept Fuloos to be an accepted form of money.
5. Contemporary economists have broader views on money, considering
gold, silver and Fuloos as money.
6. Certain contemporary jurists concur with the opinions of modern
economists viewing them as being concurrent with the Shariah laws.
THE NATURE OF MONEY
Current debates and discussions on money are especially more important given
the erroneous conceptions which have emerged about the fundamental nature of
money. These misconceptions have in turn paved the way for justifications on
the wrongful legitimacy of interest or usury, the amount charged on loaned
money. For instance the modern day gurus of the business and financial industry
justify interest by claiming that ‘money is a form of tradable commodity’. This
justification is based on the assumption that just like it is legitimate for
merchandise and commodities like cloth, vegetables, property or furniture etc. to
be exchanged for a mutually agreed price; therefore it is also legitimate to trade
money at a value greater than what is owed. This assumption in effect legitimizes
usury or interest. In cases where interest is charged on loaned or owed money,
money is treated like a commodity where all rules applicable on the exchange of
commodities are also applied to it.
Here it is important to discuss the general characteristics of commodities which
are broadly classified into consumption goods and production goods. The term
consumption goods refers to items necessary for human upkeep and include
food, clothes etc. Production goods are tradable items which may be rented and
leased for the purpose of profit. Money is considered a production good only for
people who consider it a commodity eligible for rent or lease whereby they seek
to earn profit or interest through money exchange. Viewing money to be a
production good is one of the major reasons why interests or markups are seen
16
to be justified with no religious or social implications whatsoever.1 Needless to
say , this view of money being a production good is rejected as being absurd and
baseless by not only the wider majority of Islamic scholars but also contemporary
economists.
According to Kawal Krishen Dewett in ‘Modern Economic Theory’,
“How money differs from goods? Goods are mainly of two types:
consumer goods, and producer or capita goods. It (money) cannot be
consumed as such. There was a time when some commodities served as
money and there are exceptional circumstances in modern times too, e.g.
in Germany in 1945, when there was hyperinflation, cigarettes served as
money. But normally it is not an ordinary consumer good … Money
cannot be regarded as a capital good either. Capital goods, like machines
and raw material, help in manufacture of goods by their physical
1 “The Historic Judgment on Interest by Usmani” (Justice Muhammed Taqi Usmani) Karachi, Idaratul-
Ma’araf, 1st edition, 2000 A.D, P-93:
''The commodities are classified into the commodities of first order which are normally
termed as 'consumption goods' and the commodities of the higher order which are called
'production goods'. Since money, having no intrinsic utility, could not be included in
'consumption goods' most of the economists had no; option but to put it under the category
of production goods.''
The Theory of Money and Credit, by Ludwig Von Mises, Liberty Clissics Indianapolis, 1980, P-95, Ch:5,
Part-1:
''It is usual to divide economic goods into the two classes of those which satisfy human
needs directly and those which only satisfy them indirectly - that is 'consumption goods , or
goods of the first order, and production goods ,or goods of the higher order ."
Introduction to Economic Principles, Dr.A.N Agarawala,,Katab Mahal 1983.
"Robertson defines money as a commodity which is used to denote anything which is widely
accepted in payment for goods or in discharge of other kinds of business obligation."
ھج۴۴ اول طبع ، المدنی مطبعۃ ، مصر( الحماد العزيز عبد بن حمد الدکتور) ، الحماد منہ الخالص وسيل باخطرہ
(۰ص)
(ص)، القاھرة ، التجاريۃ االھرام مطابع مصر، ،( الشيخ محمد خاطر محمد) الشيخ الربا بلو رفع فی جہاد
17
transformation….it performs entirely a different function. Money is an
exchange good, and useful only in an exchange economy.”1
In short, Dewett identifies consumption goods and production goods as two
commodities. Consumption goods can be considered money only if they do not
fulfill direct human needs. On the same note production goods do not perform
the function of money. For instance raw material and machines are used to
manufacture different products. Since these functions cannot be performed by
raw money, money is a medium and a means of exchange in these instances.
Professor Muhammad Manzoor Ali writes in his book ‘Book of Economics’:
“Money i.e. paper notes or coins cannot be classified directly as
consumption goods. Money cannot fulfill any basic human need directly
as it cannot be used as food, clothes or shelter. Similarly paper notes and
bank checks cannot be eaten or worn. Any commodity can be classified
as a monetary unit only if any of the following circumstances prevails: a)
either the society is primeval and backward or b) Its war like situation as
it was in Germany where cigarettes were used as money due to economic
circumstances developed after the Second World War …”2
Professor Ali further states,
“Money is also dissimilar to production goods, as it differs in
characteristics. That means money is useful only due to its quality of
being a medium of exchange.”
In his book ‘The Theory of Money and Credit’ Ludwig Von Mises has devoted an
entire chapter3 titled ‘Money on Economic Good’ to dismiss the erroneous
classification of money as a commodity and to justify this flawed concept. In
conclusion, he presents three different classifications of money; a means of
production, consumption goods, and a medium of exchange. For the sake of
argument, Von Mises agrees that when money is classified and treated as a
1 Modern Economic Theory,P:409 2 “Book of Economics”, by Professor Muhammad Manzoor Ali. Published-1986, page 116, Ali Book
House. 3 The Theory of Money and Credit ,P:95
18
production good then, as also pointed out by Adam Smith, it should be referred
to as ‘dead stock’ or an object with no direct use in production1. Many other
books of economics discussing the functions and characteristics of money do not
consider money to be a production good. On the contrary it is termed as a
medium of exchange.
OPINION OF ISLAMIC SCHOLAR ON THE NATURE OF MONEY
Concurring with a wide number of economists, Islamic scholars view the idea of
money being a commodity as baseless and problematic. Though this idea is yet
to be counteracted at the level it demands, the subject has repeatedly been
discussed at the secondary level. For instance ‘The Historical Judgment on
Interest’ is a renowned thesis written for the Supreme Court of Pakistan by
Justice (Retired) Mufti Taqi Usmani. In the thesis Mufti Usmani thoroughly
negates the concept of treating money as a commodity both in the Islamic and
the contemporary modern economic context. In short, three fundamental
differences between money and commodities are presented in Mufti Usmani’s
work:
Firstly, money cannot fulfill direct human needs but is a medium of exchange for
the services and goods which can fulfill these needs. Secondly, different varieties
of similar commodities differ in prices based on their quality. For instance
eatables which are close to expiring are cheaper than similar fresh products.
However, money, a medium of exchange and a store of value, does not have this
characteristic. Hence all notes of similar denomination will retain their
denomination regardless of how old they are (unless declared falsified by the
issues authority such as government). Thirdly, when exchanging different
commodities such as property, machinery or vehicles, it would be a violation of
agreement if the delivered goods are not of the promised quality. For instance an
exactly similar car might not be acceptable to the buyer if it has a different
registration number. Monetary units do not have this disadvantage; two paper
1 The Theory of Money and Credit:
"This is the complete justification and the suggestion put forward by Keynes is that economic
goods should be divided into means of production, objects of consumption, and media of
exchange". Page-502 (Cont …)
"Regarded from this point of view, Adam Smith would call these goods as "dead stock, which
produces nothing". Page-102
19
notes with different serial numbers and print dates will have the same value and
can be used to purchase any required commodity.
This discussion clarifies the point that money cannot be considered a commodity
and its use is restricted to a means of exchange only. Money was described
similarly by Sheikh-ul-Islam Ilama Ibn Tamiya many centuries ago:
وانذساھى وانذبیش الروقذ نلغھب ، ثم ھی وعیهۃ انی انزؼبيم ثھب ، ونھزا کبذ اصبب ، ثخالف عبئش "
"االيوال كب انوقود االزلبع ثھب لغھب۔
“Unlike commodities, dirham or dinar do not possess any intrinsic value
of their own, rather they are means of mutual exchange and act as a
yardstick to measure or determine the prices (of commodities).” 1
In this observation Ilama Ibn Tamiya draws a clear distinction between money
and other commodities strictly stating money to be medium of exchange as
opposed to other items of use. Money is devoid of intrinsic value because it is
not a direct means of satisfying human needs. Sheikh Tamiya further states:
االصب الروقذ الػیبھب ، ثم یوقذ ثھب انزوفم انی انغهغ ، كبرا فبسد ي لغھب عهؼۃ روقذ الػیبھب "
"كغذ ايشانبط
“Money doesn’t have any intrinsic value; rather it is a means to purchase
commodities. If money is classified as a commodity, then it will deprave
the transactions people intend to make.” 2
A detailed discussion on the inherent nature of money has also been presented
by Imam Ghazali:
“The creation of dirhams and dinars (money) is one of the blessings of
Allah…. They are like stones having no intrinsic usufruct or utility, but all
human beings need them, because everybody needs a large number of
commodities for his eating, wearing etc, and often he does not have
what he needs and does have what he needs not.. Therefore, the
transactions of exchange are inevitable. But there must be a measure on
(۵؍٢) ھج ۰ اول طبع ، الرياض مطابع ، ،السعوديۃ( تيميہ بن احمد االسالم شيخ)تيميہ ابن الفتاوی جموعۃ 1
المتوفی الجوزيہ بابن المعروف بکر ابی بن محمد عبدہللا ابو الدين شمس عالمہ)الجوزيہ العالمين،ابن رب عن الموقعين اعالم 2
(۵٧؍) ، المنيريۃ الطباعۃ ادارة مصر،( ھج٧۵
20
the basis of which price can be determined, because the exchanged
commodities are neither of the same type, nor of the same measure
which can determine how much quantity of one commodity is a just price
for another. Therefore, all these commodities need a mediator to judge
their exact value…. Allah Almighty has, therefore, created dirham and
dinars (money) as judges and mediators between all commodities so that
all objects of wealth are measured through them… and their being the
measure of the value of all commodities is based on the fact that they
are not an objective in themselves. Had they been an objective in
themselves, one could have a specific purpose for keeping them which
might have given them more importance according to his intention while
the one who had no such purpose would have not given them such
importance and thus the whole system would have been disturbed. That
is why Allah has created them, so that they may be circulated between
hands and act as a fair judge between different commodities and work
as a medium to acquire other things…. So, the one who owns them is as
he owns everything, unlike the one who owns a cloth, because he owns
only a cloth, therefore, if he needs food, the owner of the food may not
be interested in exchanging his food for cloth, because he may need an
animal for example. Therefore, there was needed a thing which in its
appearance is nothing, but in its essence is everything. The thing which
has no particular form may have different forms in relation to other
things like a mirror which has no color, but it reflects every color. The
same is the case of money. It is not an objective in itself, but it is an
instrument to lead to all objectives…
So, the one who is using money in a manner contrary to its basic purpose
is, in fact, disregarding the blessings of Allah. Consequently, whoever
hoards money is doing injustice to it and is defeating their actual
purpose. He is like the one who detains a ruler in a prison…
And whoever effects the transactions of interest on money is, in fact,
discarding the blessing of Allah and is committing injustice, because
money is created for some other things, not for itself. So, the one who
has started trading in money itself has made it an objective contrary to
the original wisdom behind its creation, because it is injustice to use
21
money for a purpose other than what it was created for…. If it is allowed
for him to trade in money itself, money will become his ultimate goal and
will remain detained with him like hoarded money. And imprisoning a
ruler or restricting a postman from conveying messages is nothing but
injustice.” (Text taken from the translation of “The Historic Judgment on
Interest” by Mufti Taqi Usmani)
Further elaborating upon this idea, Imam Ghazali states, " ارههت انوذ نـیش يب ومغ نہ
"ظهى or “To use money for the purpose not intended for its creation is vicious.”1
Hence the treatment of money as a consumable item and to turn it into an object
of trade or commodity is a cruel injustie to society. Money should only be used
for the purpose for which it was created.
It can be concluded from Imam Ghazali’s observation that dirham or dinar is a
method of standardizing and measuring the value of objects. Money such as
dirham and dinar does not have any intrinsic value nor is it a tradable good.
According to Ghazali:
"كبرا ارغش كی ػیھب كوذ ارخزھب يوقودا ػهی خالف ومغ انؾکۃ"
“Anyone who will treat dirham and dinar as a tradable object will violate
the very purpose it’s made for.”2
Though it may appear here that there is an absolute restriction on the trade of
money for money, the exchange of dirham and dinar is permitted according to
the rules of Shariah even if there is a difference in the absolute value of the two
currencies. This ruling raises the issue of the legality of trading dirham and dinar
with a difference of value such as 100 dirham for 90 dirham. This point has been
elaborated by Imam Ghazali as well:
“Dirham and dinar are created for the sake of exchanging them for items
needed, however it’s possible that there may be different forms of coins
or notes available, (like dirham is different from dinar), so as to facilitate
the exchange of a variety of items. Because each dinar can be exchanged
(٢؍۴) ، دارالمعرفۃ ، لبنان ،بيروت(ھج۵۵م الغزالی محمد بن محمد ابوحامد االمام) ،الغزالی الدين علوم احياء --- ----------------1 2 Ibid, 92
22
for several dirhams which makes it easier to fulfill minor needs
intermittently, henceforth restriction of such an exchange can hinder the
exchange process.”
More simply, let’s assume that a person desires to have a ½ liter bottle of cold
juice in the middle of a hot afternoon. This bottle is available for Rs. 25 but the
person only has a Rs. 100 note. This bottle would be easy to buy if the
shopkeeper could offer the person change for his Rs. 100 in denominations of Rs.
5, 10, 20 and 50. However if the shopkeeper does not have this change, the
person would either have to tolerate his thirst or suffer the loss of Rs. 75. Imam
Ghazali calls this common sense where he states,
“We have not disallowed the exchange of dinar for dinar, only because
it’s absurd and unintelligent to do so. No sane person will intend to
exchange a dinar for dinar, henceforth it’s irrelevant to impose any
restriction. For this reason it’s declared permissible to sale or purchase
dirham for dirham or dinar for dinar (only if done on the spot and in
equal quantities).”1
If judged from the explanation provided by Imam Ghazali, all transactions such as
those indicated above fall within permissable Shariah rulings and the idea is
merely to facilitate the usage of dirham and dinar as a means of exchange within
the boundaries of Shariah law. The point is clarified further by the opinion
offered by Mufti Misr Muhammad Khatir on the difference between money and
commodity:
“It is not appropriate to compare the nature of money with that of any
asset or property as it is prohibited by the rulings of Shariah and
jurisprudence. This is because money is used as a determinant of prices
of commodities, hence to charge rent over money (given as credit) (اصب)
is erroneous. Ijara (leasing) is in fact ػوذيلؼذ (an agreement or contract
for the sake of earning a profit/usufruct) that requires property or corpus
to be returned back, which is not possible in case of money (since (ػی)
the borrower has to spent it rather to fulfill his needs).” 2
1------------------------------------------------------------------------------------------------------------ (٢؍۴) الدين علوم احياء
(۴؍)۔ يۃالتجار االھرام ،مطابع مصر( الشيخ محمد خاطر محمد) الربا،الشيخ بلوی رفع فی جہاد ----- -----------------------------2
23
Ilama Kasani confirms the stated viewpoint in one of his book:
والیغوص اعبسح انذساھى وانذبیش والرجشھب الہ الیکبالزلبع ثھب االثؼذ اعزھالک اػیبھب ، "
"وانذاخم رؾذ االعبسح ھی انلؼۃ الانؼی
“It is not permissible to lease dirham or dinar along with their lesser
units, because it is not possible to extract benefit or usufruct (يلؼذ) from
them until and unless they are not spent; on the contrary leased asset or
property offers direct benefit to the lessee.”
Dr. Hamd Misri has also shed some light on this issue, he states:
“The difference between renting a property and renting money is very
clear (the difference is of two types). When a property is rented, corpus
(ػی) remains, and the renter gets the benefit. Definition of Ijarah in
context of Shariah is also the same (however this is not possible in case of
money). Furthermore the custodian of the subject matter is the leaser
instead of the leasee, however in case of money the custodian is the
debtor (when loaned) instead of the creditor.”1
To surmise the discussion so far, money and commodity are two different and
exclusive entities and this view has been confirmed by a number of economists
and religious scholars. Henceforth money will be treated in a class by itself and
apart from commodities and with rules and regulations which differ from
commodities. In short, money will be viewed only as a medium of exchange to be
used to facilitate the trade of commodities. Under no circumstances can money
be traded whether by renting or for earning interest. Viewing money as a
commodity and treating it as such is likely to create a imbalance in the economic
system of any given society.
FORMS OF MONEY
The Islamic jurisprudence categorizes money into two main types2; natural
money and artificial or fiat or customary money. As the name implies, natural
مطبعۃ مصر، ، الحماد العزيز عبد حماد بن حمد الدکتور)الحماد منہ الخالص وسبيل خطرہ الربا ------------------------- ----------1
(۰ص) ھج ۴۴ اول طبع المدنی 2 “The Rule of Paper Notes and Currency” by Justice Mufti Muhammad Taqi Usmani, Memon
Publishers, Karachi, 1st Edition, 1993.
24
money is money which has a physical form such as gold and silver. Other items
cannot come under this category despite having all necessary properties
mandatory to qualify as a medium of exchange. Here it can be said that Allah has
created gold and silver specifically to serve as a medium of exchange. All other
mediums of exchange besides natural money are artificial or Fiat Currency. These
include sea shells and rice, which was used as money in ancient times, and
modern money forms such as checks, money orders, bank notes and credit cards.
IMPORTANCE OF GOLD AND SILVER A logical question which can be raised here is why gold and silver are deemed
natural money when even more precious minerals and metals exist? This is so
because of special cumulative characteristics and qualities assigned to these two
metals by Allah SWT which are not found in other equally or more precious
metals and minerals on earth. These qualities are as follows:
1. It is easy to mold or forge gold and silver into any form with minimal
effort.
2. It is equally easy to segregate or blend the two.
3. The taste and odor of gold and silver remains consistent regardless of
age and usage.
4. The chemical properties of the two metals resist corrosion even if left
buried in sea water or ground for indefinite periods of time.
5. A contamination in the chemical composition of the two metals can be
easily detected.
6. Gold and silver are dense metals which occupy less space.
۵،ص اول طبع ، دارالمدنی ، جدہ( الحسنی احمد حسن احمد) الحسنی ضوءاالسالمية، فی النقود تطور
In this book, a statement from Shah Wali Allah’s book “Hujjat-ullah Al-Balagha” has been quoted,
which says:
بھما التجمل ولتاتی االنسان ن بد فی نفعھما وعظم افرادھما وتماثل حجمھما لصغر والفضة الذھب المعادن بينھاای من االليق وکان"
(۵ ص")۔ باالصطالح نقدا غيرھما وکان بالطبع نقدين فکانا
الذھب ان: الفقہاءيقولون من ا کثير ان حتی: "جھ9042 الجزءالثالث ، الخامس العدد ، الخامسة الدورة ، االسالمی الفقہ مجمع مجلة
(9049" )اثمانا۔ ليکونا خلقھما تعالی ہللا ان ای الخلقة بحکم اثمان ھما والفضة
(912,990/ 2) ، االسالمية والعلوم القرآن ادارة کراچی،( قاسمی االسالم مجاھد موالنا) مباحث،قاسمی فقہی جديد
25
7. The decorative properties of the two metals are uniquely exclusive to
those found in other value comparable metals.
8. Gold and silver are scarce hence considered more valuable.
9. There is an easily discernible similarity between the byproducts of the
two metals such as gold of varying carats can be easily distinguished. 1
Since no other mineral or metal on earth comes close to sharing these properties
and qualities found in silver and gold, these two are hence termed as natural
money.
DIFFERENCE IN MONEY AND WEALTH
Ilama Ibn Najeem has provided the following definition of asset value: 2
"انبل کم يبیزهکہ انبط ي وذ وػشوك وؽیوا وؿیش رنک انخ"
“Anything which is in the owner ship of any individual is called wealth; let
it be money, grain, cattle, property or anything of value.”
According to this, money is a form of asset. Ibn-e-Manzoor similarly states:
"انبل يبيهکزہ ي عیغ االؽیبء"
“Wealth is anything which you own.”3
DIFFERENCE BETWEEN MONEY AND CURRENCY
The definition of money or Zarr has now been established with clarity. However,
not all forms of money can be legally enforced even though they might
theoretically fulfill the requirements of being considered money. These include
prize bonds and checks. If creditors such as a bank do not wish to accept these
1-------- - --(40 ص) ہفتم طبع ، العربية دارالنھضة ، بيروت،( الشافعی زکی محمد الدکتور) الشافعی بنوک،وال النقود فی مقدمة
۵ص النقود تطور ،( ھج 204 الموفی نجيم بابن المعروف محمد بن ابراھيم بن الدين زين عالمہ) نجيم ،ابن الدقائق کنز شرح الرائق البحر -------2
ھج9091 لاو طبع ، العلمية دارالکتب ، بيروت داراحياءالتراث بيروت،( ھج٧ منظورالمتوفی ابن عالمہ)منظور ابن العرب، لسان --- -----------------------------------3
(94/224) ھج9041 اول طبع العربی،
(4/241) ، ھج9092 اول طبع ، مذکورہ مطبع( ھج9222 م الشامی عابدين بن امين محمد) الشامی ردالمحتار
(49ص) ھج9044 اول طبع ، وھبہ مکتبہ قاہرہ، ،(متولی عمر الصديق ابوبکر الدکتور)، متولی النقود، ادياتاقتص
26
forms of money for any required transaction such as repayment of loans, they are
not bound by the law to do so. To the contrary, currency such as Euros, Dollars or
Rupees is a legally enforced government tender. This legal enforcement binds the
citizens of the country to accept and make payments to creditors such as the
banks and lessees using this legally accepted tender. It can therefore be
concluded that currency is a special form of money which therefore makes it a
special kind of asset.
EVOLUTION AND USAGE HISTORY OF MONEY
The history of money starts with the barter system used in ancient times for the
exchange of goods. In the barter system people exchanged items they possessed
with the items they wanted to acquire from other people. As can be imagined,
the barter system was fraught with setbacks and laced with difficulties. A
common disadvantage was the different perceptions that people had regarding
the value of an item which commonly caused the bartering parties to
compromise on inequitable exchanges. This naturally led to squabbles where the
parties later felt that their items of exchange were far greater in value than what
they were exchanged for. As economies developed and civilizations got more
established, it was realized that the barter system was not a good way to trade or
do business. The barter system was hence the first step towards the evolution of
modern economies and paved the way for the use of commodities as the medium
of exchange.
THE COMMODITY MONEY SYSTEM
The commodity money system was the next step in the development of monetary
system and was primarily designed to resolve the disadvantages associated with
the barter system. As the name suggests, the system used different types of
commonly used and needed commodities as the medium of exchange. These
included wheat, grains, leather, salt and pieces of iron.
THE RISE AND FALL OF METALLIC MONEY SYSTEM
The primary disadvantage associated with the commodity money system was the
difficulty of transportation. As populations grew, so did the number of daily
transactions creating a challenge for people to do their business using this
27
system. The alternate solution, the next step in the evolution of money, was to
find a means of exchange which was mutually acceptable and easy to use. Gold
and silver emerged as the metals which fulfilled the needs of the time and
gradually became popular as the standard to judge the price of commodities
regardless of the geographical distances between societies. This system came to
be known as the metallic money system. However the metallic money system
was not devoid of pitfalls either which eventually led it to change furher.
1. The Informal Era of Gold Money: At the start of the metallic money
system, only items of gold and silver in varying shapes and sizes,
including jewelry and utensils, were used in transactions. The
determinant of value in this exchange was the weight of the gold and
silver items.
2. The Formal Era of Gold Money: The next era of gold money was the
formal era which emerged in the form of minted gold and silver coins.
The popularity of gold or silver money differed between different
regions. The coins were standardized on account of size, weight, and
quality of metal and were embossed with the seal of the manufacturer
as a form of authentication. The value of these coins was equivalent to
the actual content of gold and silver in them. For instance a 4.25 g, 22
carat dinar was interchangeable with any gold item with a corresponding
weight and value. This system was later named the gold standard and
was first implemented in China in 7th
BC. Though the mention of this
fact may seem redundant at this stage, it forms a basis for a later
discussion on the intentional debasement of the monetary unit in the
latter stages of the evolution of money. The formal era of gold money
gave people the freedom to use coins, gold bars, jewelry and other items
as a dependable means of conducting domestic and international trade.
Governments also encouraged citizens to convert their gold items into
coins or from coins to other items.
3. Bimettalism: Many countries started making coins by combining gold
with silver rather than with just gold alone. This necessitated the
establishment of an exchange rate between the two coinage systems
where the gold was regarded as the main currency and the silver was
28
seen to be its fractional unit. This system was referred to as bimetallism.
The biggest drawback of the system was the dissimilarity of the
exchange rate between gold and silver in different regions. For example,
in America if the exchange rate was 1:15 i.s. single gold coin was
exchanged for 15 silver coins. However at the same time if in Europe the
exchange rate was 1:15.5 or 15.5 silver coins for every gold coin. For
obvious reasons, the traders would then start to collect gold coins from
America and exchanged them in Europe for a greater number of silver
coins to be brought back and exchanged for gold coins. In other words if
30 gold coins from America could be exchanged for 465 silver coins
according to the 1:15.5 European exchange rate. In turn, exchanging
these 465 silver coins in America yielded 31 gold coins at the 1:15
exchange rate. Simply put, an extra gold coin could easily be earned
with the trade of 30 gold coins. This difference in exchange rate led to
an abundance of silver coins in America. In 1834 the American
government sought to resolve this imbalance by revising the existing
exchange rate to 1:16 or 16 silver coins for every gold coin which started
an inflow of gold coins back into the country.
4. Gold Backed Paper Receipts: The increase in the use of gold and silver
coins made it obvious that this was a far easier method of trade than
lugging around heavy or cumbersome commodities. But with this came
the new fear of theft where affluent individuals were reluctant to carry
around large amounts of gold. A solution to this dilemma was offered by
goldsmiths and money changers in the form of a service which would
hold large deposits of coins for a fixed fee with a receipt provided to the
depositor as acknowledgement of the transaction. This was the start of
deposit banking in Europe.
With time, people got comfortable with this safe, reliable and theft
proof system as they knew that they could redeem these receipts at
respective goldsmiths. Consequently, the dependence on these receipts
increased to an extent where these replaced gold as the primary method
of exchange. No longer were these receipts only a means of exchange
for the affluent but even the common citizenry started to use these for
29
trade in market places. These receipts were the first form of paper
money.
At the start of the receipt system there were no officially established
forms or formats of these receipts. The physical nature of the receipts
depended largely upon the creativity of the issuer. There were also no
legal implications which bound people to use one format over another.
The backbone of the entire receipt system rested upon the level of trust
that people had in the gold smith or money changer.
5. Legal Tender: As the gold backed receipts gradually got firmly
established into economies, they started to gain a standardized from
during the early 1700s. The Stockholm Bank of Sweden triggered this
standardization by issuing paper notes or currency notes backed by gold
or silver which could be exchanged whenever the holder desired. The
notes or currency issued by any bank was equivalent to the value of gold
in the bank vaults. This practice enabled the banks to honor all the
receipts even if they were submitted simultaneously and posed no
problems to the bank or the clients. The Stockholm Bank of Sweden
kept its gold in the form of bars, hence the term ‘Gold Bullion Standard’.
With common and widespread usage, the receipt system was legalized
by the governments of England and Wales in 1833 and was given the
name ‘legal tender’. Under this system citizens were bound by law to
accept even bank loans of legal tender or banknotes just as they would
accept gold or silver coins. Commercial banks were later prohibited
from issuing their own banknotes and the responsibility was shifted to
the Central Bank.
6. The Dawn of Debasement: There were many instances, such as war,
where governments would experience a shortage of funds for financing
the military or rebuilding infrastructure destroyed during the war.
Desperate to meet this shortage, many governments printed banknotes
exceeding the value of actual gold in the bank without public knowledge.
This naturally increased the number of banknotes circulating in the
economic structure many times more than the value of gold in the
30
banks. What gave the banks the confidence to continue the practice was
the assumption that not all depositors would claim their holdings at the
same time. Since the public was never taken into confidence over this
decision, they continued to believe that their banknotes were backed by
gold and were redeemable at any time. The reality however, was to the
contrary. According to the norms of the time, these deceitful banknotes
were referred to as ‘fiduciary money’.
As governments got concerned with the potential repucussions of this
activity, they had only one option; either increase the amounts of gold
coins, bars and rods by reducing the size of each unit without reducing
their face value, or mix them with another cheaper metal to produce the
required amount of gold, even if impure, in order to acknowledge the
surplus receipts produced to fund the governmental expenses. This
practice is referred to as debasement due to which the intrinsic value of
the gold in bank vaults dropped dramatically as compared to their ‘face
value’ or the value printed upon it. These altered gold coins were
named token money since the value indicated on these new coins only
represented in name the intrinsic value of the original, unaltered coins.
7. The Era of the Bank Runs: The circulation of fiduciary money kept
increasing and eventually banks realized that it was impossible for them
to acknowledge gold backed receipts. They also accepted the fact that it
was only a matter of time before the public apprehended this guile and
started demanding their gold against their banknotes from the Central
Bank. This phenomena is known as the bank run. The government’s
fears were not unfounded and soon the incensed public was creating
bank runs everywhere. Ironically, the bank run phenomenon is not a
thing of the past and still continues today.
The solution that banks devised to counter bank runs was the imposition
of strict conditions on all those attempting to redeem their notes. The
height of these conditions was seen in England where a complete ban
was placed on these redemptions after the end of the 1914 war. The
counry relaxed these conditions in 1925 for those who had banknotes
worth 1700 pounds . However this constituted a very small section of
31
the population, leaving the majority no other option but to keep the
economic engine running and eventually accept the status of banknotes
as a legal form of money. Since banknotes retained their purchasing
power and were already in common and wide usage, they continued to
be accepted as the alternative, even if begrudgingly, for silver and coins
in matters of trade.
8. The Point of No Return: In 1931 the Parliament of England completely
abolished the Gold Standard along with the 1700 pound limit for
redeeming bank notes. All individuals were hence legally bound to use
banknotes for business and trade. These conditions however applied to
people within the boundaries of England only and were not applicable
on countries holding the foreign reserves of other countries. For
instance, England was bound to acknowledged redemption request or
the exchange of notes for gold against any amount of pound sterling
notes presented by the German government and vice versa. This system
came to be known as the ‘Gold Exchange Standard’.
9. The Internationalization: A system of Special Drawing Rights or SDRs1
was enacted in 1947 which sought to replace gold and silver in large
scale international transactions. This system eliminated the
cumbersome process of physically transferring gold from one country to
another. The need for the creation of the system was felt because under
a strict international gold standard the quantity of gold around the world
was fixed and the economies of the participating members of the IMF as
an aggregate were continuously expanding. SDRs was seen as a way to
increase the supply of the basic unit proportionately and this ‘paper
gold’ became the credit that the countries with a balance of trade
surpluses could ‘draw’ from the nations with balance of trade deficits. In
reality, paper gold was but an accounting transaction within a ledger of
account and grew in popularity because it eliminated the logistical and
security issues related to the shipment of gold back and forth between
countries for settling their national accounts.
1 Special Drawing Rights. International Monetary Fund.
http://www.imf.org/external/np/exr/facts/sdr.HTM
32
10. Bretonwoods Agreement: The Brettonwood Agreement was crafted
during the Second World War in 1944 and was put into effect a year
later. Besides taking care of a number of other festering international
issues, the Agreement resulted in the creation of the International
Monetary Fund which aimed to stabilize exchange rates between
currencies and to act as any country’s lender as a last resort.
“A key component of the Bretton Woods Agreement was the
requirement that all countries peg their currencies to a certain amount of
gold. In practice, most currencies were pegged to the U.S. dollar, which
was itself pegged to gold. This helped the IMF accomplish its stated goals
to stabilize currencies that had experienced a large amount of
wartime inflation. The Agreement worked relatively well until the United
States unilaterally depegged from gold in 1971.” 1
The Gold Exchange Standard started to see its decline after 1971 as the
US dollar ran into serious crisis. This was during the government of the
French President Charles de Gaulle when France started to reduce its
dollar reserves, trading them for gold from the American government.
This was a serious blow to the U.S. economic influence abroad. This
economic setback set into motion by France was further exacerbated by
the Vietnam War and the Great Society expenditures proposed by the
36th
American President Lyndon Johnson. In an attempt to ease this
overwhelming fiscal strain, President Richard Nixon decided to eliminate
the fixed gold price in 1971, leading to the gradual disintegration of the
entire system. 2
The result of these modern economic maneuvers was the abolishment of gold as
a medium of exchange. In turn, it was replaced with paper notes to such as extent
1 Joerges,C., Straith, B., Wagner P. (2005) The Economy as a Polity: The Political Constitution of
Contemporary Capitalism (Psychology Press, 2005)
2 Eichengreen, B., Flandreau, M. (1985) The Gold Standard in Theory and History (Psychology Press,
1985)
33
that in present day and age gold has little to do with the established monetary
system of any country. Fiduciary notes, legal tenders or paper notes are now the
only forms of money used in business and trading activities. These notes, now
representing a fictitious purchasing power, are no longer backed by gold and
silver as they were at the start of their conception. However it would be wrong to
say that this system has fully matured, stabilized and is accepted singularly by the
masses. This is contrary to the gold and silver system of the previous ages which
was not only mature and stabilized in its usage but was also generally accepted as
‘the’ system in monetary dealings. At present that are numerous countries
demanding a reversion to the older economic system backed by gold rods or
bullion. There are even demands for the use of gold bars and coins as a medium
of exchange. Most countries today not only retain gold in their portfolio of
currency reserves, but struggle to increase this amount due to the widespread
perception that gold will shield them from the potential turbulences in the
present day system of fiduciary currency. These gold reserves, whether they are
coins or gold backed notes, however remain legally detached from the direct
usage in the monetary system of any country at present. 1
THE EVOLUTION OF MONEY AT A GLANCE: 1
st Stage: The Barter System, where commodities were exchanged for
commodities.
2nd
Stage: The Commodity Money System, where different cereals were
used as a medium of exchange.
،مکتبہ کراتشی ،( العثمانی تقی محمد المتی القاضی) العثمانی النقدية، االوراق احکام -------------------------------------------1
ص ھج9042 اول طبع دارالعلوم،
٧ص حکم کا کرنسی اور نوٹ کاغذی ايضا*
شافعی زکی محمد الدکتور ،۰ص والبنوک النقود فی مقدمة*
الحسنی احمد حسن احمد الدکتور ،92ص االسالميہ ضوءالشريعة فی النقود تطور*
علی مبارک شيخ ، 92ص ، زروبنکاری تعارف*
994ص دوم حصہ معاشيات کتاب ايضا*
(901ص)، ھج9092 سوم طبع ، دارالنفائس ، شبير،اردن عثمان محمد الدکتور االسالمی، الفقہ فی المعاصرة المالية المعامالت*
الجعيد ثواب بن ستر ، ۵۵ص االسالمی الفقہ فی النقدية االوراق احکام*
الترکمانی خالد عدنان ،14ص االسالم فی والمصرفية النقدية السياسية*
“Introduction to Economic Principles” by Dr.A.N. Agarawala, page-314
“Modern Economic Theory” by K.K Dewett, Page-416
34
3rd
Stage: The Metallic Money System, where gold and silver was
classified as money.
a. At the start of the system, gold and silver did not have any
standardized form but were exchanged in bits and pieces according
to weight.
b. The next stage was the emergence of gold and silver coins
standardized on account of weight and content of gold or silver.
The face value of the coin represented its intrinsic value. This was
referred to as the Gold Specie Standard.
c. Bimetallism emerged next where coins made with gold and silver
with an exchange rate between them started being used in different
countries.
d. The transfer of gold between parties for the purpose of trade
naturally fanned threats of theft related to these transfers. Hence
money changers and goldsmiths offered to store these coins for the
customers in lieu of issued receipts. With time, the ease of use of
these receipts increased their popularity on the larger scale as a
standard medium of exchange in markets.
e. These receipts eventually evolved in the form of banknotes issued
by commercial banks. These banknotes were in fact standardized
forms of gold backed paper receipts which could be redeemed any
time for the amount of gold they represented. The gold specie was
in the form of rods and were referred to as ‘Gold Bullion Standard’.
f. The Central Bank was made solely responsible for issuing bank notes
in 1833. The term ‘Legal Tender’ was given to these legalized
banknotes.
g. During pressing times such as during war when governments felt
that they were unable to meet their expenditures they started to
publish more paper notes than the gold backing them. These notes
were referred to as ‘Fiduciary Money’. In an attempt to keep a
cover on this act, gold and silver coins were de-purified by mixing
with cheaper metals. This reduced their intrinsic value as compared
to their ‘face value’. This money was called ‘Token Money’.
h. With time and as expected, fiduciary money became more and more
common. Hence their conversion to gold, previously allowed
before, was prohibited by law.
35
i. Though by 1931 this conversion was completely banned for the
public, numerous governments continued the conversion of
banknotes to gold until 1971 under the term ‘Gold Exchange
Standard’.
j. The use of gold for international trade was suspended in 1971 and
its use as a medium of exchange for local and international
transactions was completely abolished. Therefore no currency of
the world issued since 1971 is backed by gold. This is not to say that
the precious metal has diminished in value in any way; gold is still
sought and retained as an essential part of monetary reserves even
if it no longer has the legal status to back currencies.
VARIOUS STAGES IN THE HISTORY OF MINTING
Money was not present in the shape of coins before or after the advent of Islam.
Historical evidence indicates that though before Islam dinar from Heraclius (ہرقل)
and dirham from Iran (Baglia and Hameria) were circulating in Makka, they were
in the form of bars. According to Ilama Blazaree:
کبذ دبیش ہشهم رشد ػهی اہم يکۃ كی انغبہهیۃ ورشد ػهیھى دساہى انلشط انجـهیۃ وانؾیشیۃ كکبوا ال "
"رجش الیزجبیؼو الػهی اھب
“Before the advent of Islam, dinar from Heraclius and dirham from Iran
(Baglia and Hameria) were brought to Makkah, and people use bars as
medium of exchange.”1
After Islam, this trend was continued by Prophet Muhammad (SAW) and
according to authentic evidence, Hazrat Fatima (RAA) was given a dowry of 480
dirhams Kasarwi by Hazrat Ali (KAW) at the time of their wedding or Nikah.2
These currencies were also used for the purpose of Zakat and tax collection and
were the prevalent mode of exchange in other financial transactions as well.
Prophet Muhammad (SAW) did not find it necessary to change this system and
hence the use of gold and silver bars continued. A Hadith in this context states:
۵٧ص الثالث القسم ، المصريۃ النہضۃ مکتبۃ ، القاہرة ، البالذری يحی بناحمد البالذری، ، البلدان فتوح ----------------------- 1 يہ ، ہے کہاجاتا بھی اکبر کسری جسے ، اول کسری ہيں، گزرے دو کسری اور ، ہے نسبت طرف کی کسری کسروی --------2
اسی ، کی حکومت پر سفار تک۶۰ تا۵٢ نے کسری دوسرے ، کی حکومت تک۵٧٢ تا۵ پر فارس اور ، تھا ساسانياالصل
ہيں۔ منسوب طرف کی اول کسری کسرويہ دراہم ، تھی دی شکست نے روم شاہ ہرقل کو
36
۔"انزھت ثبنزھت وصب ثوص يضالثضم وانلنۃ ثبنلنۃ وصب ثوص يضالثضم ، ك صاد او اعزضاد كھوسثب"
“Gold must be sold for gold in equal quantities, similarly silver must be
sold for silver in equal quantities. If the quantity exceeds, then it will be
termed as Riba (Usury).”1
Not only were gold and silver bars a common medium of exchange in Arabia at
the time but were similarly used by the Romans and Persians as well. This format
of currency continued unchanged in Arab until the early period of the rule of
Hazrat Omar (RAA) in the Arabian peninsula. It was in 18th
hijri, that Hazrat Omar
introduced dirhams with inscriptions of Kasravi (وؼ كغشوى) which resembled a
donkey’s head, hence the name ‘dirham Baghlia’. The dirhams were embossed
with the name of their city of origination such as Damascus or Ba’lbak. It would
therefore be correct to acknowledge Hazrat Omar (RAA)as the first person to
introduce a new coin or medium of financial exchange in the Islamic world.
According to the historian Baleer however, evidence also indicates that Khalid Bin
Waleed (RAA) had introduced a coin in Tabaria in 15th
hijri, or even before the
introduction of dirham Baghlia by Hazrat Omar (RAA). Later when Hazrat Usman
(RAA) became governor or khalifa after Hazrat Omar (RAA), he too introduced a
coin with the words ‘Allah Is Great’ ( واكبراہللاھ ) embossed on it.
The tradition of the introduction of new forms of currency within the Islamic
world continued; Hazrat Mavia (RAA) introduced the dirham and Fuloos
specifically for use in the Islamic peninsula and Hazrat Ziad (RAA) introduced
dirhams during his rule in Kufa and Basra. Later rulers like Yazeed, Mavia the 2nd
and Marvan Bin Hukum did not take too much interest in amending the existing
state or design of coins. New formats in coins were introduced later under the
governance of Katri bin Faja’t Al Kharji, Abdullah bin Zubair (RAA) and Masa’b bin
Zubair (RAA) in 70th
hijri. It is believed that Hazrat Abdullah bin Zubair (RAA) was
the first person to introduce the circular shaped dirham in the Islamic society.
The Islamic monetary system was further refined during the rule of Abdul Malik
bin Marvan (65th
to 86th
Hijri). In 79th
hijri he introduced coins specially designed
for use in the Islamic financial system which were far superior in purity as
compared to the previous coins. He then sent samples of this coin to Hajjaj bin
Yousuf Al-Saqfi for distribution and adoption by all other states. It was also
--------------------------------------------الربا۔ باب ، المساقاة کتاب ، مسلم اخرجہ ---------------------------------------------1
37
during the era of Abdul Malik bin Marvan that a supervisory board was created in
order to monitor the manufacturing standards of the minting factories. Abdul
Malik bin Marvan can hence be considered the first reformer اول (مصلح ) of the
Islamic monetary system.
The standard and quality of coins were improved further and strict measures on
production were enforced under Omar bin Huberah Wali Iraq during the
governance of Yazeed bin Abdul Malik and Khalid bin Abdullah Bajli during the
governance of Hashsham bin Abdul Malik and Yousuf bin Omar. The use of pure
silver was initiated during these times hence making the coins produced under
the brands of Huberee, Khalidi, and Yousufi the purest of all at the time of Bani
Ummiya. These brands were superior to an extent where Mansoor Tukhraaj
refused to accept coins of any other brand. There were not only (منصورتوخراج)
strict regulations on the adulteration in the silver content of the dirham but the
act was declared a major crime. During the time of Hazrat Omar bin Abdul Aziz
(RA), a man arrested for this crime was sent to jail. Similarly when Abdul Malik
bin Marvan arrested a man on similar charges, he contemplated amputating his
hands. He however relaxed the sentence and jailed the man instead.
The next era in the evolution of money in the Islamic world was the Abbasid
dynasty, a disturbed and turbulent time in Islamic history leading to the
formation of various independent states. During this time the dirham was
adulterated in various ways. For instance during the early period of the Abbasid
dynasty fractions of copper and brass were mixed with the silver dirhams, or
equal proportions of other metals were combined with the silver dirhams, or only
a fraction of silver was found in the dirham as compared to the content of the
other metals. The third form of dirham which contained only a fraction of silver
as compared to some other metals was also referred to as ‘sick money’ (حمى).
These were produced during the time of Zahir Bairqooq. In jurisprudence
literature this currency is also called ‘Dirham Beharja’ and ‘Dirham Stoqa’.
According to accounts by Ibn-e-Mamatee, the content of silver in these
adulterated dirhams declined to such an extent by 300th
hijri that pure silver
dirham coins became a rarity in Egypt. At the same time in Syria, the dirhams in
circulation contained less than a third of pure silver content. The name of Azd-
ud-dolah stands out in the production of impure (مغلوط) dirhams loaded with
copper which were refused even by traders. During the dynasty of Salahuddin,
38
silver and gold coins were almost impossible to find. It was also during this same
period that dirhams and dinars started being produced with two third of silver or
gold content and one third of other metal. This proportion continued into the
reigns of Banu Ayub in Egypt and Syria. At this time in Paris dirhams and dinars
were produced with a silver or gold content of nearly 70% with 30% being other
metals.
HISTORY OF FULOOS
Fuloos (فلوس) or artificial money refers to any currency made with materials other
than gold or silver. Before the invention of Fuloos, wheat and other grains were
used as a measure of value and common means of exchange. The next era of
Fuloos was Fuloos made from copper. In Texal (Dar-ul-Zarrab) circular shaped
currency was produced but was mostly used for petty transactions given its
aesthetic inferiority. Evidence shows that the first artificial currency in Arabia
was produced under Hazrat Omar (RAA) with the ‘Bazanti’ (بزنطى) design. This
currency, which was also branded, later became popular in many regions of
Egypt. Later, artificial currency embossed with the date and place of minting
emerged, the earliest being from 90th
hijri. This currency was aggressively
promoted by Abu-al-Fazal of Kharasan or present day Afghanistan. He wrote of
this money:
"ھی كیب ثضنۃ انلنۃ ػذھى"
“We treat Fuloos just like silver is treated elsewhere.”
Not only did the currency Fuloos (فلوس) gain a footing in Kharasan but different
forms of it became abundantly popular by 650th
Hijri in a number of regions
around the world under different emperors. In 720th
Hijri, Amir Mehmood
standardized the form of Fuloos in circulation and eliminated the use of the
dirham entirely. The popularity of the new form of Fuloos became the measure
of the value of gold, hence attaining the position of a major currency form. By
828th
Hijri, Fuloos had become established and standardized to an extent that its
39
exchange rate with the dirham was announced at 1:12, or twelve dirhams for
every unit of artificial currency. This rate was later revised at 1:8. 1
LEGAL RIGHTS TO MINT COINS
According to the rules of constitutions, minting rights are only held by the
governments of respective countries. The general public does not hold these
rights and attempting to do otherwise is considered illegal and punishable by law.
The question within the context of the text is whether or not these rights are
awarded to the general public by the Shariah. Here the consensus of the majority
of Islamic scholars is unanimous; as per Shariah only governments have the legal
rights pertaining to minting. Individuals cannot produce coins equivalent to or
different than the ones produced by the government. If a person attempts any
such act, it will be considered an unlawful act and a display of hostility against the
nation (االرض فى Two related incidents attest to this Islamic stand on .(فساد
minting. A person was brought to Hazrat Omar bin Abdul Aziz (RA) who had
produced his own coins. Not only were his coins destroyed but he was also
imprisoned. Similarly during the time of Hazrat Abdullah bin Marvan, a person
who had minted his own coins was arrested. Though Hazrat Abdullah bin Marvan
initially decided the punishment to be the amputation of his hands, the person
was forgiven and imprisoned instead.
According to Dr. Khalid Adnan Turkamani:
اہ ي انلغبد ونوکب اننشة ػهی انوكبکب سوی ػ عؼیذ ث انغیت ا : وکش رنک االيبو يبنک ، وهبل"
۔"ي ینشة انوود ي ؿیشسعبل انذونۃ او انغهطۃ انؾبکى یؼزجش ي انلغبد كی االسك
“Imam Malik has declared this act (minting of coins by the general
public) as aversive and said that it is explicit hostility ازقبيل) ) even if the
minted coin is exactly similar to that produced by the emperor. And
Hazrat Saeed Bin Masayab (RAA)narrated that if anyone other than the
government produces a coin then it would be considered as hostility
against the nation.”
، ھج۴۴ دارالعاصمۃ ، بيروت( العمر صالح بن ابراہيم)العمر االئتمانيۃ، النقود ----------------------------------------------1
تا۵ص
(۶ص) ھج۴٢ الرسالۃ مؤسسۃ ، بيروت( الترکمانی خالد عدنان الدکتور) الترکمانی ، والمصرفيۃ النقديۃ السياسيۃ
40
The Hanafi school of thought relaxes this rule to some extent stating that
privately produced coins equivalent to those produced by the state are
acceptable on the condition that they not pose a threat of any kind to Islam or
Muslims. However, in view of the fact that giving private parties a free authority
to produce coins is likely to creae a disturbance and loss to economies, even if
not a direct threat to Muslims, it is suitable to give only governments the right to
mint coins or to produce any other form of currency as per current norm. 1
FUNCTIONS OF MONEY IN SHARIAH AND ECONOMICS
The various functions related to money pertain to its use in society and the
services that it provides. In order to understand the differences and similarities
of the functions of money in Shariah and contemporary economics, both sources
need to be consulted whereby it is revealed that the functions of money as
outlined in Shariah are not dissimilar to those in contemporary economics.
Economics discuss the functions of money by giving them separate headings
while jurists divide these functions by discussing them as Zakat, interest or Riba
and so forth. Hence in context, though certain functions of money have briefly
been touched upon before they will be discussed here again.
AS A MEANS OF EXCHANGE The most important function of money since its time of inception, despite
changing forms, has been as a medium of exchange for the sale and purchase of
goods and commodities in societies across the world. Before money was
invented, people used the barter system where they exchanged one object for
another. However the system was tedious and difficult and using money instead
resolved all the disadvantageous related to bartering. Money can now be
exchanged easily by any party or individual for desired services and products. It
won’t be wrong to say that money is like the blood in the economy which
continually flows as services and goods are traded with it. Manufacturers
purchase raw material and machinery and pay the laborers salary to work these
machines. This money is used by laborers to buy desired goods produced by
other manufacturers. This cycle keeps the economic engine running full speed.
(۶٧ص) ھج۴٢ الرسالۃ مؤسسۃ ، بيروت( الترکمانی خالد عدنان الدکتور) انیالترکم ، والمصرفيۃ النقديۃ السياسيۃ -----------1
41
STANDARD OF VALUE In any given economic system, money is the standard for the measurement of
value of commodities. Just like wheat and other grains are measured according
to weight and liquids like oil are measured in liters and gallons, the value of
commodities is established with the monetary unit in terms of its price. For
instance different radios are priced differently hence making it easy to judge the
more valuable ones from those of inferior quality.
STORE OF VALUE Money serves the purpose of storing savings for future needs and acts as a safety
net for unforeseen circumstances. Money does not perish like other
commodities like grain or cattle and does not depreciate in value. Apart from
special conditions and monetary policies, there are little chances for the value
stored as money to be lost.
STANDARD OF DEFERRED PAYMENTS As the name indicates, deferred payments are the payments between different
business transactions which are deferred to a future date. In accounting
terminology, these payments are referred to as accounts payable or notes
payable. Payments of loans in installments are also an example of deferred
payments. Money is the optimal medium for deferred payments, under normal
circumstances, since its value remains stable over extended periods of time.
Contrary to this, the price or value of any other commodity is likely to fluctuate
frequently in the market. According to Professor Manzoor Ali:
"If money wouldn't have existed then production and sales of goods
would occur like it use to in ancient times, that’s why it is said that
money is among those inventions which have contributed heavily in the
advancement of human societies. It has acted as a catalyst in the
advancement of human civilization.”1
1 The Book of Economics, Vol-2, page 120
: للجعيد النقديۃ االوراق احکام
: الوظائف تلک بين يلی وفيما’’
للتبادل۔۔۔ وسيط ۔النقود
للقيمۃ۔۔۔ مقياس النقود ۔
للقيمۃ۔۔۔ مخزن النقود ۔
42
Various Islamic scholars concur with this view. Allama Ibn-e-Al Arabi (RA)
declares money as the standard of measuring value and a medium of exchange:
“To fragmentize dirhams and dinars (debasement) is a grave sin, because
they are used as a standard of value of commodities, to estimate the
worth of assets, and as a medium of exchange. Some scholars have even
compared dirham and dinar with a ‘judge in the court of law’ (as he has
the capacity to do justice while measuring deviation and disparity among
seemingly similar commodities or assets, like vegetable or fruits which
seems identical but have different weights).”1
Allama Ibn-e-Al Hamam also acknowledges money as a medium of exchange,
additionally stating:
“Both (Dirham and Dinar) have been created for the purpose of acquiring
various goods.”2
According to Allama Sarkhasi:
“Money helps in determining the value of various items.”1
۶۶۶ص‘‘المؤجلۃ۔۔۔ للمدفوعات وسيلۃ قودالن ۔۴
:للترکمانی االسالم فی والمصرفيۃ النقديۃ السياسيۃ
:ثانويتين ووظيفيتين اساسيتين وظيفتين للنقود ان’’
، للنقود يۃالثانو ۔۔الوظائف کمعيارللقيمۃ النقود: الثانيۃ ۔۔۔الوظيفۃ للتبادل وسيط النقود: االولی الوظيفۃ: للنقود االساسيۃ الوظائف
ص‘‘للقيمۃ مستودع النقود: الثانيۃ الوظيفۃ ، الذمۃ فی النقود ثبوت االولی الوظيفۃ
“The Theory of Money and Credit” by Ludwing Von Mises, page-41, Chapter-1
Modren Econmic Theory by Dewet, Page-412
“Money performs five important functions:
1. It is serves as a medium of exchange.
2. It is used as a store of value.
3. It is standard for measuring values.
4. Money serves as a standard for deffered payments.
5. It transfers value."
Introduction to Economic Principles, page - 315
"Money performs four main functions: common medium of exchange, A common measure
of value..., Store of value…, A standard of deffered payments....", (۶۴؍)------- دارالمعرفۃ, بيروت( ،۵۴ متوفی العربی بابن المعروف ہللا عبد بن محمد بکر ابو)، العربی ابن, القرآن احکام 1
--------------------------------------------------------------------------------------------(۵۵؍) القدير فتح 2
43
Allama Ibn-e-Al Qasim states:
“Gold and silver are a standard of value for all items.”2
Allama Ibn-e-Taymiyya writes about Fuloos:
“… That artificial currency which is used in routine. Its worth is its
inherent characteristic and people will use it as a standard to measure
the value of commodities.”3
And in the words of Ibn-e-Al Qameem:
“Dirham and dinar are Asman ( ثمانا ) for sold out items, and Saman (ثمن)
is the standard to establish the prices of commodities.”4
These references are quoted in order to establish the clear concurrence of
opinion between contemporary economists and Islamic scholars on the functions
of money. It needs to be pointed out here that this concurrence does not exist
on money being a tradable commodity which makes it clear that money itself is
not a tradable good but only a means to trade goods. In none of these definitions
is money indicated as an item to be traded or rented for profit and has to be
treated and used only as a medium of exchange.
INFLATION AND DEFLATION
The topic of inflation and deflation of money falls under ‘Value of Money’ and
hence will be discussed in more detail later alongn with its various types and
causes and effects on the economy. Inflation and deflation are antonyms. The
literal meaning of inflation is appreciation, amplification or expansion of anything
while deflation means decrease, reduction or contraction. When the terms
inflation and deflation are used in context of the monetary system, they refer to
the expansion or contraction of the supply of money. When there is an
--(٢؍) ھج۴۴ ، بيروت،دارالمعرفۃ( السرخسی الدين شمس) ،السرخسی المبسوط ---------------------------------------1
االموال خيرة تعرف ھماوب ، االشياء قيم انھما سوی فيھما مقصود ال وانہ بھما االموال تقوم انہ’’:ہيں فرماتے جگہ دوسری
(؍)ومقاديرھا۔ ------------------------------------------------------(٧ص) والتجاريۃ النقديۃ االوراق احکام بحوالہ ---------------------------2 --------------------------------------------------------------------------(۴۶۰؍٢) الفتاوی مجموع -----------------------------3 4 ------------------------------ ---------------------------------------------------------------------(۰،٧؍) الموقعين اعالم
44
expansion of money, there is a greater supply of money in relation to the supply
of commodities which leads to higher prices. This situation also analogously
reduces the value of the monetary unit and is referred to as inflation. Similarly, if
the money supply reduces in the economy in relation to the supply of
commodities, prices are reduced and each monetary unit increases in value as
compared to the value of commodities. This situation is referred to as deflation.
Simply put, monetary expansion leads to an increase in the price of commodities
and reduction in the value of currency while the contraction of money supply
reduces commodity prices and increases the value of currency.1
Inflation and deflation in economies was just as common in ealier times as it is
now. Over time the meanings of the terms have ‘standardized’ where the
fluctuating prices of commodities, regardless of reasons such as fluctuating
money supply or reduction in the supply of commodities, is now also
encompassed within these standard definitions. This subject will be discussed in
detail in Chapter 6.
1 “Islam and Contemporary Economics and Trading” by Justice Muhammad Taqi Usmani, page 108
Addition References:
“Money and Banking” by Sheikh Atta Allah MA, page 184
“Money and Banking” by Sheikh Mubarak Ali, page 83
الشافعی زکی محمد الدکتور( ۶۰ص) والبنوک النقود فی مقدمۃ
Value of money
Prices of Commodities
45
CHAPTER-2: RIBA (INTEREST/USURY)
Islamic rulings related to money are a critical issue when it comes to the Riba (ربا)
or interest. It is hence imperative to define Riba in detail and discuss related
matters to it in detail. Both the literal and terminological meaning of Riba are
markup or increase.
SYNOPSIS OF EVIDENCE ON IMPORTANCE OF RIBA
The Quran explicitly warns against the use of Riba:
ي انظ رنک ثبھى هب" ب یووو انزی یزخجطہ انؾیط ک اال ثوا الیوويو انش یبکهو ب انجیغ يضم انزی نواا
و ا ثوا واؽم للا انجیغ وؽش ثوا اآلیۃانش -"نش
“Those who take interest will not stand but as whom the demon has
driven crazy by his touch. That is because they have said: 'Trading is but
like Riba'. And Allah has permitted trading and prohibited Riba.” (Surah
Al Baqarah, verse 275)
ذهبد وللا الیؾت کم کلبس اصیى" ثوا ویشثی انق ؾن للا انش "ی
“Allah destroys Riba and nourishes charities.” (Surah Al Baqarah, verse
276)
ورسوا يبثوی ي ان" یبا یھب انزی آيوا اروواللا للا نى رلؼهوا كؤروا ثؾشة ي ، كب زى يئيی ک ثوی ا ش
وسعونہ اآلیہ
“O those who believe, fear Allah and give up what still remains of
the Riba if you are believers. But if you do not, then listen to the
declaration of war from Allah and His Messenger." (Surah Al Baqarah,
verse 278,279)
ثبامؼبكب ينبػلۃ اآلیۃ" ...یبا یھب انزی آيواالربکهواانش
46
“O ye who believe! Devour not usury, doubled and multiplied; but fear
Allah that ye may (really) prosper.” (Surah Al-Imran verse 130)
Some Hadith on the subject of Riba are as follows:
نؼ سعول للا : وكی سوایۃ نغهى وؿیش آکم انشثبويوکهہ ملسو هيلع هللا ىلصنؼ سعول للا : ػ اث يغؼود هبل"
آکم انشثب ، ويوکهہ ملسو هيلع هللا ىلص
"ھى عواء: وکبرجہ وؽبھذیہ ، وهبل
“Hazrat Muhammad (SAW) has cursed those who take and facilitate in
the process of Riba, and according to another tradition he has cursed all
those who eat, facilitate, write contracts and bear witness for the Riba
based transaction and has said that they are all equal (in their sin).”1
انشثبثنغ وعجؼو ثبثب وانؾشک يضم رنک"
“There are seventy plus anomalies in Riba, and Shirk is equal to them.”2
"انذسھى یقیجہ انشعم ي انشثب اػظى ػذ للا ي صالصۃ وصالصی صیۃ یضیھبكی االعالو"
“One dirham of Riba is equal to fornication done thirty three times, that
fornication which a person does after accepting Islam.”3
"انشثبصالس وعجؼو ثبثبایغشھب يضم ا یکؼ انشعم ايہ"
“Riba has about seventy three levels of sins and the least among them is
like committing adultery with one’s own mother.”4
"يباؽذ اکضش ي انشثب االکب ػبهجۃ ايش انی ههۃ"
“Any who earns more with Riba, its imperative that his earnings may
decrease.”5
"ارا ظہشانضب وانشثب كی هشیۃ كوذ اؽهوا ثبلغھى ػزاة للا"
-------------------------------------------وغيرھا البيوع، کتاب ابوداؤد ، المساقاة کتاب مسلم الطالق، کتاب یبخار -------------1 --------------------------------------باختصار صحيح باسناد ماجہ ابن عند وھو الصحيح، رواة ورواتہ البزار رواہ --------------2 --------------------------------------------------------(ھ ۶ م احمد بن سليمان) الکبير،الطبرانی الطبرانی ---------------3 --------------ھج۴ ، العلميۃ دارالکتب ، ،بيروت( ھ ۴۵ م الحاکم عبدہللا بن محمد) الحاکم حاکم، مستدرک -------------4 -----------------------------------------------------------------------------------------------والحاکم ماجہ ابن ------------------5
47
“If in a society adultery and Riba become a norm then that society has
invited the wrath of Allah SWT.”1
انؾذیش" يبي هوو یظہش كیھى انشثب االاخزوا ثبنغۃ"
“If Riba becomes a norm in any society, it will most definitely face
famine.”2
ذیشانؾ" ثی یذی انغبػۃ یظہش انشثب"
“Before the judgment day, Riba will become widely accepted.”3
۔"نى یبکهہ افبثہ ي ؿجبس نیبری ػهی انبط صيب الیجوی اؽذ االاکم انشثب، ك"
“A time will come when no person will be saved from consuming Riba,
even if he does not, the effects of Riba will surely reach him”4
These Quranic verses and Hadith can be considered just a tip of the mountain
when it comes to highlighting Islamic admonitions against the use of Riba.
Innumerable other traditions discuss the punishments for individuals engaging in
the practice. All Hadith pertaining to the issue of Riba are detailed in ‘Problem of
Interest’, a journal by Mufti-e-Azam Moulana Mufti Muhammad Shafi (RA). The
doctoral thesis ‘Shirkat-o-Madarbat’ by Dr. Imran Ashraf Usmani is another
comprehensive discussion on the topic. Dr. Usmani’s thesis is certified by Karachi
University and is also available in book form.
TYPES OF RIBA
RIBA AN-NASIYAH ( ہرباالنسيـ ) Riba An-Nasiyah, Al-Nasiah ( ہرباالنسيـ ) meaning debt, is also referred to as Riba Bil-
Quran (رباالقران), Riba Al-Jahiliyya ( ہـرباالجھلي ), and Riba Al-Qard (رباالقرض). This type
of Riba is directly and strictly forbidden in various verses of the Quran, hence the
name Riba Bil-Quran. There is also irrefutable and inviolable evidence in Shariah -----------------------------------------------------------------------------------------------للحاکم المستدرک ------------------1 ---------------------------------------------------------------------------------------------حنبل بن احمد مسند ------------------2 ------------------------------------------------------------------------------------------------الطبرانی المعجم -----------------3 --------------------------------------------------------------------------------------------------داؤد یاب سنن -------------------4
48
against Riba Al-Nasiah. Riba Al-Nasiah is called Riba Al-Jahiliyya as it was a
common practice in the decadent classes, notably the Jews, both before and after
the advent of Islam. The third alternate name, Riba Al-Qard is used because this
is money which is charged over a loan given to any person for any reason.
RIBA AL-FADL (الفضل) Riba Al-Fadl (الفضل), Al Fadl meaning excess, is the second major type of Riba and
is also referred to as Riba Al-Hadith (رباالحديث) and Riba Al-Bay’. The alternate
name Riba Al-Hadith is used for it because this type of Riba is not only detailed in
the Quran but also in a number of Hadith. It is called Riba Al-Bay’ because it deals
with the excess money charged on sale transactions. The following definition
provided by Ibn-e-Al-Arabi encompasses both Riba Al-Nasiah and Riba Al-Fadl and
is considered one of the most complete definitions on the subject:
"انشثب كی انهـۃ انضیبدح ، وانشاد كی اآلیۃکم صیبدح الیوبثهھب ػوك"
“Literal meaning of Riba is of “excess/markup” and in the verses of
Quran it is used for all such markup/gains which are without any service
or effort.”1
This definition applies to Riba Al-Nasiah ( ہالنسيـ ) because the markup or the gain in
price or repayment of loan is earned by the lender on the principal balance
without offering any additional services or effort to the borrower. The definition
applies equally correctly to Riba Al-Fadl since the additional money charged on
sales transactions with deferred payments does not pertain to any additional
services offered by the lender.
Abu-Bakar Al-Jassas (RA) defines Riba in the following words:
"ػهی انغزوشك وھو انوشك انؾشوه كیہ االعم وصیبدح يبل"
“The Riba is a stipulated increase expected from the borrower (by the
creditor) over a the principal amount of the loan given for stipulated
period.”2
( ۴؍)ھج ٢ سوم طبع ، ، دارالمعرفۃ بيروت،(ھج۵۴ م ہلل عبدا محمدبن) العربی ابن القرآن، احکام --------------------1
-----------------(۵۵٧؍) اکيڈمی سھيل( ھج٧ م الجصاص لیع بن احمد) الجصاص القرآن، احکام 2
49
In this definition Allama Al-Jassas focuses on debt and confines the scope of the
definition of Riba to Riba Al-Nasiah. Commenting on this definition, Justice Mufti
Taqi Usmani writes:
ئش االدیب انغبویۃ ، وروعذ وا ھزا انزؼشیق یؾم عبئش اواع سثبانغئیۃ وکب ھزا انشثب يؾشيب كی عب"
۵:قوؿ رؾشیہ ؽزی اآل كی يغوػۃ انکزبة انوذط ، وساعغ علش انخشوط
، وعلش ايضبل ۵:۵ي اعلبس انزوساح ، وصثوسداإد ػهیہ انغالو :وعلش انزضیۃ ۵:۵وعلشاالؽجبس
،۵،، ۱:۱، وعلش ؽضهیم ػهیہ انغالو ۵:۵،وعلش ؾیب ۱:۱عهیب ػهیہ انغالو
"
“This definition incorporates all forms of Riba Al-Nasiah ( ہرباالنسيـ ) which
has been prohibited in all religious scriptures. This definition has also
been acknowledged in Exodus 22:25, Leviticus 25:35, Deuteronomy
23:20, Psalms 15:5, Proverbs 28:8, Ezekiel 12,22,17,13,8,18.”1
Explanation and Investigation of Famous Hadith on Riba Al-Nasiah ( ہرباالنسيـ )
"کم هشك عش لؼب كھو سثب"
ث اثی اعبيۃ كی يغذ ػ ػهی سكؼہ سوا انؾبسس
“Haris Bin Ibn-e-Abi Usama has reportedly narrated the sayings of Hazrat
Ali (RAA): Profit earned by a debt is Riba (interest).”2
Since this Hadith mentions ‘debt’, it refers to Riba Al-Nasiah ( ہرباالنسيـ ). Though
there is dispute over the authentication of this Hadith, its content has been
confirmed by reliable evidence and quotes which make it acceptable. According
to Mohdaseen, this Hadith is not only accepted for implementation but is widely
acknowledged as authentic by the Ummah or Muslim world. It has been declared
reliable by Imam-al-Harman and Imam Ghazali and has been discussed in ‘The
Problem of Interest’3 by Mufti-e-Azam Moulana Mufti Muhammad Shafi (RA):
“This Hadith has been quoted in Jamia’-e-Sagheer (جمعصغير) by Allama
Seoti, but in his highly comprehensive commentary Jamia’-e-Sagheer ( هبل
ھ ۴۵--- اول طبع- ۴کراچی دارالعلوم ،مکتبہ کراچی( عثمانی تقی محمد مفتی جسٹس)مسلم صحيح شرح الملہم فتح تکملہ 1
(۵۶٧؍) ھج۴ سوم طبع ،، الرسالۃ سۃ،مؤس بيروت( ھج۶ م الجراحی العجلونی محمد بن اسماعيل) الجراحی الخفاء، کشف( ) 2
(۶۴؍) ------------------------------------------------ھج٢٢ ، جديد طبع کراچی المعارف ادارة ،(۵ص) سود مسئلہ --------------3
50
ؽذیش ؽغ نـیش: انؾیخ ) he has declared its authenticity to be disputed and
labeled it as untrustworthy. However in his commentary Siraj-ul-Muneer
he describes it as follows: ‘This Hadith should be treated as good as other
since its contents are confirmed by other sources and evidences hence as
per historians of Hadith, it should be accepted for implementation’”.
The acceptance and acknowledgment of this Hadith as being valid 1 by the
majority of Islamic jurists and historians gives credence to the fact that it is
congruent with the rulings of the Quran and Sunnah on the subject. It is hence
highly inappropriate to doubt the validity of this Hadith as done by some Arab
authors and scholars. 2
The Hadith clearly implies that any form of markup is a conditional part of the
contract. According to various Shariah rulings, ‘compulsory’ or ‘conditional’ are
used in similar context and are hence used in the same perspective by Imam
Abubakar Jassas and others. It can easily be deduced that the Hadith places a
wide ranging or general prohibition on markup or interest, whether this markup
or interest occurs in the form of an additional commodity, asset or additional
service. Therefore ‘Any profit or markup either conditional or compulsory, in any
form (money, service, or any form of asset’ is Riba and is prohibited’.
The following conclusions can be deduced from this discussion:
1. That since the emphasis on gain or profit is generalized in the
Hadith, it refers to both compulsory or conditional gain or profit.
2. The term profit or markup is generic and includes different forms
such as additional service, money or any other type of asset.
1-- ----------------------------------- مصطفی نزار مکتبہ الرياض،(۰۵ م العسقالنی حجر ابن عالمہ) الحبير،العسقالنی تلخيص
(٢٢٧؍) ھج۴٧ اول طبع ، الباز
امام واما ، شئی فيہ يصح لم: المغنی بدرفی بن عمر قال"
الغزالی وتبعہ" صحيح انہ":فقال ، الحرمين
(۵۶؍۶) القدير فتح* 2--------------------------- ---------- مصطفی نزار مکتبہ الرياض،(۰۵ م العسقالنی حجر ابن عالمہ) الحبير،العسقالنی تلخيص
(٢٢٧؍) ھج۴٧ اول طبع ، الباز
امام واما ، شئی فيہ يصح لم :المغنی بدرفی بن عمر قال"
الغزالی۔ وتبعہ" صحيح انہ":فقال ، الحرمين
(۵۶؍۶) القدير فتح*
51
The first conclusion is justified since all the Hadith and historical evidence
confirming the actions of Prophet Muhammad (SAW) and his companions relate
to it. 1 The second point is irrefutable on grounds that all the four imams have
restricted any form of gain yielded by the creditor over what was loaned. A
number of Hadith further elucidate and clarify these prohibitions:
1. Any understood or conditional benefit accrued over a loan in any form is
illegitimate.2
2. It is illegitimate for the lender to use the borrower’s means of transport
or eat food in his house in lieu of the debt.3
3. It is illegitimate to give a loan on the condition that the borrower will
later sell any of his asset, like car or house, to the creditor.4
4. Suftaja ( ‘‘) has been prohibited by all four imams even though the
creditor’s gain is not in the form of any physical asset.5
Analyzing the prohibition on Suftaja, the economist Sheikh Mehmood Ahmed
(Late)6 asserts that judging by the literal meaning of the word as offered by
Allama Al-Jassas and other scholars, the term ‘asset’ is used generically and refers
to any type of gain, even if it is in the form of easing any hardship related to loan
ء،٢۶٧ دوم طبع--- ،دارالکتاب لبنان ، تبيرو( ھج۰٧م الھيتمی بکر ابی بن علی نورالدين الحافظ)الھيتمی الزوائد، مجمع ----1
(۴؍۴)
الرجل فقال شئی، نا ماجاء: ملسو هيلع هللا ىلص رسول فقال ، فاتاہ االنصاری فاحتاج صاعا، اربعين االنصار من رجل من ملسو هيلع هللا ىلصالنبی استسلف"
"بمائتين۔ فاعطاہ لسلفہ فضالواربعين اربعين فاعطاہ ، تسلف خيرمن فانا االخيرا، التقل: ملسو هيلع هللا ىلص ہللا رسول فقال ، يتکلم ان واراد
ماکان: قال ، دراھمی من اجود دراھمک ان: لہ فقلت ، اجودمنھا فقضانی درھم الف منی عمر ابن استسلف: قال يعقوب بن عطاء عن"
۔" عندی من لک نائل فضل من فيھا
االحاديث من ذلک وماالی --------------------------------------------------------------------------------(٧؍)وردالمحتار الدرالمختار ----------------2 ---------------------------------(٧۴؍۴) دارالفکر بيروت( الزحيلی وھبہ الدکتور) الزحيلی وادلتہ االسالمی الفقہ --------------3 4 Ibid ----------------------------------------------------------------------------------(٧۴؍۴)وادلتہ االسالمی الفقہ -----------------5
is a type of loan which the borrower is supposed to return not to the lender but to a person“ سفتجہ“
specified by the lender. It requires the borrower to bear the traveling risks and expenses. For example,
Zaid, who is a trader, take a loan from Omar on a condition that Zaid would return this amount to his
relative or friend on another city. This has been prohibited by jurists because Omar gets a benefit
from via avoiding the travel fatigue and risk, this is like جرنفعا قرض hence prohibited. 6 “Alternative to Interest”, a book by Mehmood Ahmed, Publisher: Idarah Saqafat Islamia Lahore, 1st
Edition, 1986.
52
retrieval. Hence it is incorrect to assume that gains which do not have a viable
physical form are permissible. The term ‘asset’ was used symbolically before the
advent of Islam where it was generally understood that any gains over loans were
not limited to visible assets alone. Therefore in later usage also, the word asset is
not taken in the literal sense. Had this been the case, the explanation given by
Allama Al-Jassas would contradict with the Hadith under discussion since it fails
to specify exactly the type or form of gain. Additionally, a number of other
scholars also do not limit the definition of the word gain to ‘asset’ alone. 1 To
surmise, as per this Hadith, any formal or informal markup, profit or gain,
irrespective of form, over a loan is Riba Al-Nasiah. It is prohibited in Quran and
Hadith and hence must be avoided.
RIBA AL-FADL
Riba Al-Fadl refers to the profit earned through the exchange of certain cereals or
grains. There is a recognized Hadith pertaining to Riba Al-Fadl, also referred to as
the Hadith of ‘six items’ because it discusses items of six types:
انزھت ثبنزھت يضالثضال وانلنۃ ثبنلنۃ يضالثضم ، وانزشثبنزشيضالثضم وانجش ثبنجشيضالثضم ، وانهؼ "
ثبنهؼ يضالثضم ، وانؾؼیش ثبنؾؼیشيضالثضم ك صاد اواصداد كوذ اسثی ، ثیؼوا انزھت ثبنلنۃ کیق ؽئزى یذا
ثیذ، انؾذیش
“Gold for gold, silver for silver, wheat for wheat, barley for barley, date
for date, salt for salt, must be equal on both sides and hand to hand.
Whoever pays more or demands more (on either side) indulges in Riba,
however gold can be exchanged for more silver, similarly dates can be
exchanged for more barley at any mutually agreed rate.”2
This Hadith has been quoted in various books with slight variations 3 even though
it infers the same basic principle; any gain during the exchange of identical items
is prohibited. Though the Hadith mentions six items, it is understood that Riba is
not limited to just these items but includes other goods, grains, and services also.
1 The Problem of Interest
--------------------------------------------۔۴۶۶٢الحديث عدد( الھندی لمتقیا علی الدين عالء) ،المتقی کنزالعمال --------------2 -----------------------------------المساقاة باب( القشيری الحجاج بن مسلم الحسين ابو) القشيری مسلم، صحيح: مثالا -------------3
المساقاة باب( خاریالب اسماعيل بن محمد ہللا عبد ابو) البخاری البخاری، صحيح
البيوع ،( السجستانی اسحاق بن االشعث بن سليمان) السجستانی داؤد ابی سنن
53
In an attempt to clarify exactly what these other goods are, Mujtahideen (مجتھدين)
or qualified scholars adopt a rationalizing (تعليل) approach according to which the
Illah for these items has been identified (Illah is the primary feature or condition
for any rule or law to be applicable). It is through the process of Ijtehad (اجتھاد)
that every Mujtahid (مجتھد) derives Illah and makes it the basis for his rulings. The
details of this are available in jurisprudence literature.
DEFINITION OF ILLAH
As per the rules of Arabic lexicon the meaning of Illah (علت) is ‘illness’ if the letter
‘ayn’ (ع) is removed from it. However terminologically, it refers to different
things .1 An extract of one of the most establisehd definitions of Illah is as follows:
“Illah is the basic condition of ruling, i.e. it is the intrinsic property of an
action due to which a ruling can be derived from it. Illah allows the
application of that ruling to another action if it posseses similar
properties or Illah.” 2
EXTRACT OF DEFINITIONS OF ILLAH Assume that a reference act is Act-A from which Illah is derived. If the reference
is found in Act-B as well then this ruling or Illah will be applicable here too.
However if the Illah or the feature or condition is not present in Act-B, then the
ruling will be considered non-applicable on Act-B. The Illah of any act is the basic
criterion according to which the ruling can be applied on other actions. It needs
to be emphasized here that the Illah for these acts necessarily have to be the
دارالبشائر لبنان، بيروت، العراقی، الہيتی السعدی السعد الرحمن عبد عبدالحکيم)الہيتی ، االصوليين عند القياس فی العلۃ مباحث 1
( ۶۰ص) ھج ۴۶ اول طبع االسالميۃ
”۔۔۔اھ للعلۃ کثيرة تعريفات لھم االصول ۔۔۔وعلماء المرض بمعنی تأتی فانھا بالکسر واما“ ،بيروت،( ھج٧ م" النسفی الدين حافظ"ب المعروف احمد بن ہللا عبد البرکات ابو) النسفی نوراالنوار، شرح االسرار کشف 2
ھج۴۶ اول طبع ، ، العلميہ دارالکتب
(۴۰؍" )فيہ بوجودہ حکمہ فی لہ نظيرا الفرع وجعل النص عليہ اشتمل مما النص حکم علی علما ماجعل"
( االفغانی الغفور عبد الرحمن فضل) االفغانی للکاکی، للنسفی المنار فی االسرار جامع حاشيۃ
: بقولہ بعضھم عرفہ ما ھو نظری فی واحسنھا تعريفاتھا واوضح العلۃ تعريف فی االصوليين عبارات اختلفت: قلت"
(۰۴؍۴" )مضافااليہ يکون بحيث للحکم المناسب الخارج الوصف"
"ہو۔ مضاف طرف کی اس حکم اور ہو، مناسب لئے کے حکم جو ہيں، کہتے کو وصف خارجی اس علت"
“The Historic Judgment on Interest” by Justice Muhammad Taqi Usmani:
"The Illah is the basic feature of a transaction without which the relevant law cannot be applied to it”,
page-80
54
criterion for the ruling of the reference act. Illah here can also be referred to as
the standard by which to judge the applicability of this ruling on other acts
conforming to the requisite features and conditions or the Illah of the reference
act (ال انـ اونی واهو ی ي انؼهۃ).1
For instance, though alcoholic drinks are declared haram or forbidden in the
Quran, there is no specific mention of drugs such as cocaine, marijuana or heroin
in the Quran. However given the fact that the Illah or the intrinsic nature of
alcoholic drinks is also present in cocaine and other drugs, therefore these too
would be considered haram. Also the prohibition on alcoholic drinks is not due to
its Illah but because it is instructed so in the Quran. Therefore even though these
drugs are not specifically mentioned by name in the Quran but because they have
the same Illah as alcohol, these are also considered haram or forbidden.
HIKMAH (WISDOM) According to the Arabic lexicon, Hikmah is strength or stability. Its terminological
meaning within the context of the current discussion is as follows:
“Hikmah is the ‘reason’ or ‘logic’ which holds an act prohibited or
allowed, whether the reason is about holding the earnings or about
letting go or scraping the money earned.”2
This means that if a certain act is permitted by Shariah, then the Hikmah is the
benefit a person can potentially gain by performing the act. Similarly if an act has
been prohibited, then the Hikmah would be avoiding the damage that could
1
ھج۴۰--- سوم طبع االسالميہ والعلوم القرآن ادارة ،، کراچی( الشامی عابدين ابن عالمہ) المنار،الشامی علی االسحار نسمات
(٧ص)‘‘ عندھم االصل فی الالحکم اليہ مضاف الفرع فی الحکم الن مشائخنا اکثر ندع الفرع فی الحکم علی علم ھو ثم’’
2---- ----------------- اول طبع ، االسالميہ درمان ام دارجامعہ ، العالم حامد يوسف الربا،ڈاکٹر تحريم فی االسالمی التشريع حکمۃ
( ص) ھج ۴
لھم نفع جلب اما المصلحۃ ھذہ وان عبادہ حکماااللمصلحۃ ماشرع وتعالی سبحانہ ہللا ان ينالمسل العلماء جمہور بين عليہ المتفق من’’
‘‘ عنھم ضرر دفع واما
( : عبدالرحمن الحکيم عبد) ،الہيتی االصوليين عند القياس فی العلۃ مباحث
(۵ ص)‘‘ تقليلھا او مفسدة دفع او تکميلھا او مصلحۃ جلب من التشريع علی مايترتب علی يطلقھا فالجمہور’’
“The Historic Judgment on Interest” by Justice Muhammad Taqi Usmani, page 80
"The Hikmahat is the wisdom and the philasophy taken into account by the legislator while framing
the law....."
55
occur if that act is performed. The content of Hikmah is limited to the capacity of
human intellect, unless a ruling has specifically been defined in the Quran or
Sunnah. It is possible that over time and in the light of emerging evidence, new
reasons for an act to be permitted or prohibited may be discovered. For instance
Muslims today have scientifically backed reasoning for why Allah has deemed
swine flesh Haram. Similarly there are new grounds today as compared to 1400
years ago which authenticate the reasons as to why Allah has prohibited the use
of drugs and alcohol. These new grounds can be considered the new level of
Hikmah for abstaining from these prohibited acts.
THE DIFFERENCE BETWEEN ILLAH AND HIKMAH The above stated definitions of both terms clearly illustrate the difference
between them as well; Illah are the boundaries, features or properties of an act
or situation which constitute the criterion for acceptability or non acceptability as
per Shariah rulings. Any act judged by Hikmah alone and without the presence of
Illah is null and void as per Islamic rulings. Hikmah refers to the intellect of every
individual person as he or she seeks to make the right choices in life as prescribed
by the Quran and Sunnah. For instance a traveler is allowed to offer short
prayers or Qasr. The Hikmah behind this ruling is to save the traveler added
fatigue. However today traveling is no longer as tedious, tiring or time consuming
as it used to be given modern technologies and amenities. Judging by modern
standards, it would be difficult to justify the ruling on Qasr on the basis of this
Hikmah alone. It is however not just the Hikmah behind this judgment on Qasr
but the Illah on ‘traveling’ as per Shariah rulings which makes the rules of Qasr
applicable even today regardless of how easy travel has become.
In an attempt to clarify further the difference between Hikmah and Illah, some
scholars revert to contemporary examples such as the traffic law of stopping at a
red light. Here, to stop the car at a red light is the rule while the red light itself is
the Illah. The Hikmah behind this rule is to regulate the flow of traffic and avoid
accidents. However, if this rule was just supported by Hikmah alone, it wouldn’t
always be followed such as at times when there is no traffic on the road and it is
apparently safe to cross the light. But according to the rule, people have to stop
on the red light whether there is any traffic on the road or not. Illah here is the
56
red light and not the issue of safety which makes it mandatory to stop even if a
person fails to see the Hikmah or logic in it. 1
Caution: The reason why it is necessary to explain the difference between Illah
and Hikmah within the context of this book is that various Hikmah or excuses
have started being presented in favor of Riba or interest. One of these is that
since bank loans are borrowed by businesses to invest and earn profit, or since
the loans which banks take from various lenders or depositors is beneficial to all
parties involved therefore the prohibition on Riba is deemed void in these
scenario. Another so called Hikmah is that though a markup demanded on a loan
from a needy person who took the the loan because he had no other choice is
cruel and unfair, the loans given by banks to businesses cannot be judged on the
same grounds. This Hikmah is formulatd to justify the profit or interest accrued
by banks on their loans since these loans are used as an investment to earn profit
which in turn is shared among the lenders. Since these bank transactions are
considered beneficial for both parties, the Hikmah related to the rulings of Riba
or interest in this case is that gains or profit in any form here cannot be deemed
illegitimate. Fallacies such as these have started to emerge primarily because of
the prevalent confusion which exists in society regarding the definitions of
Hikmah and Illah.
At this point in the discussion, this confusion have been clarified satisfactorily,
validating the fact that the correct ruling for the above scenario is the one based
on Illah and not Hikmah. Rulings are formulated in the presence of Illah and
never in their absence. Only Hikmah related to deciding the unfairness or
fairness of an act are not sufficient grounds to formulate Islamic rulings. In this
case it is the Illah on Riba which needs to be considered in order to justify or
dismiss the legitimacy of interest on bank loans. Therefore for banks, lenders,
businesses or depositors to charge or earn markup of any nature on any type of
loan is classified as Riba, hence Haram or strictly prohibited. Various scholars
have discussed in detail the unjustness and unfairness of business loans
altogether. 2
۴۵ اول طبع ، دارالعلوم کراچی،مکتبہ(۵٧۴؍( ) عثمانی تقی محمد مفتی جسٹس) ۔العثمانی مسلم صحيح شرح الملہم فتح لۃکم 1
Historic Judgment on Interest (by Justice Muhammed Taqi Usmani) ----------------------------------------------------------------------------------------------------سود مسئلہ ------------------2
الملہم فتح تکملہ
57
INVESTIGATION OF ILLAH ON RIBA IN THE FORM OF MONEY
As discussed earlier, Riba can occur in a variety of forms. Riba in the form of
money can occur as Riba Al-Nasiah and Riba Al-Fadl. When attempting to analyze
the reasons or Illah of Riba Al-Fadl being Haram or forbidden when in the form of
money, three famous verdicts need to be discussed:
1ST VERDICT
When money is judged on weight and substance then it must be exchanged with
equal weight and substance such as equal amounts of gold for gold or silver for
silver. It is imperative that weight and substance remain identical during any such
exchange. If this exchange occurs with even the slightest gain or loss of weight
and material, it will be termed Riba. This opinion is from the Hanafi School of
Thought1 and a famous verdict of Imam Ahmed ibn Hanbal (RA). Some Quranic
verses are also associated with the verdict:
ط وصوا خغشی ان غزویى ط اوكو ا انکیم والرکووا ي ثبنوغطبط ان
"Give just measure, and cause no loss (to others by fraud).” (Surah Al-
Shura, 181)
ثبنوغو والرج یضا کیبل وان خغوا انبعبؽیبء ھى اآلیہویب هوو اوكواان
"And O my people! give just measure and weight, nor withhold from the
people the things that are their due: commit not evil in the land with
intent to do mischief. ” (Surah Hood, 85)
انزی طللی وارا کبنوھى او وصوھى یخغشو ویم نه ارا اکزبنوا ػهی انبط یغزوكو
“Woe to those that deal in fraud, those who, when they have to receive
by measure from men, exact full measure, but when they have to give by
measure or weight to men, give less than due.” (Surah Mutaffifin, 1 – 3)
------------------------------------------------------------------------------(۵؍٧)ردالمحتار الدرالمختارمع -----------------1
‘‘ الفضل حرم وجدا فان ، الجنس مع وزن او بکيل المعھود القدر الزيادة يمتحر علۃ ای وعلتہ’’
(٧؍۶)لدقائق کنزا شرح الرائق البحر
۔‘‘الربا فوتھا عند يلزم التی المساواة وجوب ای والجنس القدر وعلتہ’’
اول طبع الرياض ، الکتب دارعالم ، لمغنیا( ھج۶ م المقدسی قدامہ بن محمد بن احمد بن ہللا عبد محمد ابو الدين موفق) قدامہ ابن
ھج۴۶
(۵۴؍۶)‘‘ جنس موزون کونہ والفضۃ الذھب فی الربا علۃ ان اشہرھن روايات ثلث ذلک فی احمد عن فروی’’
58
These verses specifically instruct to measure correctly and weigh fully. The Quran
also explicitly warns against not delivering what is promised. In the light of these
verses the Illah of Riba is ‘weight’ in case of gold and silver and ‘measurement’ of
other units of exchange such as Fuloos. 1 All evidence found in the Sunnah
indicates that the items belonging to the group of six imply to the said Illah:
"انزھت ثبنزھت وصب ثوص يضالثضم وانلنۃ ثبنلنۃ وصب ثوص يضالثضم ، ك صاد او اعزضاد كھوسثب"
“Gold for gold, silver for silver, the additional quantity demanded over is
Riba.” 2
-"زھت االوصب ثوصالرجیؼوا انزھت ثبن"
“Don’t sell gold for gold, unless the quantities are equal.”3
"ال رجیؼوا انذسھى ثبنذسھی والانقبع ثبنقبػی"
“Don’t sell a dirham for two, and don’t sell a Saa (measured quantity) for
double of its quantity.”4
In the last Hadith, dirham is mentioned in context of weight and Saa (صاع) is
related to measurement. The literal meaning of Saa is weighing scale but here it
is used to indicate the items which are weighed. These Hadith also compare the
fundamental nature of items hence inferring that the Illah for Riba is also
applicable on Qadr and Jins or the value and material content of items. Similar is
the case with the Hadith of six items which focuses primarily on their
fundamental nature or essence. It can also be said that these are weighable
(موزونات ) or measureable (مكيالت) items.
-"يبوص يضالثضم ارا کب وػب واؽذ ا ويبکیم كضم رنک ،كبرا اخزهق انوػب كالثؤط ثہ"
“Those items which are weighed must be exchanged in equal quantities.
Those items which are measured hold the same verdict. However when
------------(۰۴؍۵) ء٢ اول طبع سعيد، ايم ايچ کراچی،( الکاسانی ابوبکر الدين عالء) الکاسانی الصنائع بدائع ------------1 -------------------------------------------------------------------------الربا۔ باب ، المساقاة کتاب ، مسلم خرجہ -----------------2 3 Ibid ----------------------------------------------------------------------------------------(؍۴) الزوائد مجمع 4
59
the types are different, then there is no issue (in exchanging items in
unequal quantities).” 1
In the sale of asset for an asset, the assets should be equal meaning that all units
of items should be exchanged with identical units of the same item. For instance,
in case of dinars the shape and material content of each dinar should be equal on
both sides. If they are identical in shape then they will be considered weighable
(موزونات ) since their material properties are identical. Therefore even if there is
an addition of ½ dinar on either side of the transaction, it would be considered
Riba as postulated by the conditions of the 1st
verdict.2 Simply, it is illegitimate to
increase the weight or material content of similar items being used in a
transaction. Hence the Illah of Riba Al-Fadl is the weight or material content of
the items in any transaction.
2ND VERDICT
The second verdict states that when Riba Al-Fadl is in the form of money, the Illah
for judgment are (a) its material content and (b) its natural characteristics of
being a unit of exchange which is also referred to as Saman Johria and Samaniat
Ghalba. This is the opinion of Imam Shafi’i (RA) and also a well known verdict of
Imam Malik (RA).3 The Illah of Riba in cases of gold and silver transactions is their
‘value’ not weight as per the opinion of Imam Malik and Imam Shafi’i. This
opinion is endorsed by a number of scholars that the ‘forward sale’ of gold and
silver is permissible in exchange of any item. This also applies to the weighable
items where the values of the items exchanged with gold or silver must be equal
even if the weights of the items exchanged differ. For instance 1 ton of wheat
delivered a week later in lieu of spot-payment of ¾ ton of barley or vice versa is
not permissible since their values differ. The same principle applies to gold or
silver in their forward sale in lieu of objects where difference of weight is allowed
-----------------------------الربا۔ ابواب من( ھج۵۵ م الشوکانی محمد بن علی بن محمد) ،الشوکانی االوطار يلن 1 -----------------------------------------------------------------------------------------(۰۴؍۵)الصنائع بدائع 2
3--------- ھج۴۵ سوم طبع ، بيروت ، االسالمی المکتب( ٧۰؍) الطالبين روضۃ( النووی شرف بن يحی الدين محی) النووی
والمضروب التبر تشمالن والعبارتان غالبا، االثمان جوھريۃ: قلت شئت وان ، الغالبۃ الثمنيۃ صالحيۃ فيھما العلۃ: الجمہور وقال’’
الی واليتعدی ، الغالبۃ الثمنيۃ النتفاء ، فيھا الربا انہ والصحيح ، وجہ راجت اذا الفلوس الی الحکم ی تعد وفی ، منھما واالوانی والحلی
‘‘وغيرھاقطعا۔ والرصاص والنحاس الحديد من الفلوس غير
(۵؍) الممہدات المقدمات( ھج۵ م القرطبی احمد بن محمد ابوالوليد) المالکی رشد ابن! ہو مالحظہ نيز
اثمان انہما ھی واحد کل فی التفاضل منع فی عندہ العلۃ الن توزن او تکال التی العروض من اشيئ عليھما يقس فلم والفضۃ الذھب واما’’
‘‘ لالشياء
60
but values should be consistent. Therefore the Illah of Riba Al-Fadl here is
consistent value in case of gold and silver.1
Negation: Since the Illah in the 2nd
verdict remains confined to the use of gold
and silver alone and cannot be applied to other items, it is considered a
redundant verdict. Also assuming that this Illah is primarily applicable to
transactions of gold and silver makes this Illah additionally defunct. This verdict
therefore becomes irrelevant and has little practical value.2
3RD VERDICT
According to the verdict of the Maliki School of Thought, the Illah for Riba when it
occurs in monetary form is ‘its fundamental nature and ascribed value’. The
verdict is also popular among the scholars of the Hanafi school and is supported
by Imam Muhammad (RA).3 As per the verdict, when the ascribed value of a
monetary unit is Illah for Riba Al-Fadl then the rules of Riba Al-Fadl will be
applicable here regardless of the type of currency in the monetary system, Fuloos
or any other. For this reason the verdict disallows the sale of money for money,
declaring the transaction as interest based.4 The logic behind this verdict is that
the function of Fuloos is similar to dirham and dinar since all are mediums of
exchange. Therefore the rulings of Riba which apply to dirham and dinar will
similarly apply on Fuloos well.5
ILLAH OF RIBA AL-NASIAH
Contrary to the difference in views related to Riba Al-Fadl, Riba Al-Nasiah is clear
and there are no two opinions; any understood or conditional gain, markup or
profit in any transaction related to loan, debt or credit which is accrued without
additional services or effort from the lender is illegitimate. Though the core
philosophy of Riba Al-Fadl is similar, the Hadith related to it focusing on six items
only raises the question of whether this ruling is limited to just the six specified
items or if it can be extended to other items as well. A number of scholars
assume that the scope of Riba as outlined in the said Hadith is limited only to the
----------------------------------------------------------------------------(۴٧؍٢) تيميہ ابن فتاوی مجموع -----------------1 --------(۵ص)ء٢٢ اول طبع ، الصديق ،مکتبۃ الطائف ، السعوديۃ( ثواب بن ستر) الجعيد ۃوالتجاري النقديۃ االوراق احکام 2
------------------------------------------------------------------------------------------(۵٢؍۶) الصنائع بدائع ---------------------3 ------------------------------------(۰ص( ) العثمانی تقی محمد القاضی المفتی) العثمانی ، ديۃالنق االوراق احکام -----------------4 ----------------------------------------------------------------------------------------(۰۵؍۵) الصنائع بدائع ---------------------5
61
six listed items. According to Hazrat Omar (RAA), it was this form of Riba which
was not elaborated upon by Prophet Muhammad (SAW) before his death.
Therefore a number of scholars have formulated the Illah for this Riba through an
extensive analysis and investigation of required texts to the best of their ability
and have developed rulings accordingly. On the other hand, Riba Al-Nasiah is not
associated with any particular items or item but elaborates a basic principle that
any loan which becomes the source of Jar-e-Manfea’t (to draw benefit – جرمنفعت)
is illegitimate and hence forbidden.
1ST BENEFIT OF EXTENDED SCOPE OF RULING OF RIBA
Even though the Hadith of six items explicitly focuses on Riba on specified items,
there is still a question of whether this scope of Riba can be extended to other
items. This room for question divides scholars into two groups.
The first group is convinced that this ruling is applicable to other items as well
while the second group feels that the scope of the ruling is only limited to the
items specified in the Hadith.
Scholars in the second group include Taoos, Qatadah, Sha’bee, Masrooq, Usman
Batee, Qazi Abu Bakar Alba Qalani, Siddique Hasan Khan, Allama Ibn-e-Hazam and
all Ahl-e-Zahir (ضاھر .(اھل1. These scholars hold their opinion on following
grounds:
1. They do not agree with an approach based on an assumption.
2. They believe that the Hadith applies on to the items specifically
mentioned (اباحت).
3. For contriving this Illah, the first group of scholars contradict with the
other group, hence rendering the Illah null and void. There is also an
absence of a decisive logic which could justify the extension of this
Hadith to other items.
----------------------------------------------------(۴؍۴) الکبير الشرح مع قدامہ البن المغنی --------------------------------1
ھج۵ اول طبع ، مصر المنيريۃ الطباعۃ ادارة( ۴۶۰؍۰) المحلی( ھج۴۵۶ م حزم ابن سعيد بن احمد بن علی ابومحمد) حزم ابن
‘‘اصحابنا وجميع سليمان وابو ، البتی وعثمان وقتادة ، طاؤوس‘‘ المذکورة االصناف االفی الربا’’: قال وممن’’
62
2ND BENEFIT: DIFFERENCE BETWEEN RIBA AL-NASIYAH ( ہرباالنسيـ ) AND
RIBA AN-NASA (انساء) These two terms are frequently mentioned in Islamic literature and it is important
to understand the difference between them. Riba An-Nasa (انساء) is related to
sales while Riba An-Nasiyah ( ہرباالنسيـ ) is related to loan. Consider the following
four cases:
1. The exchange of gold with gold.
2. The exchange of silver with silver.
3. The exchange of silver with gold.
4. The exchange of gold with silver.
In the first two cases, Riba Al-Fadl and Riba An-Nasa could be ascribed. If there is
an increase during the transaction on either side, it would be Riba Al-Fadl. In case
of sales with deferred payments and forward sales with increase, it would be Riba
An-Nasa. In the last two cases an increase can occur on either side of the
transaction on account of differing exchange rates. These two exchanges are
however permissible only for spot exchange since it is only due to time difference
that a difference in rate is more likely to occur, categorizing the transaction as
Riba An-Nasa. This issue will be discussed in more detail in the chapter on
Bay’Surf (بيعصرف) or Money Exchange.1
-------------------------------------------------------(؍) ، الشيخ محمد خاطر الربا،محمد بلوی رفع فی جہاد ---------------1
:قسمين الی لبيوع ربا ينقسم ھذا وعلی"
63
WHAT IS SAMANIAT (ثمنيت)?
The Samaniat of any item is its ability to represent its stored value or Saman.
The extract of all these definitions is that anything which is exchanged for another
during a sales contract is known as Saman (ثمن).
-"انض اعى نب ھو ػوك ي انجیغ"
“Anything which could be exchanged in lieu of an item while it’s sold.”1
-"ص کم ؽئی هیزہ: هبل انهیش: هبل الصھشی "
“Saman of any item is its value.” 2
"وانؼشوف ا انض ھو يبعؼم ػومب كی ػوذ انجیغ"
“It is widely accepted that Saman is something which is swapped in a
sales contract.” 3
Though these definitions seemingly classify all forms of money as Saman, not all
exchangeable items with the attributes of Saman can be termed money. For
instance if a person barters his house with a car, then the car would be Saman,
even though it obviously shares no similarities with a monetary unit of exchange.
Therefore all those who believe that Saman-e-Mutlaqa or stored value is the Illlah
of ‘Riba over money’ also see it to be Saman-e-Khilqi or natural value or simply
Saman.
The term Saman is hence generally used to refer to any form of money including
Fuloos or paper currency. There are three different forms of Saman:
۔۔۔۔ افاالصن احد ببيع ويتحقق: الفضل ربا ۔
"الخ البدلين احد فی القبض تأجيل عند العلۃ فی معھا يتحد ، جنسھا بغير او بجنسھا الربويۃ االموال بيع فی ويکون: النساء ۔۔ربا
(۶۶ ص) ، العربی ،دارالفکر بيروت ، زھرہ ابو االمام ، الربا فی بحوث
"قبل من بيناہ الذی النسیءة ربا ھو وليس النساء ربا ويسمی ربا يکون ذلک فان" بيروت،--- ،(ھج ۶۶ المتوفی المطرزی علی بن السيد عبد الدين ناصر الفتح ابو) المعرب،المطرزی ترتيب فی المغرب کتاب 1
۔ العربی دارالکتب منيريۃال----- الطباعۃ ادارة مصر،( ھج۶٧۶ المتوفی النووی شرف بن الدين محی ابوزکريا) النووی ، واللغات االسماء تہذيب ---2
(۴۵؍) -------------------------------------------------------()ص ، الحسنی احمد حسن احمد للدکتور النقود تطور -----------------3
64
1. Natural Saman such as gold or silver.
2. Artificial or supposed Saman such as Fuloos or paper notes.
3. Circumstantial Saman such as the car mentioned above.
As per the details outlines in Chapters 1 and 2, it should be clear that assets,
money, currency and Saman do not represent the same thing and the differences
between all, even if slight, should be well established.
65
CHAPTER-3: CURRENCY NOTES AND FULOOS
CURRENCY NOTES
As previously discussed in the section on the history of money, the receipts issued
by money changers and goldsmiths during the 1700s later evolved into paper
notes. Over time these took the form of banknotes or legalized receipts.
Eventually governments assumed the sole responsibility of producing these under
the title of legal tender. As per their evolutionary history, paper notes may be
defined in the following words:
“Paper note is a promissory receipt which has been legally enforced like a
coin.”1
In his book ‘Behjat-ul-Mushtaq’, Allama Syed Ahmed Al-Hasaee (RA) writes:
“When we researched about the fundamental nature of a ‘banknote’, we
learned that it originated from a term in a famous French lexicon called
La’roos, which means: ‘Banknote is a currency note which can be
exchanged for its real value when demanded’ and this is exactly how
these notes are recognized. Furthermore these notes are secure i.e. their
replacement is guaranteed so that people can trustfully use them in
market …”2
It is asserted here that the terms ‘notes’, ‘currency notes’, ‘banknotes’, or ‘paper
money’ are all synonymous in meaning. In Arabic these are referred to as “ االوسام
"االواه"," انوود انوسهیۃ" ro" انوذیۃ
1 Contemporary Problems in Jurisprudence (2/88) 2 Refer to Rules of Paper Notes and Currency, page 17
66
It is seen that scholars and jurists hold varying viewpoints related to the concept
of currency notes in Shariah. In jurisprudence literature, seven different views
stand out, of which the four most popular are further discussed:
PAPER NOTE AS A CERTIFICATE OF DEBT.
A number of scholars from the twentieth century of mostly Indian origin,
including Hazrat Moulana Rasheed Ahmed Gangohi, Hazrat Moulana Ashraf Ali
Thanvi and Hazrat Moulana Mufti Muhammad Shafi (RA), were of the opinion
that a paper note is a ‘certificate of debt’. These scholars do not see a paper note
as an asset, an alternate form of gold or silver, or as a store of value or saman but
consider it to be only a certificate of the debt which the issuer owes to the bearer
of the note.1
JUSTIFICATIONS FAVORING THE VIEWPOINT i. An important justification in support of this viewpoint was the promise
stated on the note at the time when the gold standard was intact. As
per this promise, the entire value of the note was returned when
demanded hence justifying the status of the note as a certificate or proof
of debt. Commenting on this justification, Allama Syed Ahmed Al-
Hasaee (RA) states:
"ؽکبكی اھب عذاد دیو انخ نى یغؼم‘‘ یزھبنذی االهالع نؾبيهھبانخهبثهۃ نذكغ ه:"كوونہ
“This statement which confirms that a ‘Paper Note’ is redeemable by any
amount specified on it is sufficient to justify that this note is a genuine
certificate of debt …”2
ii. The value which is ascribed to these notes is based on the assumption
that they can be redeemed with precious metals at any time. This
assumption is based on the requirement that a substitute amount of
(۵؍)-- ،۴ کراچی دارالعلوم مکتبہ ، کراچی( تھانوی علی اشرف موالنا حضرت) تھانوی ، الفتاوی امداد -----------------1
(۰؍) للقاسمی مباحث فقہی جديد
(٧۶ص) للجعيد والتجاريۃ النقديۃ االوراق احکام
(ص) للعثمانی النقديۃ االوراق احکام ھج ۵۶ ، اول--- طبع ، الربانی الفتح مطبعۃ مصر،( البنا الرحمن عبد احمد) الساعاتی ، نیالربا الفتح علی االمانی بلوغ ------2
(۴۰؍)
67
gold or silver be present in the vault of the issuer. This makes paper
notes a viable certificate of the gold and silver held by the issuer. 1
iii. Paper notes are nothing but pieces of paper with different
denominations printed on slightly different sized paper using varying
amounts of ink. On the contrary, a currency note of Rs. 50 is half the
worth of Rs. 100 and differs in value. This is a clear indication that these
notes are a substitute for real wealth.
iv. It is understood that governments are responsible for replacing currency
notes when they are damaged or expired. This further supports the
viewpoint under discussion. 2
CONTRADICTIONS OF THIS VIEWPOINT WITH PRINCIPLES OF JURISPRUDENCE i. A paper note cannot take the part of assets in forward sales. Acquiring a
paper note does not mean acquiring the item it represents since a paper
note is a certificate of debt. Therefore obtaining a paper note does not
mean obtaining the actual real value. On the contrary, as per the
principles of jurisprudence, it is mandatory for the party purchasing the
goods to show the assets against which the sales are being made. It is
imperative to follow this principle during forward sales otherwise the
transaction will be rendered ‘sale of debt for debt’ and this is prohibited
in Shariah.3
ii. It is illegitimate to sell or purchase gold or silver with the use of paper
notes because this constitutes the sale of money for debt. This is also
unacceptable because in transactions of money exchange and spot
exchange, it is mandatory for both parties to acquire physical ownership
of the asset at the venue where the transaction is taking place.
However, as per this viewpoint, money is assumed to be a promissory
note or certificate of debt redeemable with gold or silver and not real
wealth. Since it is non-permissible to spot exchange while purchasing
gold or silver with paper notes, therefore such a transaction is void from
the Shariah perspective.4
ء٢۰ ، دوم طبع-- ، المعارف مکتبۃ ، الرياض ، السعوديہ( السعدی الناصر الرحمن عبد الشيخ) السعدی ، السعديۃ الفتاوی ----1
(۴ص) --------------------------------------------------------(٧۶) للجعيد والتجاريۃ النقديۃ االوراق احکام ---------------------------2 3-------------------------------- -------------------------------------------------------------الفقہ کتب جميع فی بہ مصرح ھو کما --------------------------------------------------------------(ص) للعثمانی النقديۃ االوراق ماحکا ----------------------------4
68
iii. Zakat cannot be paid by using promissory notes.1
iv. The transactions which are made with paper notes can be compared
with Hawala or money transfer which is acceptable as per Ta’tee (تعاطى),
a transaction without any specific word of offer and acceptance. For
instance, when purchasing a book from Zaid, Omar paid with paper
notes but did not pay the actual price of the book. Instead he asked Zaid
to ask the issuer of the paper note to substitute it for gold or silver equal
to the price of the book.2
v. It is not permissible to exchange a note for a note unless the
denominations differ such as changing a Rs. 100 note for two notes of
Rs. 50. Unless the denominations differ, the transaction constitutes ‘sale
of debt for debt’, which is prohibited.
ANALYSIS In attempting to follow the rules of Shariah pertaining to this viewpoint, it is
possible to run into a number of operational difficulties and barriers in monetary
transactions, such as the matters discussed above. However in Shariah and more
specifically according to the Quran and Sunnah, unnecessary operational
difficulties (Haraj) are sought to be relieved and removed. According to the
researcher Abd-ur-Rehman Al-Sadie;
كی ھز االوسام انزی رغی االواه ، كهوؽکى الیخلی ا عیغ اهطبس انذیب االنضس انیغیش کم يؼبيالرھى"
ا یخلق كیہ نھب ثبؽکبو انغذاد وانذیو نزؼطهذ انؼبيالد كی انوهذ انزی روزنی االؽوال وظشوكھب
"ؿبیۃ انزخلیق
“All transactions are based on these notes, therefore if it is said that they
are ‘Certificate of Debts’ then all dealings will be suspended, but
circumstances rather demands agility and ease.” 3
Similarly Justice Mufti Taqi Usmani states:
كیہ ؽشط ػظیى وانؼہود ي انؾشیؼۃ انغؾۃ"
"انغؼۃ وانغہونۃ انخ كی يضهہ
---------------------------------------------------------------------------------(۵؍) امدادالفتاوی ------------------------------1 ---------------------------------------------------للجعيد النقديۃ االوراق احکام بحوالہ المشتاق بہجۃ ----------------------------2-------------------------------------------------------------------------(۰ص) السعديۃ الفتاوی ------------------------------3
69
“There is a colossal and intolerable loss in this case, but on the contrary
Shariah intends or tries to facilitate and give room for related matters of
contemporary nature.” 1
These opinions imply that in applying this viewpoint, people will opt to resist
obscurity and choose to act in a manner which might possibly violate Shariah
rulings. Also the legitimacy of referring to a paper note as a certificate of debt is
not confirmed by any clear-cut or distinct clause in the Shariah. This makes it
inappropriate to call a paper note a certificate of debt, in which case it would
become impossible for the public to refrain from acts which are haram or
illegitimate. Also in earlier times the promise mentioned on a currency note was
made with the intention of being fulfilled when required. In current day and age
this promise is meaningless where the issuer of paper notes is not bound to
redeem these with quantities of gold or silver. Furthermore, these notes are not
even backed by gold or silver. The only benefit of these promissory notes or
guarantee is that the issuer could replace them with notes of different
denominations, coins, and other monetary forms such as bonds and treasury bills
at will. According to Geoffrey Crowther, “The ‘promise to pay’ which appears on
their face is now utterly meaningless. Even amounts of £1700 (as it was allowed
earlier) cannot be converted into gold now. The note is no more than a piece of
paper of no intrinsic value whatsoever and if it were presented for redemption,
the Bank of England could honor it only by giving silver coins or other notes, but it
is accepted as money throughout the British Isles.”2
Nowadays the use of these notes is to facilitate purchasing activities. This
guarantee keeps the trust of the public intact so that they continue to be used as
a medium of exchange smoothly and without resistance. This discussion
demonstrates the weakness and violability of this viewpoint, hence establishing
its unsuitability for use in contemporary conditions.
PAPER NOTE AS A FORM OF ASSET OR GOODS
According to this view paper notes are a form of assets or goods. All types of
transactions today are conducted with paper notes because these notes are
-------------------------------------------------------------(۶ص) للعثمانی النقديۃ االوراق احکام -----------------------------1 2 Rulings on Paper Notes and Currency, page 25
70
considered valuable. Their continued use over the years has developed the
public trust in these notes. At the same time it has made them comparable with
the items of real value such as precious stones like diamonds. This viewpoint is
held by a number of scholars of Indian origin including Allama Ram Puri and
Ahmad Raza Khan Baralvi, and Sheikh Abd-ur-Rehman Bin Sa’dee. 1 Seeking to
establish that a paper note is a form of asset and not a certificate of debt or
Saman, Ahmad Raza Khan Baralvi writes in his journal:
ھز انغکۃ االسؿجۃ نهبط انیہ وصیبدح كی ايب افهہ كؼهوو اہ هطؼۃ کبؿز وانکبؿز يبل يزووو ويب صادرہ"
"فهوػ ادخبس نهؾبعبد ، وھزا يؼی انبل ای يبییم انیہ انطجغ ویک ادخبس نهؾبعۃ انخ
“We know that it is a piece of paper and paper is an item of commercial
value. It caught the attention of public due to its ability to substituted for
coins. It gained popularity as a hoarder of savings; just like assets which
have the same capacity. It is widely accepted and recognized and
capable to fulfill the requirements of time.”2
JUSTIFICATIONS FAVORING THIS VIEWPOINT
i. All definitions which apply on assets are also valid for paper notes.
"انؼشك ھو کم يبػذا انؼی وانطؼبو ي االؽیبء کهھب"
“Other than gold, silver and eatables, all items can be termed as asset.”
"ھو يبعوی انوذ"
“Anything other than money (dirham, dinar and Fuloos) is an Asset.”
"ھو کم يبالصکوح كی ػیہ"
“All those items upon which ruling of Zakat is not applicable are Assets.”
"ھو يبػذاانؾیوا وانطؼبو وانوذ"
-------------------------------------------------------------------------------(٢تا٧ص) السعديہ الفتاوی -----------------1
بازار-- اردو ، بردرز شبير الہور،( بريلوی رضاخان احمد مولوی) بريلوی والدراھم، القرطاس احکام فی الفاہم الفقيہ کفل -------2
(ص)الہور،
71
“Other than animals, eatables and cash (dirham, dinar and Fuloos),
anything is an Asset. ”1
i. A sale contract is considered valid when paper notes are used from one
side of the transactions and this validity is not conditional upon the
physical presence of gold or silver. Though these notes being paper
differ in nature from gold or silver, they are equivalent to gold and silver
in context of Saman. However this does not imply that the rulings
associated with gold and silver can also be applied to paper notes.
Similarly diamonds or pearls may exceed in value than gold or silver but
are nonetheless treated differently. 2
ii. Paper notes have an exclusively unique fundamental nature and they
cannot be weighed or measured.
iii. Jurists have defined principles for comparing contemporary items with
similar items discussed in jurisprudence. One of these rulings is that a
paper note can be treated as an asset. This is so because according to
jurisprudence laws, assets are items which are neither measurable nor
weighable. However paper notes are not comparable with animals or
pieces of land. 3
iv. In prior times, the dissolution of the issuing authority behind paper
notes, such as governments, caused the value of these notes to dissolve
as well. This asserts that paper notes do not share similarities with
money even though they can be used until their value eventually
expires. Gold and silver are entirely free of any such constraints and are
real money. Hence to compare them with paper notes and to ascribe
their rules to money is irrelevant. Qayas M’al al Farq. 4
-------------(٢ص) للجعيد والتجاريۃ النقديۃ االوراق احکام بحوالہ ، المبارک ابراھيم محمد للشيخ الصاوی شرح -------------1 -------------------------------------------------------------------------------------(۰ص) السعديۃ الفتاوی ------------------2 ------------------------------------------------------------(ھج٧۰؍۶؍)٢٧ العدد السعوديۃ البالد جريدة ----------------3 ------------------------------------------------------------------------------------(ص) السعديۃ الفتاوی ------------------4
72
CONTRADICTION WITH PRINCIPLES OF JURISPRUDENCE i. The assumption that paper notes are exempt from the rules of money
makes this viewpoint very risky and dangerous since this implies that the
rules of Riba Al-Fadl are non-applicable on paper notes. For instance, as
per this viewpoint a person can exchange Rs. 800 for Rs. 810 and the
excess amount will not be considered Riba. However scholars holding
this view do consider the rules of Riba An-Nasiyah applicable on paper
notes where any markup over a loan is considered prohibited. In
context, Ahmed Raza Baralvi states the following in answer to a
question:
"ؼى یغوص ثیؼہ ثبصیذ ي سهہ وثبوـ يہ کیلب رشامیب انخ"
“It is acceptable to sell a paper note for another of lesser or greater value
when both parties mutually agree”.1
It is also mentioned in “Fatavee-e-Sadia”:
غ یضجذ نھب يبیضجذ نغبئش انغهغ ي صیبدح ووقب وعواص ثیغ ثؼنھب ثجؼل كزؼی اھب عه"
"يزبصال او يزلبمال ي عظ او اعبط انخ
“It has been confirmed that paper note is an asset, therefore it can be
exchanged for lesser or greater value of notes, irrespective of their origin
(dollars for Riyals) or denomination.”
Sheikh Salman Al-Hamdan states in his Fatwa:
ارا ػهى ھزا كاليبغ ي ثیغ انوسم ػهی اخزالف اواػہ ويغبیبرہ ي انشیبالد او انذبیش او "
ؽئی ي ثبؽذ انوذی انزھت وانلنۃ يزلبمال او غبء والدخم نهشثب كی انغیھبد ثبؽذ انوذی
ثبنکیالد وانوصوبد وانوسم رنک ال انوسم نیظ ي االيوال انشثویۃ وال انشثب يخزـ
"نیظ ثکیم واليوصو
۔
“Riba has nothing to do with exchange of notes because they are not
among those items for which Riba is prohibited. Riba is particularly
-----------------------------------------------------------(۶ص) والدراھم القرطاس احکام فی الفاہم الفقيہ کفل ----------------1
73
associated with items which are weighable or measurable, where as
paper note is neither of the two.”1
ii. Zakat is not compulsory on paper notes if they are kept without the
intention of trading. 2
iii. Mudharabat through paper notes is allowed in Shariah since it requires
dirham or dinar, or Naqood or real money; paper notes are promissory
notes or a replacement for gold or silver.
ANALYSIS The most perilous and critical point in the prior discussion is the insinuation that
the rules of Riba Al-Fadl and Riba Al-Nasa are inapplicable on paper notes. This
situation clearly allows transgression into the frontiers of Riba under the
assumption that paper notes are neither weighable nor measureable. Since
Samaniat is also assumed to be absent in notes, the features or Illah related to
the application of the rules of Riba Al-Fadl are considered invalid here as well. As
per this viewpoint, paper notes are incorrectly assumed to be compliant with the
definition of ‘Urooz’, an item used in replacement of gold or silver. This is so
because jurists have tailored the definitions for Urooz for special circumstances
only and not for ordinary conditions. For instance, in literature related to Zakat,
Zakat on urooz has been discussed after the discussion on Zakat on animals, land,
and money. The book of Malkia states:
"انشاد ثبنؼشك ھب يوبثم انزھت وانلنۃ"
“Arz (عرض) here means something which is used as a substitute of gold
or silver.”3
In one of the justifications, the value of paper notes is contingent upon the
influence of the issuing authority. This makes it obvious that the definition of Arz
is tailored for specific situations and is not to be used in general. Though (عرض)
the justification for the disintegrating value of paper notes has been provided,
----------------------------------------------------------(ھج٧۰؍۶؍)٢٧ العدد السعوديۃ البالد جريدة ----------------------1
ھج ۴٢ سوم طبع ، دارالنفائس ، بيروت ، شبير عثمان الدکتور ، االسالمی الفقہ فی المعاصرة الماليۃ المعامالت 2 Ibid -------------------------------------(٢۵؍) دارالصادر بيروت،( المالکی الخرشی محمد) الخرشی ، خليل سيدی علی الخرشی ---3
74
their status under the rules of jurisprudence can be analyzed only if their value
remains intact. If the value is not intact, then the topic no longer falls within the
context of the current discussion, making it irrelevant to evaluate its status in the
light of jurisprudence laws.
PAPER NOTES AS A SUBSTITUTE FOR GOLD OR SILVER
The third viewpoint assumes paper notes to be a counterpart of gold and silver
where they are not seen to be a certificate of debt or Urooz or have Samaniat.
On grounds that they are publicly accepted as substitutes for gold and silver, all
rules applicable on these metals will consequentially apply to these as well. This
view is held by Moulana Abdul Hai Lakhnavi. According to him paper note is
Saman but instead of Fuloos, the rules related to gold and silver will apply to it.
He states,
“Fuloos are artificial money and not considered natural money. Contrary
to this paper notes are considered natural money despite the fact that
their Samaniat is not natural rather artificial. If Tafadl Bay’ تفاضل
csecee(/بيع ) is allowed in Fuloos then it doesn’t means that it is also
allowed in case of paper notes. This is because they are unnatural
Saman in actual and in theory. Since paper notes have been erroneously
labeled and termed in a way that Samaniat is ascribed to them, therefore
paper notes are treated as having natural Saman in all rulings. Hence in
the chapter of Tafadl (تفاضل) its rulings will be developed in the same
context and Tafadl (تفاضل) will be declared illegitimate.”1
JUSTIFICATIONS FAVORING THIS VIEWPOINT i. There are no disagreements with the idea that paper notes are
alternates of gold and silver and hold a similar status as a medium of
exchange. Given the fact that paper notes have completely replaced
these precious metals, therefore all rules applied to these are now
applied on paper notes. A well famed principle of jurisprudence is that
‘rules will hold true for the alternate items as well’( "انجذل نہ ؽکى انجذل" ).
Since the alternate in question here are paper notes, therefore the rules
of gold or silver apply on them in the same capacity.
------------------------------------(٧؍) چوک پاکستان ، سعيد ايم ايچ کراچی،( الحی عبد موالنا) لکھنوی الفتاوی، مجموعۃ 1
75
ii. According to the principles of Shariah, the essence and objective of an
item defines its context. A recognized principle here is that ‘all rulings
are built around the basic purpose of an item, not on its form or
shape’( "انجذل نہ ؽکى انجذل" ). Since the purpose of paper notes is to possess
Samaniat or to represent value, therefore the rulings for gold and silver
apply to paper notes as well.1
IMPLICATIONS WHILE IMPLEMENTATION
According to Shariah rulings paper notes are equal to gold and silver and since
they have replaced these metals, all accepted rules of gold and silver are apply
on these as well. These include:
1. The rules of Zakat.
2. The use of paper notes to pay Zakat.
3. No form of Riba, such as Riba Al-Fadl, Riba Al-Nasiah and Riba An-Nasa,
is permissible on paper notes. The exchange of notes of similar
denominations, or the exchange of notes with those representing gold is
prohibited. It is allowed to exchange a note representing silver with one
representing gold. During all transactions, it is mandatory to be in
possession of the notes.
4. Money exchanges are allowed when all conditions are followed.
ANALYSIS The use of paper notes as an alternate to gold or silver does not imply that these
metals are the actual medium of exchange. Paper notes are a secondary medium
and therefore it is not necessary for the rules of gold or silver to be applicable on
this medium. Paper notes have purchasing ability because of their Samaniat.
Even though Fuloos has also been used throughout history, it is not equivalent to
gold or silver in the same capacity as paper notes. For this reason justification is
not strong enough.
Additionally, since paper notes are not backed by gold or silver, it is questionable
how the rules of Zakat and Riba will apply to them. The ambiguity in deciding
which denominations of notes are equivalent to gold or silver and which are not
---------------------------------------------------------------------------------------------------( ۴تا) السعديۃ الفتاوی 1
76
creates extensive room for error against the core philosophy of Islam. For this
reason the Quran and Hadith do not concur with this viewpoint.
PAPER NOTE AS A ‘CUSTOMARY PRICE’ AND ITS TREATMENT AS
FULOOS
According to the fourth viewpoint, paper notes hold artificial value and hence
should be placed in the same category as Fuloos. This means that a paper note is
not a certificate of debt, an alternate for gold or silver, urooz, or their substitute.
Paper notes are actually Saman and since they are assumed to have an inherent
value, they should be treated as Fuloos as per the rules of Shariah. A majority of
Ulema concur with this viewpoint including, the author. The opinion of Sheikh
Abdullah bin Salman, member of Darul Afta, Riyadh, clearly asserts that a large
number of reputed scholars agree with this viewpoint. He declares this stance to
be relatively closer to what is correct and cites the ones who agree as ‘impartial’.
He writes,
ھز انظشیۃ رشی ا االوسام انوذیۃ کبنلهوط كی هشإانضیۃ ػهیھب كب صجذ نهلهوط ي اؽکبو انشثب "
کجیشح ي اكبمم انؼهبء و یؼزجش وانضکبح وانغهى رضجذ نالوسام انوذیۃ يضهھب وهذ هبل ثھز انظشیۃ يغوػۃ
والؽک اہ اهشة ئهی ثبنظشیۃ انؼشمیۃ ،ثی انوبئهی ثبنظشیۃ انغذیۃ وانوب انوبئم ثھب كی انغهۃ وعطب
(۱انوذ انوسهی ؿ) "االهوال انی االفبثۃ كی ظشب
“According to this concept paper note is like Fuloos due to its Samaniat.
Therefore rulings related to Riba, Zakat, and forward sale when
conducted with Fuloos will also be applicable on paper notes. A large
number of reputed scholars concur with this viewpoint. All those who
agree with this concept stand between (a) those who believe that paper
note is like Arz (singular of Urooz), and (b) those who consider it as a
certificate of debt. (Therefore this point of view is balanced among the
two extremes already discussed) and in my opinion this viewpoint is
relatively more appropriate and justified.”1
This statement clearly reflects the stance of Sheikh Salman which is very much in
favor of the said viewpoint. According to him:
a) A large number of reputed scholars agrees with this viewpoint.
-------------------------------------------------------------------------------للقاسمی مباحث فقہی جديد بحوالہ -----------------1
77
b) He declares those who agree as “impartial”.
c) He also declares this point of view relatively closer to what is right.
Sheikh Ahmed Khateeb comments in the same context:
اهبع انلوط ثبنؾبم " )عیغ اؽکبيھب ظبہشا وثبهب كزجی ثغیغ رنک ا انود کب نلهوط انؾبعیۃ كی"
(۸۱ثبنلهوط ؿ انود
“All explanations have clarified that paper notes, in their endogenous
and exogenous characteristics, are similar to Fuloos made of copper.”1
According to Sheikh Abdullah bin Bassam,
رزـیش انوشوػ ثبنکغبد وانشواط وروشیش الھب نیغذ رھجب والكنۃ واب ھی اصب رزـیش کب"
ن ثہ وا رؼطی ؽکہ وؽکى انوشوػ کب انوسم ثبنوشوػ اؽجہ وثہ اونی كبالؽغ ا رهؾ انؾکويبد۔۔۔كب
("۱انوسم انوذی ؿ)يؼشوف انخ
“These notes are not gold or silver but are like fiat currency. They change
with the change of cultures, or due to economic recession (كساد), or even
because of dissolution of governments, just like coins of Naikl (نيكل).
Therefore if paper notes resemble and relate more to the coins of Naikl
then it is better to compare paper notes with them and their ,(نيكل)
rulings should also be ascribed accordingly because these rulings are
most liked.”2
The scholars belonging to the board of Ulema-Kabar, Saudi Arabia collectively
state,
وانلنۃ وؿیشہب ي االصب واہ اعبط رزؼذد كی انزھت ا انوسم انوذی یؼزجش وذا هبئب ثزارہ کویبو انوذیۃ"
انوسم انوذی االيشیکی عظ وھکزا کم ثزؼذد عہبد االفذاس ثؼی ا انوسم انوذی انغؼودی عظ وا
"کم ػهۃ وسهیۃ عظ يغزوم ثزارہ انخ
“Paper Notes are considered money like gold, silver and other currencies,
and its characteristics would depend on its issuer, i.e. a note from one
issuer will be different from a note from another. This means Riyal from
1 Ibid -----------------------------------------------------------------------------دوم جلد للقاسمی مباحث فقہی جديد ------------------2
78
Saudi Arabia is a different currency then American dollar; hence each
currency note has a unique nature.”1
In the words of Sheikh Ahmed al Bana,
انوذی ربيب عواء ثغواء الہ یزؼبيم ثہ كبنزی اسا ؽوب وادی للا ػهیہ ا ؽکى انوسم انبنی کؾکى"
یکہ فشكہ كی هنبء يقبنؾہ ثہ كی ای وهذ ؽبء ك يهک انقبة ي کبنوذی ربيب ، وال يبنکہ
"انوسم انبنی ويکش ػذ ؽوال کبيال وعجذ ػهیہ صکبح ثبػزجبسانلنۃ انخ
“I consider it right to apply the rulings for gold and silver on paper notes.
Paper notes are used as a medium of exchange just like gold or silver and
the bearer of notes can fulfill his needs whenever he wishes. Anyone
possessing paper notes in amounts necessary for the qualification of
Zakat, for an year or more, will most definitely have to pay Zakat.”2
Justice Mufti Taqi Usmani states:
عذاد نذیو كی رخشیغھب انلوہی ، وابفبس د اصبب كبرنؼ ثب رکشب ا انوود انوسهیۃ نى رجن اآا"
سيضیۃ یؼجشػھب انلوہبء ثکهۃ انلهوط انبكوۃ ، كب انلهوط انبكوۃ رکو هیزھب االعیۃ امؼبف هیزھب انزاریۃ
ھب انزاریۃ وعشد ثھب انزؼبيم انؼبو كیب ثی انبط هیز كکزنک االواسام انوذیۃ رکو هیزھب االعیۃ امؼبف
"دو ایب كشم ثیھب وثی انلهوط انبكوۃ انخ
“After the discussion it has been clarified that paper notes are no longer
certificates of debt. Now they qualify as fiat currency. Scholars termed
them as Fuloos Nafiqa because their face value is many times greater
than its actual value (cost of its material and making). Same is the case
with paper notes and still they are regularly used for trade. For this
matter there isn’t any difference between Fuloos and paper notes”3
Dr. Muhammad Suleman al-Ashqar concurs with the view:
انوول انضبنش اھب ػهۃ وذیۃ هبئۃ ثزارھب رؼبيم يؼبيهۃ انزھت وانلنۃ اال اھب ؽئی آخش نیغذ ھی انزھت "
اخشی ثؾغت انذول انقذسح ونیغذ ھی انلنۃ ونیغذ ھی هبئۃ يوبو انزھت والانلنۃ ، ثم ھی اعبط
االيشیکیۃ عظ صبنش وھکزا ۔ نھب ، كبنذبیش انکویزیۃ عظ و انذبیش انؼشاهیۃ عظ صب وانذوالساد
وانلنۃ ثغبيغ انضیۃ ، وھزا انوول ھو انغبئذ اآل كی ودنیم ھزا انوول دنیم واؽذ وھو انویبط ػهی انزھت
1-- --------------------------------------------- (۵٧؍) ھج ۴٢ اول طبع ، السعوديۃ العربيۃ بالمملکۃ العلماء کبار ھیءة ابحاث --------------------------------------------------------------------------------------------------الربانی الفتح -------------------2
------------------------------------------------------------------------(۵ص) للعثمانی النقديۃ االوراق احکام ------------------3
79
االوعبه االعاليیۃانهزضيۃ ثبنؾشیؼۃ ۔۔۔وهذ دسط ػهیہ ؿبنجیۃ انغهی انهزضيی كی انزؼبيم ۔۔۔وفذسد
"انوول وفذسد هشاساد ي ثؼل انغبيغ انلوہیۃ ثوعجہ انخ انلزبوی ي کضیش ي انلزی ثھزا
“The third verdict (on paper notes) confirms it as currency / money which
can be used like gold and silver, though it differs in essence. It is not gold
or silver, not even equivalent to gold or silver in quintessence, rather its
nature depends on the issuing authority. For example dinar of Kuwait is
different from the dinar from Iraq and American dollar is totally different
then these two. Similar is the case with other currencies. It has just one
justification i.e. paper notes have purchasing power (feature or Illah) just
like gold and silver (though different in nature). In the countries where
Shariah is followed, the same justification is assumed correct and most
Muslims perform their business in the same context. A number of
scholars (Mufti) have developed rulings (Fatwa) based on the same
viewpoint and some resolutions have also been passed from certain
Institutes of Jurisprudence.”1
The essence of Dr. Ashqar’s above analysis brings forth some important points:
1. Paper note is real currency, contrary to the view which established it a
certificate of debt or Urooz.
2. Even though paper notes differ in basic characteristics, they can be used
just like gold or silver. Therefore paper notes perform just like these
metals when used in trade. This however does not mean that paper
notes are equivalent to or a substitute for gold or silver. Paper notes are
also not judged with the same rulings which apply to gold or silver, as
this would contradict the viewpoint under discussion.
3. The justification for this opinion is that the Illah or the purchasing power
of paper notes is comparable to gold and silver. Gold and silver are
Muqees A’lia ( ہمقيسعليـ ) and paper notes are Muqees (مقيس). Samaniat
or the purchasing power is the Illah or the feature and the qualifying
condition common between these three mediums.
4. This viewpoint is accepted and used in daily transactions in all countries
which follow the laws of Shariah. Scholars have devised rulings
accordingly and institutes of jurisprudence have passed resolutions
---------------(۶۰۶ص) ، ھج۴٢ الثالث، الجزء الخامس، العدد ، الخامسۃ الدورة ، االسالمی الفقہ مجمع مجلۃ -------------1
80
supporting this view. All these factors further strengthen the legitimacy
of this view.
According to a resolution passed by the Islamic School of Jurisprudence, Jeddah:
كی انذوسح انضبنضۃ ثب انؼالد انوسهیۃ وود اػزجبسیۃ كیھب فلۃ ۳وثؼذ االهالع ػهی هشاس انغغ سهى "
صیۃ کبيهۃ ،ونھب االؽکبو انؾشػیۃ انوشسح نهزھت وانلنۃ ي ؽیش اؽکبو انشثب وانضکبح وانغهى وعبئش
-"اؽکبيھب
“Paper notes are artificial money and have firm purchasing power. All
the rulings on Riba, Zakat and forward sale in context of gold and silver
are also applicable on paper notes.” 1
JUSTIFICATIONS CONFIRMING THIS VIEWPOINT 1
st Justification: Paper notes have taken the form of legal tender and the public is
legally bound to use them just like they are bound to use contrived currencies like
coins. Contrary to this, the public is not bound to accept other forms of
exchange. For instance, a person is not bound to accept a bank check from his
debtor in lieu of his loan but is legally bound to accept the payment in the form of
paper notes. As discussed earlier, currency notes have been declared unlimited
legal tenders.
2nd
Justification: It is legally permissible to issue certificates of debt, common
examples being notes payable or accounts payable. However the general public
is not allowed to issue paper notes.
3rd
Justification: Paper notes have purchasing power and are used as a medium of
exchange. This further indicates that they are not a certificate of debt or gold or
silver.
4th
Justification: People still use coins for sale and purchase in the market and do
so without thinking twice about whether or not they are backed by gold or silver.
Similar is the case with paper notes when these are used as a medium of
exchange. Keeping this point in mind, it cannot be assumed that these notes are
certificates backed by gold or silver nor can they be considered a substitute for
these metals or even Urooz.
------------------------------------------------------------------------------------------------------(۶ص) السابق المرجع 1
81
5th
Justification: In analyzing the evolution of gold and silver as a medium of
purchase, it is evident that considerable time has elapsed since money was
backed with gold or silver. It is hence illogical to assume paper notes to be
certificates of gold or silver or even their substitute. The opinion of Geoffrey
Crowther quoted earlier reflects on this issue.
6th
Justification: As discussed earlier, a number of difficulties can potentially
surface in assuming paper notes to be Urooz or certificates of gold or silver.
Primarily, this multiplies many times the risk of Riba in transactions. Additionally,
the principle of ‘Prohibition of Evasive Legal Devices’ (عذ انزسائغ), which is very
critical from the Shariah point of view, is likely to be violated. This is because in
declaring paper notes to be Urooz and allowing Riba Al-Fadl, the business of
money exchange accommodating Riba Al-Fadl becomes a norm.
7th
Justfication: In declaring paper notes to be certificates of debt or Urooz
business dealings will get unnecessarily complicated as per the rules of ,(عروض)
Shariah. These complications can be avoided when paper notes are
acknowledged to be different in essence than gold or silver though they are
nonetheless a form of money with purchasing power.
8th
Justification: The Illah of Riba for currency, as discussed earlier in the verdict
on Riba, is the ‘intrinsic purchasing power’ or Samaniat Mutaliqa. In the presence
of this Samaniat, all related rulings of Riba will apply. For this reason paper notes
are treated accordingly.
9th
Justification: Paper notes fall within the category of money as defined in the
earlier chapters.
10th
Justification: All the functions of money discussed in the first chapter
correspond with the inherent functions of paper notes. This further establishes
paper notes as money.1
--------------------(۴٧ص) منيع البن النقدی الورق للجعيدعن االسالمی الفقہ فی والتجاريۃ النقديۃ االوراق کاماح -------------1
(۵ص) االول المجلد من االول العدد ، االسالميۃ البحوث مجلۃ*
(٧؍) للقرضاوی الزکاة فقہ*
االسالمی الفقہ فی المعاصرة الماليۃ المعامالت*
مباحث یفقہ جديد*
للعثمانی النقديۃ االوراق احکام*
82
STATUS OF PAPER NOTES IN JURISPRUDENCE
On the basis of the above justifications, following are some popular verdicts
legitimizing the status of paper notes. 'Paper notes are themselves Asman (plural
of Saman) and for this reason the rulings of gold and silver are applied on it. The
only difference is that gold and silver are a natural form of money while paper
notes are fiat or artificial money. Paper notes are neither certificate of debt nor
are they Urooz. They are also not a substitute for gold or silver.
Outstanding reasons which have successfully established the status of paper
notes as a preferred form of money include the following:
1. All definitions of money are fully applicable on paper notes.
2. Paper notes are able to perform all economic functions.
3. In accepting paper notes as money and Saman, all matters related to
Zakat, forward buying, Musharakh or Mudarabah can be conducted with
ease.
4. The virtue of paper notes authenticate all rulings of Riba. The critical
principle of Shariah ‘Prohibition of Evasive Legal Devices’ (عذ انزسائغ) is
also not violated.
5. Paper money is no longer backed by gold or silver as was done in earlier
times.
6. Paper notes are acceptable forms of money in all geographical locations
and culture.
7. The public uses paper notes irrespective of the fact that they are no
longer backed by gold or silver.
8. Paper notes are legally enforced as money.
9. Only the central bank of a country reserves the right to print paper notes
or mint coins.
10. Paper notes remain valid irrespective of changes in government.
Changes in regimes do not interrupt the prevalent denominations or
modes of paper note printing.
83
Given these reasons, the majority of Muslim scholars have accepted the use of
paper notes as money and have devised rulings accordingly, as discussed earlier. 1
Caution: It would have been possible to concur with the opinion of those who
claim paper notes to be certificates of debt only if they had been backed by gold
or silver. But in the absence of this condition in present day and age, it is not
logical to do so. It is always been an acceptable principle of Shariah to offer
flexibility in accommodating special rulings as per current need of the time due to
unforeseen upheavals in social trends. The issue of paper notes falls within this
category of rulings. At the start of their inception, paper notes were certificates
which later evolved into Asman. Therefore any differences in opinion related to
paper notes are in fact the result of the disparity in rulings tailored to the unique
status of paper notes during certain points in time.
Advantage: Among the four viewpoints, the first one on certificates and the
second on paper notes are similar to Urooz and differ distinctly from the last two
views. The last two viewpoints closely match each other and are in agreement
that paper notes are not certificate or Urooz but are Asman possessing Samaniat.
The third viewpoint asserts that paper notes are not Saman in themselves but are
categorized thus because they are a substitute for gold or silver. For this reason,
paper notes are applied with some of the same rules used for gold or silver. This
however does not mean that the nature of paper notes and that of gold or silver
is similar. Paper notes is fiat money, like Fuloos, and their exchange will not be
considered ‘money exchange’ as per the jurisprudence definition of money
exchange. Since gold and silver are natural money therefore the rules of money
exchange will apply to these. Details of this will be discussed later.
-----------------------------من الثالث الفريق اليہ ماذھب الراجح’’ المعاصرة الماليۃ المعامالت:جات حوالہ اضافی --------------1
(٢ص)‘‘الخ العام العرف الن الثمنيۃ صفۃ وتاخذ ، التعامل فی والفضيۃ الذھبيۃ النقود مقام تقوم الورقيۃ النقود
کے فلوس احکام جو لھذا ، ہيں مروجہ اثمان طرح کی فلوس نوٹ کاغذی کہ يہ کالم حاصل’’:ہے مذکور ميں مباحث فقہی جديد
(۰۵؍)‘‘الخ اگرچہ گے ہوں بھی کے اس وہی ہونگے،
ثمن طرح کی چاندی سونے ، ہيں مال خود بلکہ نہيں رسيد نوٹ کہ ہے يہ نظر نقطہ صحيح’’:ہے ميں وتجارت معيشت وجديد اسالم
(۶ص)‘‘الخ ہيں عرفی ثمن بلکہ نہيں حقيقی
ھج ۴ اول طبع ، وھبہ مکتبہ ، قاہرہ( عمر الصديق ابوبکر) متولی ، االسالمی الفکر اطار فی النقود اقتصاديات کذافی
84
CHAPTER-4: FULOOS
Fuloos is the plural of Fals, meaning small coin. The words Iflas, poverty, and
Taflees, when the ruler calls someone poor, are also derived from the root word
Fals.1 Terminologically, Fuloos are forged or molded pieces of copper used as
coins. They are also referred to as Fuloos-e-Nafiqa or Fuloos-e-Raija. 2
SUMMARY OF THE EVOLUTION OF FULOOS
1. Before and after the advent of Islam, items like eggs or wheat were
commonly used as Fuloos in transactions.
2. The next step in the evolution of Fuloos was the use of irregular pieces of
copper as a medium of exchange.
3. The formal form of Fuloos emerged when copper was forged or minted
into the form of coins. Eventually Fuloos acquired a legal status when
each coin or Fals was dated and had the name and title of the ruler
engraved on one side and the name of the country on the other.
4. Fuloos became so widespread during the era of Zahir Barqooq in 781st
Hijri that they almost replaced the dirham. According to some historical
accounts, there came a point when the ameer or governor of the time
----(۰؍) ھج۴۰ اول طبع ، العربی التراث ،داراحياء بيروت ، ھج ٧ متوفی المنظور ابن ، العرب لسان ----------------1 -----------------، ھج۴۴ اول طبع دارالفکر، ، دمشق( الزحيلی وھبہ الدکتور) الزحيلی ، وادلتہ االسالمی الفقہ ------------------2
کان النحاس من قطعۃ وھو ، فلس جمع الفلوس"
(۰٢؍۴")الخ بھا يتعامل
ھج ٧۴ اول طبع النشر، للطباعۃ داراالسوة ، لبنان( الشرتونی الخوری سعيد عالمہ) الشرتونی ، اردالمو اقرب
من وھی بھا يتعامل النحاس من مضروبۃ قطعۃ الفلس"
(٢٧؍۴" )القديمۃ المسکوکات
عليش محمد عالمہ) الجليل منح شرح
(۵۴؍) و بفتحھا فلس جمع الفاء بضم س فلو"
(۴؍٧) ، ھج ۵٧ القرآن معارف دائرة مطبعۃ( وجدی فريد محمد)، وجدی ، القرآن معارف دائرة فی کذا
85
produced Fuloos is huge quantities and nearly suspended the use of the
dirham in trade.
5. Fuloos was used both on account of their weight and quantity. Later, the
quantitative use of Fuloos became more customary. Hence Shariah rules
regarding Fuloos are formulated accordingly.1
DIFFERENCE OF OPINION ON FULOOS BEING SAMAN IN
JURISPRUDENCE
According to some jurists the scope of money as pertains to its usage in trade is
very broad and Fuloos is also considered within the scope of this definition. This
inclusion of Fuloos within the general boundaries of money has resulted in
creating a point of contention between jurists as some see Fuloos as Saman and
some do not. These differing opinions are elaborated further with supporting
evidence and related references.
After Tatbe and inductive analysis on the opinion of jurists, the following three
major opinions have emerged regarding the issue:
1. The first group of scholars are from the Hanafi School of Thought and
hold the opinion that Fuloos is Saman. Scholars in this group include
Imam Muhammad (RA), Muhammad bin Al-Fadl, Allama Sarkhasi, Allama
Halwani, Hazrat Malkia, Allama Ibn-e-Taymiyya, and Allama Ibn-e-Al-
Qeem.
2. The second group of scholars are also from the Hanafi School but believe
that Fuloos is not Saman. This group includes Imam Abu Hanifa, Imam
Abu Yousuf (RA), and Hazraat-e-Shafia.
3. The third group consists of scholars from the Hanbali School of Thought.
This group is further dividied into those who agree that Fuloos is Saman
and those who do not. Imam Ahmed ibn Hanbal was among the ones
who agreed that Fuloos is Saman.
-دارالمدنی ، ھج ۴ اول طبع( الحسنی احمد حسن احمد الدکتور) الحسنی ، االسالمی الفکر اطار فی النقود تطور ------------1
86
THE OPINIONS OF THE FIRST GROUP The stance of Imam Muhammad (RA) that Fuloos is Saman is confirmed by his
prescribed rulings on Riba, forward buying, Musharakah, and Mudarabah. Allama
Kasani states the following on the ruling of riba:
ویغوص ثیغ انؼذوداد انزوبسثۃ ي ؿیش انطؼويبد ثغغھب يزلبمال ػذ اثی ؽیلۃ واثی یوعق ثؼذ ا "
یغوص ۔ وعہ هونہ، ا انلهوط اصب كالیغوص ثیؼھب یکو یذا ثیذکجیغ انلهظ ثبنلهغی ثبػیبھب ، وػذ يؾذ ال
ثغغھب يزلبمال کبنذساھى وانذبیش ، ودالنۃ انوفق ػجبسح ػب روذس ثہ يبنیۃ االػیب ويبنیۃ االػیب کب
روذس ثبنذساھى وانذبیشروذس ثبنلهوط كکبذ اصبب ، ونھزا کبذ اصبب ػذ يوبثهزھب ثخالف عغھب ، وػذ
ب ثغغھب ؽبنۃ انغبواح، وا کبذ صب كبنض الیزؼی وا ػی کب انذساھى وانذبیش كبنزؾن انزؼی يوبثهزھ
كیھب ثبنؼذو كکب ثیغ انلهظ ثبنلهغی ثـیش اػیبھب، ورا الیغوص ، والھب ارا کبذ اصبب كبنواؽذ یوبثم انواؽذ
"زا رلغیش انشثب انخكجوی اآلخش كنم يبل ال یوبثهہ ػوك كی ػوذ انؼبومۃ وھ
"As per Imam abu Hanifa and Imam Yousuf, sale of items ‘other than
eatables or those among Ma'dodat-e-Mutaqarba (المتقاربة are ’(معدودات
allowed against the same item with an excess only in case of spot-
exchange. For example, one coin can be sold for two coins if their value is
based on judgment. However this is not allowed by Imam Muhammad
(RA).
Imam Muhammad (RA) holds this opinion because according to him
Fuloos are Saman and are like gold or silver therefore their sale is not
allowed as described. Their Samaniat is proved because they are used to
measure the value of items, just like dirhams and dinars. Because Fuloos
serve the same purpose, they are assumed to be Saman. For this reason
if Fuloos are compared with items of different nature or same nature and
in equal proportions, then they will be considered Saman for obvious
reasons. Therefore their value cannot be based on judgment, as is the
case with gold or silver and the judgment of their value is not the
criterion. Consequently this makes exchanging a Fals for Fuloos (Fuloos
having an identified rate of exchange in the market) impermissible,
particularly when it qualifies as Saman. In such a case the additional Fals
will be in excess, which will render the transaction an obvious case of
Riba..."1
طبع ، کمپنی سعيد ايم ايچ ، کراچی( الکاسانی مسعود بن بکر ابی الدين عالء العالمۃ االمام) الکاسانی ، الصنائع بدائع -----------1
ھج۰ اول
87
The following notable points can be extracted from this statement:
1. As per Imam Muhammad (RA), the sale of Fuloos for more Fuloos is
forbidden.
2. This is due to the Samaniat found in Fuloos.
3. The logic behind the presence of Samaniat in Fuloos is associated with
their characteristics which are similar to dirham and dinar. Hence Fuloos
qualifies as Saman.
4. Transactions can only be made with Fuloos or Fals if Fuloos qualifies as
saman. Hence it is mandatory for Fuloos to qualify as Saman first.
5. Fuloos are Asman and the value of Saman or its rate of exchange is
already identified in the market. Hence the personal judgment of the
buyer or seller regarding the value of Fuloos is unacceptable and
groundless. It can therefore be said that the traits of Fuloos are similar
to dirham and dinar.
6. Every piece of Fals is identical to the other. Hence exchanging more
Fuloos for less or vice versa will be considered usurious and is
prohibited.
7. During the sale of less Fuloos for more, if the Fuloos are identical then
according to the Illah of the transaction, Nasa will be prohibited.
Allama Kasani states the following in context to Shirkat and Mudarabaht:
عذح كالرغوص انؾشکۃ والاننبسثۃ ثھب ، الھب ػشوك ، وا کبذ بكوۃ كکزنک وايب انلهوط كب کبذ کب"
كی انشوایۃ انؾہوسح ػ اثی ؽیلۃ واثی یوعق وػذ يؾذ رغوص۔
وانکالو كیھب يجی ػهی افم وھو ا انلهوط انشائغۃ نیغذ اصبب ػهی کم ؽبل ػذ اثی ؽیلۃ واثی یوعق
انبكوۃ ورقیش يجیؼب ثبفطالػ انؼبهذی ، وػذ يؾذ انضیۃ الصيۃ نهلهوطالھب رزؼی ثبنزؼیی كی انغهۃ
ثبصی ، كزقیش سأط يبل انؾشکۃ کغبئش كکبذ ي االصب انطهوۃ ، نھزا اثی عواص ثیغ انواؽذ يھب
"االصب انطهوۃ انخ
:اضافيہ مراجع
اول طبع ، العلميۃ دارالکتب ، بيروت( ھج ٢٧ متوفی ابراھيم بن الدين زين العالمۃ الشيخ) نجيم ابن ، الدقائق کنز شرح الرائق البحر
(٢؍۶)ھج ۴۰
کوئٹہ ، الرشيديہ المکتبۃ ، کوئٹہ( م الھما بابن المعروف لواحد عبدا بن محمد الدين کمال) الھمام ابن ، ايۃالھد شرح القدير فتح
(۰؍۶) باکستان،
، دوم طبع ، رشيديہ مکتبہ ، کوئٹہ ، الکبار العلماء من جماعۃ ، العالمگيريۃ الفتاوی
(۴؍)ھج ۴
88
"It will be prohibited to conduct Shirkat and Mudarbat with Fuloos if they
are falsified or uncommon (different from those in use), as they will
rather qualify as Urooz. Even if Fuloos are genuine (commonly accepted
for use), then according to Imam Abu Hanifa and Imam Yousuf their use
in Shirkat will still be prohibited, but as per Imam Muhammad (RA) it is
permissible.
There is another basis of this debate that Fuloos (which are commonly
used) do not always qualify as Saman because their value is Identified on
judgment at some stage (like their exchange rate with dirham or dinar).
For traders they are acceptable as a medium of exchange. Imam
Muhammad (RA) assumes that Fuloos-e-Nafiqa (used commonly) must
possess Samaniat, therefore Fuloos should be recognized as Asman
Mutaliqa. For the same reason, Imam Muhammad (RA) doesn't allow
sale of a single Fuloos for two. Henceforth for Shirkat, using Fuloos as
capital like other Idenfieid Asman is permissible."1
It needs to be noted that in instances of Shirkat and Mudarbat, the capital must
be present in the form of liquid cash; assets may not be used in lieu of capital.
For the same reason, the use of Fuloos for Shirkat and Mudarbat is stressed also.
However Imam abu Hanifa and Imam Abu Yousuf (RA) disagree with this view.
Allama Kasani has emphasized that the opinion held by both Imam Hanifa and
Imam Yousuff is evidenced in ‘a famous and well known tradition’ ( كی انشوایۃ
There is another well known tradition which states .(انؾہوسح ػ اثی ؽیلۃ واثی یوعق
to the contrary. According to this tradition, Imam abu Hanifa and Imam Abu
Yousuf (RA) have agreed that Shirkat and Mudarbat are permissible via Fuloos.
This statement is found in Tanveer Al-Absar Matan Adar Al-Mukhtar,
"ۃ وػب ثـیش انوذی وانلهوط انبكوۃ انخوال رقؼ يلبوم"
"… and Shirkat Mafawda and Shirkat Anan are inappropriate in absence
of gold, silver and Fuloos." 2
-----------------------------------------------------------------------------------------(۵٢؍۶) الصنائع بدائع -------------------1
، بيروت( ٢٢ المتوفی الغزی التمرتاشی الخطيب احمد بن ہللا عبد بن محمد) التمرتاشی ، الدرالمختار متن االبصار تنوير -------2
(٧۵؍۶) ھج۴٢ اول طبع ، العربی التراث داراحياء
89
This statement associated with these two Imams confirms that it is correct to do
Shirkat and Mudarbat with Fuloos. However the tradition of the two Imams
which is given credence in this issue is the one stating that Shirkat and Mudarbat
is impermissible when conducted with Fuloos. In a popular book ‘Kitab Al-Usul’
by Imam Muhammad (RA), Salam or forward buying is declared permissible.
Apparently, Imam Muhammd has reverted his opinion on Fuloos for this case
(Shirkat and Mudarbat with Fuloos) as he also permits the use of Fuloos in Salam.
A condition which renders a Salam contract correct is that the value of Mubay’ or
item against which the sale is made, should be identified on judgment. This is the
reason why Bay’Salam or forward buying with dirham or dinar is incorrect
because their value is not judged by the trading parties. But since forward buying
with Fuloos has been permitted by Imam Muhammad (RA), it is obvious that he
has negated its Samaniat, characterizing Fuloos as Urooz. This point emerges
again in the renowned jurisprudence book ‘Tuhfat-ul-Fuqaha’(رؾلۃ انلوہبء):
"اہ یغوص: وهبل "االفم " ايب انغهى كی انلهوط كوذ رکش كیو"
"Imam Muhammad (RA) has deemed Fuloos permissible for Salam in Al-
Usul." 1
In context, in Kitab Al-Usul, Imam Muhammad (RA) has quoted the opinion of
Imam Abu Hanifa and Imam Abu Yousuf (RA). This leaves no reason to believe
that Imam Muhammad (RA) had changed his verdict in any way. The author of
Kitab Al-Fuqaha or Tuhfat ul-Fuqaha confirms this with the following statement:
"ویغت ا یکو رنک ػهی هول اثی ؽیلۃ واثی یوعق ۔۔۔ وػهی هول يؾذ الیغوص"
"It is necessary that this issue be based on the opinion of Imam Abu
Hanifa and Imam Abu Yousuf (RA), whereas according to Imam
Muhammad (RA) this issue is not correct."2
Therefore Allama Kasani clearly writes about Salam:
وايب انغهى كی انلهوط ػذدا كغبئض ػذ اثی ؽیلۃ واثی یوعق وػذ يؾذ ال یغوص ثبء ػهی ا انلهوط "
"ذ كالیغوص انغهى كیھب کب الیغوص انغهى كی انذساھى اوانذبیشوػذھبو انخاصب ػ
---------ھج ٧٧ ، اول طبع ، دمشق جامعہ مطبعۃ ، دمشق ،( ھج۵٢ المتوفی الدين عالء عالمہ) ، السمرقندی ، الفقہاء تحفۃ 1
2 Ibid
90
"The quantitative use of Fuloos in Salam is correct according to Imam
Abu Hanifa and Imam Abu Yousuf (RA), but not for Imam Muhammad
(RA). This is because Fuloos is Asman hence impermissible for Salam.
Similarly forward buying (Bay' Salam) is also not allowed with dirham
and dinar... “1
In the light of the discussion related to the intricacies of Riba, Musharakat,
Mudarabaht, and Salam or forward buying, it is clear that according to Imam
Muhammad (RA), Fuloos qualifies as Saman. To the contrary, according to Imam
Yousuf and Imam Abu Hanifa, Fuloos is not Saman since they find them devoid of
the characteristics of Samaniat. An opinion shared by Muhammad bin Al-Fadl,
Shams Al-Ae’ma Al-Sarkhasi and Shams Al-Ae’ma Al-Halwani states:
انؾلیۃ يضم يؾذ ث انلنم واخزبس انغشخغی ویواكن يؾذ ث انؾغ ػهی ھزا االفم ثؼل ػهبء"
"وؽیخہ انؾهوای
"In this rule, some scholars of Hanafi School are on agreement with
Imam Muhammad (RA). Muhammad Bin Al Fadl, Allama Sarkhasi and his
teacher Allama Al-Halwani have also adopted this opinion"2
OPINION OF SCHOLARS FROM MALIKI SCHOOL
Though the general consensus of the scholars of the Maliki school is that Fuloos
are Asman, there are some scholars who deviate from this opinion. Also while
certain scholars assume Fuloos to be entirely prohibited, going as far as to deem
them reprehensible (يكشو), others consider them permissible. The majority of
the Maliki scholars however agree that the sale of Fuloos is prohibited and
illegitimate. According to Justice Mufti Taqi Usmani,
وھو ي انشثب انؾشو ؽشػب ػذ االيبو يبنک ث اظ ويؾذ ث ورنک ا ثیغ انلهظ ثبنلهغی ؽشاو يطهوب "
"انؾغ انؾیجبی انخ
"... for this reason the sale of a Fals (singular of Fuloos) with two Fuloos is
illegitimate and as per this law (شرع) Malik Bin Anas and Imam Muhammad (RA)
consider it equivalent to Riba and hence illegitimate ... "1
-----------------(۴٢؍٧) ردالمحتار مع الدرالمختار وفی( ۶؍۶) الرائق البحر فی کذا ،( ۰؍۵) الصنائع بدائع --------------1 -----------------------------------(٢ص) والمبسوط الھنديۃ والفتاوی البدائع عن والتجاريۃ النقديۃ االوراق احکام ---------------2
91
However it cannot be assumed on the basis of this particular difference in opinion
that contention also exists within these scholars on Fuloos being Saman; the
entire Maliki school is in agreement on this point. The Author perceives the issue
similarly. There are a couple of reasons why the scholars of the Maliki school are
in agreement on this point:
1st
Reason: Assuming that Fuloos are equal to gold or silver according to the Illah
of Samaniat, they should be applied with the same rules ascribed to gold or silver.
Consequently just as it is illegitimate to sell one dinar or one dirham for two, it is
illegitimate to sell one fals for two. However a point which can be raised here is
that Fuloos are asman though they are not similar in any way to gold or silver and
hadiths and traditions specifically quote only gold and silver. Therefore there is
room to consider this illegitimate, creating confusion. Hence to help avoid
inaccuracy in judgment and undue disputation it is recommended that the matter
declared disliked or makrooh (يكشو).
2nd
Reason: The Illah for Riba may or may not be the quantity when the medium
of exchange is gold or silver. Those who consider quantity to be the Illah assume
differences in exchanges of gold and silver on the basis of quantity to be Haram
or illegitimate while the ones who do not consider quantity to be the Illlah
consider considered these differences permissible. Those who are in confusion
over the issue consider it disliked or makrooh(يكشو).2 ‘Al Madonah’ (انذوۃ)the
famous book by Hazrat Imam Malik states,
الیقهؼ ھزا كی هول يبنک ، وھزا : ا زوبثل ، هبل اسأیذ ا اؽزشیذ كهوعب ثذساھى كبكزشهب هجم ا: ههذ "
یھى انغهود ؽزی رکو انبط اعبصوا ث الخیش كیھب ظشح ثبنزھت والثبنوسم ، ونو ا: نی يبنک :كبعذ ، هبل
اسأیذ ا اؽزشیذ خبرى كنۃ او خبرى رھت او : نکشھزھب ا رجبع ثبنزھت وانوسم ظشح ۔ ههذ نھب عکۃ وػی
الیغوص كهظ ثلهغی۔۔۔ هبل انهیش ث : هول يبنک ؟ هبل رجش رھت ثلهوط كبكزشهب هجم ا زوبثل ایغوصھزا كی
فبسد عکۃ اھب: وط ثبنلهوط وثیھب كنم اوس ظشح وهبالکشھب انله عؼذ ػ یؾی ث عؼیذ وسثیؼۃ اھب
۔"يضم عکۃ انذبیش وانذساھى
"I asked if I could purchase dirham for Fuloos and acquire the physical
ownership at another time? He said that this is impermissible by the
verdict of Imam Malik and it is corrupt. Imam Malik has also told me that
------------------------------------------------------------------------(٧ص) للعثمانی النقديۃ االوراق احکام -----------------1 2-- المخطوطين المالکی الفقہ فی التھذيب وشرح المالکی الفقہ فی للمازری التلقين شرح عن للجعيد والتجاريۃ النقديۃ االوراق حکاما
(۴ص) ، القری ام بجامعۃ العلمی البحث بمرکز
92
there is no good in credit sale of gold or silver with Fuloos, and even if
people start using hides (animal skin) abundantly as a medium of
exchange or Fuloos, I will also declare their credit sale with gold and
silver as disliked (يكشو).
I asked if I purchased a gold ring with Fuloos and delayed the possession
to another time, then would it be permissible for Imam Malik? He said
‘As per Imam Malik it is not permissible to trade Fals with Fuloos (more
than one Fals)’...
Lais Bin Saad, Yahya Bin Saeed and Rabia in a tradition are said to term
those dealings of Fuloos for Fuloos as reprehensible where there is an
increase on one side or if there is credit, and said that Fuloos are now like
coins of dirham and dinar (in usage)."1
اسأیذ ا : کزؾشیى انذبیش وانذساھى ، ههذ اکش رنک كی انلهوط والاسا ؽشايب: وهبل يبنک "
۔" الیغوص كهظ ثلهغی: ثلهغی ایغوص ھزا ػذ يبنک ؟ هبل اؽزشیذ كهغب
“… and Imam Malik has narrated: I consider it reprehensible in Fuloos,
however I don’t consider this matter illegitimate as it is in case of
dirhams and dinars. I asked if it is legitimate to sell a Fals for two? He
said that the sale of a Fals for two is not legitimate.”2
Allama Ibn-e-Taymiyya (RA) also belongs to the first group of scholars who
consider Fuloos to be Asman. His Fatawee on the subject confirm his opionion:
۔" االصب ورغؼم يؼیبس ا اليوال انبط االظہش انغ ي رنک كب انلهوط انبكوۃ یـهت ػهیھب ؽکى"
“It is explicitly prohibited because the rules of Asman are imposed on
Fuloos Nafiqa (انلهوط انبكوۃ), and they are generally considered as a
standard of value in trade.”3
۔" كبرا فبسد انلهوط اصبب فبسكیھب ھزا انؼی ، كالیجبع ص ثض انی اعم"
1- --- ھج ۴۵ اول طبع ، يۃالعلم دارالکتب ، بيروت ،٧٢ المتوفی االصبحی انس بن مالک االمام) االصبحی ، الکبری المدونۃ
(۶ ،۵؍) ----------------------------------------------------------------------------------------(۵۰ص) سابق مرجع -------------------2
----------------------------------------------------------------------(۴٧؍٢) تيميہ البن الفتاوی مجموعۃ -----------------3
93
“When Fuloos are assumed as Asman (plural of Saman), then the
definition of Asman is applied on them, therefore there will be no more
credit sale of Saman for Saman.”1
Allama Ibn-e-Al-Qeem also consider Fuloos to be Saman. He writes,
"هب، الیشرلغ وال یخلل انخا یکو يؾذدا ينجو وانض ھو انؼیبس انزی ثہ یؼشف روویى االيوال كیغت"
“Saman is the standard of the value of items Therefore it is necessary
that there is a Tehdeed (تحديد) for Saman which is also Manzbat (منضبط)
so that there isn’t any fluctuation in its value.”2
ارخزد انلهوط عهؼۃ رؼذ نهشثؼ كؼى ؼبيالرھى واننشس انالؽن ثھى ؽیکب سأیذ ي كغبد ي"
ھی اننشس وؽقم انظهى ونوعؼهذ صب واؽذ ا الیضداد والیوـ ثم رووو ثہ االؽیبء والرووو
۔" ثـیشھب نقهؼ ايشانبط
“I have seen conflicts among people and the damage that was caused.
The use of Fuloos as tradable item and as an instrument to earn profit
caused a lot of harm to public and injustice has also become obvious. If
Fuloos would have been declared as Saman with no fluctuation in its
value, used as a measure of value of items, or its value would not have
been derived from any other item, then the public would have been at
peace.”3
In his statement Allama Ibn-e-Al-Qeem clearly asserts that not considering Fuloos
as Saman will only be a source of unrest in society with chances of injustice in
economic and financial transactions. The second point emphasizes that Fuloos is
money rather than a ‘tradable item’. The details of this have been discussed
earlier.
THE SECOND GROUP: IMAM ABU HANIFA AND IMAM ABU YOUSUF (RA): As per the opinion of these scholars, it is not necessary for the characteristics of
Samaniat to be present in Fuloos. This contends that the value of Fuloos can be
identified on judgment, whereby invalidating the rules of Fuloos enacted by Imam
Muhammad (RA).
1 Ibid -------------------------------------------------------------------------------------(٢؍) الموقعين اعالم -------------------2 3 Ibid
94
Imam Shafi’i (RA): The scholars who belong to this group also consider Fuloos as
Saman. Allama Kohaji (RA) states the following in context of the Illah of Riba:
۔" وػهۃ انشثب كی انزھت وانلنۃ انضیۃ وھی يزلیۃ ػ انؼشوك وانلهوط"
“Illah of Riba in case of Gold and Silver is Samaniat, which is not found in
Urooz and Fuloos”.1
According to Allama Noovi (RA):
ارا ساعذ انلهوط سواط انوود نى یؾشو انشثب كیھب ، ھزا ھوانقؾیؼ انقوؿ وثہ هطغ انقق "
۔"وانغہوس
“When Fuloos starts to be used in trade like money, then any excess will
not be considered illegitimate. This is correctand has been described by
the author in detail. Majority of scholars also agrees.”2
Caution: Arab scholars have clearly suggested that the scholars of the Shafi
school do not consider Fuloos to be Asman. Allama Kohaji’s above statement also
confirms this. However an analysis of jurisprudence literature of the Shafi’i
school reveals that this statement does not negate the inherited Samaniat of
Fuloos.
What is negated here is Samaniat-e-Johria or Samaniat-e-Ghalba whereby it is
affirmed that the Samaniat in Fuloos is neither ornamental or Johria, or natural or
Khalqi. In the view of these scholars, the Illah of Riba in Naqood or cash is
Samaniat-e-Johria. Since Fals does not possess this characteristic or Illah,
therefore they allow the sale of less Fuloos with more. Basically these scholars do
not entirely disqualify Fuloos from being Saman but maintain that the Illah of
Samaniat-e-Johria is absent in Fuloos.
This negation can be understood more clearly by the example of a student who
didn’t come to school without his notebook. This statement does not imply that
the student never came to school.
(۴؍)-- ھج۴ اول طبع ، قطر( الکوھجی الحسن حسن الشيخ بن عبدہللا الشيخ) الکوھجی ، المنھاج شرح المحتاج زاد -----1 ---------------دارالفکر۔ ، بيروت ، النووی شرف بن الدين محی زکريا ابو االمام) النووی ، المھذب شرح المجموع --------------2
95
What it means is that he never came without his notebook. Similarly the
negation of Samaniat-e-Johria doesn’t imply the negation of Samaniat entirely.
Hence in this certain school of thought, Fuloos Nafiqa also qualifies as Asman but
it is not Asman-e-Johria. For this reason the Samaniat of Fuloos will be
considered to be the illah of Riba as per the Shafi’i School. This consequently
renders the sale of less Fals with more as legitimate. Following is a statement in
this context:
عوہشیۃ االصب ؿبنجب،۔۔۔وكی رؼذی : ؽئذ ههذ انؼهۃ كیھب فالؽیۃ انضیۃ انـبنجۃ ، وا: وهبل انغہوس "
۔" انؾکى انی انلهوط ارا ساعذ وعہ ، وانقؾیؼ اہ السثب كیھب الزلبء انضیۃ انـبنجۃ
“As per the majority of scholars, Illah in case of gold and silver is their
capacity of Samaniat-e-Ghalba, which can also be termed as Johria
Asman (عوہشیۃ االصب)… there is a tradition which asserts the rule of Riba
in case of indentified Fuloos. Hhowever it is true that Riba has nothing to
do with it, as they (Fuloos) don’t possess Samaniat-e-Ghalba.”1
It is mentioned in Hawashi Sharwani:
"انخ وػهۃ انشثب كیہ عوہشیۃ انض كالسثب كی انلهوط وا ساعذ"
“The Illah of Riba is the Johriat (basic value) of Saman therefore in case
of identified Fuloos there is no Riba.”2
OPINION OF SCHOLARS OF HANBALI SCHOOL OF THOUGHT
Jurists who belong to the Hanbali School are divided into two groups where one
considers Fuloos to be Saman and the other does not. The 2nd
tradition is
however seen to be more firmly established within the Hanbali school of thought
according to which the sale of a Fals with more is illegitimate. 3 Hence the
majority of scholars and jurists view Fuloos as Asman and the sale or purchase of
----ھج۴۵ مدو طبع ، االسالمی المکتب ، بيروت( النووی شرف بن الدين محی عالمہ) النووی ، الطالبين روضۃ ------------1 --------------------------------------------------------------------(٧٢؍۴) العبادی قاسم بن الشروانی حواشی -----------------2
- (۰؍۴ الکبير الشرح مع المغنی) الوزن اصلہ ، بابرتين والابرة بالسکينين والالسکين بالفلسين الفلس اليباع: وقال 3
المرداوی، ، االنصاف)۔ اثمان بانھا معلال االمماثلۃ بمثلھا التباع نفاقھا مع( الفلوس۔عصمت) بانھا: الصغير خالفہ فی الخطاب ابو وجزم
(۵؍۵) ھج٧۶ اول طبع ، المحمديۃ السنۃ مطبعۃ ، قاہرہ( الحنبلی المرداوی سليمان بن علی ابوالحسن الدين عالء
کالدراھم بھا الشرکۃ فجازت ثمن النھا ثور وابی الحسن بن محمد قول وھذا الصرف يشبہ النہ الفلوس فی السلم الاری: قال احمد فان
(۵؍۵الکبير والشرح المغنی)والدنانير۔
96
Fuloos for Fuloos as illegitimate when done with an increase or decrease on
either side.
The established opinion on Fuloos states that:
1. Fuloos are Asman
2. Their value cannot be identified by mere supposition or speculation.
3. Their exchange with any reduction or increase in quantity is illegitimate.
4. Shirkat and Mudarbat can legitimately be conducted with Fuloos.
5. Forward buying with Fuloos is not permissible.
The preference of jurists for this established opinion is based on the extensive
contemporary use of Fuloos in trade just as gold and silver were used in prior
times.
Here Fuloos effectively performs the functions of money and the definitions of
Zarr or money can all be applied on Fuloos as well. It is hence appropriate to
term Fuloos as Asman and there is no reason why it should not be treated like
Naqood or money.
The scholars who agree on the Samaniat of Fuloos include Imam Muhammad
(RA), Imam Malik, Imam Ahmed, Shams Al-Aema Al Sarkhasi, Shams Al-Amea Al-
Halwani, Muhammad Bin Al-Fadl, Allama Ibn-e-Taymiyya, Allama Ibn-e-Al-Qeem,
and the majority of contemporary scholars and jurists.
97
CHAPTER-5: MONEY EXCHANGE ( صرفبيع )
When analyzed by itself, the term Surf in Bay’Surf (صرف has a number of (بيع
different literal meanings which include ‘to transport’, ‘to look away’, ‘release or
letting a person go’, ‘expenditure’, ‘excess or increase’, ‘repentance’, ‘aesthetical
appeal’, and ‘to shout or create noise’. The terms Serfi (فيرفى), Seroof (صيروف),
and Sarraf (صراف) are its verb forms. When Surf is analyzed in context of the
contract of Surf (عقدصرف), the word implies to a transaction made for a gain. It is
a sale contract in which money is exchanged with money or profit. As discussed
earlier, money cannot yield a direct benefit like cereals or cloth etc. Therefore
Aqd-e-Surf is a trade done for profit earned over exchange of money. A theory
for why this term is used for such an exchange is because during earlier time
when gold and silver were weighed on measuring scales, it created a typical
sound. Since Surf also means ‘to shout or to create noise’, hence the name
Bay’Surf.1
-------------------------------( الزيادة ھولغۃ: )ردالمحتار وفی ، الزيادة لغۃا( الصرف)ہو: وردالمحتار الدرالمختار --------------1
وجھہ عن صرفتہ: المصباح ففی معانيہ احد ھذا"
، سبيلہ خليت ، والصبی االجير وصرفت ، ضرب باب من صرفا
واسم ، بعتہ بالدراھم الذھب وصرفت ، انفقتہ: المال وصرفت
ابن قال ، للمبالغۃ وصراف ، وصيروف صيرفی ھذا من الفاعل
صرفتو الدرھم علی الجودة فی الدرھم فضل الصرف: الفارس
(۴؍٧" )زينتہ: الکالم
:القدير فتح
االنتفاع دون االالزيادة بہ اليقصد العقد وھذا( الزيادة")
الطعام نحو بخالف بعينہ الينتفع النہ الغالب فی اآلخر البدل بعين
و التجارة المتعاقدين من کل قصد ان والمراد ، والحمار والثوب
صرفا تسمی والزيادة ، الفائدة عن العقد واالخال بالنقل فيہ الربح
ابيہ غير الی انتمی من: ملسو هيلع هللا ىلص قولہ فی صرفا النافلۃ العبادة سميت وبہ
(۵٢؍۶)" الخ والعدال صرفا منہ ہللا يقبل ال
(؍۶) الرائق البحر فی کذا
98
TERMINOLOGICAL MEANING OF BAY’ SURF
The definitions for the term Bay’Surf differ between different schools of thought.
The scholars belonging to the Hanafi, Shafi’i and Hanbali Schools define Bay’Surf
as ‘The sale or purchase of Saman or money against Saman or money, regardless
of where it is in different or similar form (جنس)’. In this chapter the term Saman is
used for Saman-e-Khilqi or natural money such as gold or silver irrespective of its
shape. Hence this gold and silver can occur as dinar, dirham, utensils, jewelry and
bars. The rules of Bay’Surf do not cover the exchange of Saman-e-Urfi or Fiat
Currency such as currency notes or Fuloos. The exchange of Saman-e-Urfi needs
to be analyzed under different rules.
According to Allama Haskafi (RA):
۔" وؽشػب ثیغ انض ثبنض ای يبخهن نهضیۃ ، ويہ انقوؽ عغبثغظ اوثـیش عظ"
"As per Shariah, Bay' Surf is only about sale and purchase of Saman for
Saman, i.e. Saman-e-Khilqi, even if in the form of utensils (jewelry, bars
etc); however on both side of exchange the form could be same or even
different (like utensils being exchanged for jewelry)."1
Allama Marghinani states in the same context:
عواء کبب یزؼیب کب نقوؽ اوالیزؼیب کبننشوة ، او یزؼی اؽذھبوالیزؼی االخش، الهالم يبسویب ، "
۔"انشثب والہ ا کب یزؼی كلیہ ؽجھۃ انزؼیی نکوہ صب خهوۃ كیؾزشه هجنہ اػزجبسا نهؾجھۃ كی
“If value of the subject matter is based on the judgment of trading
parties like in the case of exchange of utensil for utensil; or if value of
subject matter is not based on judgment like in case of exchange of coins
for coins; or if ‘items - whose value is judged’ are exchanged for items of
identified value (like dirham or dinar), then all these types of exchanges
can be categorized as Bay' Surf as confirmed in a Hadith. Secondly
، االبحر ملتقی شرح فی االنہر ومجمع
(۶؍) ھج۴٢ اول طبع ، العلميۃ دارالکتب ، بيروت( ھج٧۰ المتوفی سلمان بن محمد بن عبدالرحمن العالمۃ) ، زادہ الشيخی
:القناع کشاف
ھج۔ ٢۴ بمکۃ الحکومۃ مطبعۃ ، العربيہ السعوديہ ،( ھ ۵ المتوفی يونس بن منصور العالمۃ) ، البہوتی ،
(۵؍" )الميزان فی تصويتھما لصريفھماوھو بذلک سميت" 1------------ -- (۴؍٧)-- بالشامی المعروف عابدين البن المحتار رد ومتن للتمرتاشی االبصار تنوير شرح کفیالدرالمختارللحص
99
despite involving Saman-e-Khilqi, still there remains a chance of Riba
even if value of items is judged. Therefore due to this possibility, it is
mandatory for the trading parties that the subject matter be in their
ownership (of the item exchanged)." 1
The above statement confirms the following points:
a) Utensils or jewelry of gold and silver and their mandatory presence on
one or both sides of the exchange.
b) The presence of dirham or dinar on one or both sides of the exchange.
c) The exchange of dirham and dinar for utensils and jewelry of gold or
silver.
In short, all item/items in the exchange must qualify as Saman-e-Khilqi and it is
mandatory for the item/items to be in the ownership of the buyer or seller at the
time of exchange. There are a number of reasons why the exchange of items
other than Saman-e-Khilqi do not qualify as Bay’Surf. In the opinion of Allama
Nasfi:
وؿبنت انـؼ نیظ كی ؽکى انذساھى وانذبیش كیقؼ ثیؼھب ثغغھب يزلبمال وانزجبیغ واالعزوشاك ثب یشوط "
۔"ػذدا او وصب اوثھبوالیزؼی ثبنزؼیی نکوھب اصبب
"If purity (of gold or silver content) is doubtful then it will not be dealt
with rules related with dirham and dinar. For this reason an increase or
excess will be allowed during exchange and as per known tradition it
would be correct to trade them by quantities or weight. Since they are
Asman therefore their value will not be based on judgment." 2
Elaborating this further, Allama Ibn-e-Najeem says:
الھب ثبالفطالػ فبسد اصبب ، كبداو رنک یؼی يبدايذ رشوط"والیزؼی ثبنزؼیی نکوھب اصبب : "هونہ
۔" الرجطم انضیۃ نویبو انوزنی االفطالػ يوعودا ،
1---- - باکستان،---- کوئٹہ،( ھج۵٢ المتوفی المرغينانی ابوبکر الحسن ابو الدين برھان االسالم شيخ) المرغينانی ، الفتح مع الھدايۃ
(۶؍۶) رشيديہ مکتبہ --------------------------------------محمود بن احمد بن ہللا عبد البرکات ابو االمام) النسفی ، البحر مع دقائقال کنز ----------------2
(۵؍۶) ھج۴۰ اول طبع ، العلميۃ دارالکتب بيروت،( ھج ٧ المتوفی النسفی الدين بحافظ المعروف
100
“This statement (of Allama Nasfi) ‘… since they are Asman therefore their
value will be based on judgment’, asserts that until the unit of exchange
is popular or public have declared them Asman, their Samaniat will
remain dependent on this custom, and will remain so till the demand
persists among public."1
In short, if the coins in common usage have impure contents of gold or silver
creating the chance of falsification in trade, then their sale with lesser or greater
quantity, corresponding to their impurity, will be allowed. Despite similarity in
shape and appearance, their value cannot be supposed or judged by trading
parties. This is because they are Asman-e-Urfia or commonly accepted Asman
with identified value. Therefore such transactions will not qualify as Bay’Surf
because they contradict the rules defined for money exchange. In these
transactions, Saman which does not fulfill the requirements of Saman-e-Khilqi is
traded with other Saman of similar value or nature of impurity. These
transactions do not qualify as money exchange or Bay’Surf. Hence the excess or
increase is allowed on both side by scholars even if the shape and appearance of
items being exchanged are identical. It is additionally indicated by the jurists of
the Hanafi School that the presence of Saman-e-Khilqi in any form or shape is
mandatory for a transaction to be declared a legitimate money exchange.
However if the value of an item has not been judged by the trading parties but
has been publically established then that is sufficient ground for the item to
qualify as Saman only.
The book ‘Kashaf Al-Kana of the Hanbali School states:
۔" اخزهق او كقم كی انقبسكۃ، وھی ثیغ وذ ثوذ، ارؾذ انغظ"
"Musarafa is sale or purchase of money for money (Saman-e-Khalqi),
irrespective of their Jins i.e. their form or shape may be identical or
different.” 2
The scholars of the Hanbali School use the term Naqdain-e-Tasnia with dirham
and dinar or gold and silver. This indicates that the Hanbali scholars have also
1 Ibid 2 Ibid (253/3)
101
used the term Naqd for Saman-e-Khilqi or natural money in the context of
Bay’Surf.
‘Maghni Al-Mahtaj’ is a popular book of the Shafi’i School of Thought. The book
states,
۔"وانشاد ثہ انزھت وانلنۃ ينشوثب کب او ؿیشينشوة( انوذ ثبنوذ")
"(Bay' Surf is sale or purchase of cash for cash) i.e. in gold or silver coins
or any other form."1
In the same book it is also stated:
۔"وذ ثبنوذ ي عغہ وؿیش یغی فشكبثیغ ان:رجیہ "
"Sale of cash for cash is called Surf, whether the form of money is same
or different".2
According to Allama Ibn-e-Taymiyya
عظ انزھت وانلنۃ عواء کب صباو کب فشكب كیوانضبیۃ الیؾزشه انؾهول وانزوبثل ، كب رنک يؼزجش "
-"وانضیہ ػبسمۃ نھب او کب يکغوسا ثخالف انلهوط وال انلهوط ھی كی االفم ي ثبة الػشاك
"According to another tradition, bilateral 'cash payments' and
possessions are not mandatory; because these conditions are rather
mandatory in the case of gold and silver, except Fuloos (as they are not
made of gold or silver) and also because Fuloos is categorized as 'goods',
and Samaniat is only temporarily associated with them."3
This is similar to the second tradition of Imam Ahmed which asserts that the
presence of Saman-e-Khalqi is mandatory for Surf.
Allama Zaheli writes,
ای ثیغ انزھت ثبنزھت او انلنۃ ثبنلنۃ او انزھت : وؽشػب ھو ثیغ انوذ ثبنوذ عغب ثغظ او ثـیش عظ "
۔" يقوؿب او وذا ثبنلنۃ
-----(۴؍) العربی التراث داراحياء ، بيروت( الخطيب الشربينی محمد الشيخ) الشربينی محتاج،ال مغنی -------------------------1 2 Ibid -----------------------------------------------------------------------------------(۴۵٢؍٢ الفتاوی مجموعۃ) -------------------3
102
"In context of Shariah, Surf is sale or purchase of cash for cash, whether
the form is same or different i.e. gold is exchanged for gold, or silver is
exchanged for silver, or silver is exchanged for gold, or gold is exchanged
for silver, either in the form of a coin or even in the form of utensil."1
It is quoted from the book ‘Tatoor Al-Naqood’,
ػشف انؾلیۃ انقشف ثبہ ثیغ االصب ثؼنھب ثجؼنواسادوا ي االصب يب کب صب خهوۃ ای "
ثبنوذی او کبب ي انوذو وھو انزھت وانلنۃ عواء کبب يغکوکی دبیش ودساھى وھی انؼشوكۃ
: واانؾبكؼیۃ وانؾبثهۃ ػ انض ثبنوذ كوبن يقوؿی کب الهشاه واالعبوس او کبب رجشا وػجش
ثبنوذ ي عغہ او ؿیش ، اسادوا ثبنوذ کزنک انزھت وانلنۃ يغکوکی او انقشف ثیغ انوذ
يقوؿی او رجشا وانؾکى كی انزاہت انضالصۃ ھوا انزھت وانلنۃ ارا ثیؼب ثغغھب کزھت ثزھت
نهقشف ػذ وانزؼشیق انغبثن:( انی هونہ)او كنۃ ثلنۃ وعت انؾهول وانزبصم وا نزوبثل
ئۃ انضالصۃ یلیذ اہ يؾقوس كی انزھت وانلنۃ انهزی الیـهت ػهیھب انـؼ ، كبرا کبذ اال
انذساھى يـؾوؽۃ و سائغۃ او کب انوذ ي انغبی كهوعب سائغۃ الیغشی كیھب ؽکى انقشف
-"انخ
"Scholars of the Hanafi School have defined Bay' Surf as Sale or purchase
of Saman for Saman. According to them these units of exchanges are
Saman-e-Khilqi just like the currency used in ancient times i.e. gold and
silver in form of coins or dirham or dinar which were the popular form of
cash. They could also be in the form of jewelry, like earrings or bangles or
even in the form of solid bars. Scholars of Shafi’i and Hanbali Schools
have compared Saman with Naqd (cash) as they have stated that 'Surf' is
sale of Naqd with Naqd. Their shape and form could be similar or
different. By Naqd they also mean gold or silver, irrespective of their
nature. These three Schools of Thought agree on this point that if gold or
silver is exchanged with an item of similar nature like gold for gold or
silver for silver, it is mandatory that there be no credit, the exchange
must be in identical units, and the ownership of items being exchange
must be assumed by the trading parties. The definition of Surf stated by
the three Imams tells us that only pure gold and silver qualifies for a Surf
contract. If it is not pure or if Fuloos is the identified currency, then it will
not qualify for contract of money exchange.”2
-----------------------------------------------------------------(۶۶؍۴) الزحيلی للعالمۃ وادلتہ االسالمی الفقہ -----------------1
---------------------------------------------------------------------------------------------------(۵۴،۴ص) النقود تطور 2
103
It is confirmed from the above statement that Saman should be natural or
Saman-e-Khilqi for money exchange and some content of gold or silver must
dominate the unit of exchange whether it is in the form of coins, bars, utensils, or
jewelry etc. It is under these conditions that the sale transaction will be termed
Surf, Tasrruf, or Musarfa according to the three imams. No other term for such a
transaction is used other than Surf. The Maliki School however presents three
terminologies for this; Muratla, Mubadala, and Surf.
MURATLA Muratla means to sell gold for gold or silver for silver by weight irrespective of
their shape and size. It is however mandatory that the material of the items be
similar on both sides of the exchange. For instance a gold coin for a gold coin and
not a silver coin for a gold utensil.
MUBADALA Mubadala means the exchange of coins for coins by quantity such as dinars for
dinars and dirhams for dirhams. The material of items being exchanged needs to
be similar here as well.
SURF Surf is the exchange of gold for silver or silver for gold regardless of their physical
form. This exchange can be according to the quantity or weight of the items in
question.
The unit of exchange must be in coin for all the types mentioned above.1
------ دارالغرب( ھج۶۶ المتوفی شاس ابن نجم بن ہللا عبد الدين جالل) شاس ابن ، الثمنيۃ جواہرال عقد --------------------------1
ھج ۴۵ اول طبع ، االسالمی
The subject of Mubadla and Maratla has been covered quite in detail in the reference mentioned
previous page
(٢۶تا ۵؍)
، مصر( الدردير احمد بن محمد بن احمد البرکات ابو العالمۃ) الدردير ، مالک االمام مذھب الی المسالک اقرب علی الصغير الشرح
(۰۵ تا ۴۰؍) المعارف دار
، السعوديۃ( القرطبی البرالنمر عبد بن محمد بن ہللا عبد بن يوسف عمر ابو) القرطبی ، المالکی المدينۃ اہل فقہ فی الکافی کتاب
(۶؍) ھج ۴ دوم طبع ، الحديثيۃ الرياض مکتبۃ ، لرياضا
: االسالميۃ الشريعۃ ضوء فی النقود تطور
104
BAY’SURF AND ITS CONDITIONS
In order for Bay’Surf to be legitimate as per Shariah rulings, there are four
conditions which need to be met. Two of these conditions are optional while two
are compulsory.
1. Possession of the unit of exchange.
2. Similarity of the nature of money being exchanged.
3. Khiyar Shart (Optional Condition)
4. Ajal or Tajeel (Deferred Payment)
The last two conditions are contingent upon the first two conditions of
ownership. Meticulous analysis has revealed that the second condition of
انھم ذلک ، االثمان بيع فی آخر اصطالح فلھم المالکيۃ اما’’
، والصرف ، والمبادلۃ المراطلۃ: اقسام ثلثۃ الی يقسمونھا
لفضۃ با الفضۃ او لذھب با الذھب بيع فھی: لمراطلۃ اما
۔ تبرا او مصوغين او مسکوکين اکانا سواء ، وزنا
الفضۃ او الذھب من المسکوک النقد بيع فھی: المبادلۃ واما
۔ عددا بجنسہ
بالذھب الفضۃ او بالفضۃ الذھب بيع فھو الصرف ۔۔۔واما
(۴ص)‘‘احدھمابالفلوس۔ او
The summary of these statements are the same as discussed, one thing which should be clear is that
in these statements the difference is only of terminologies. As far as the rules are concerned, Malikia
School of thought is not much different then the other three. This school only allows a little excess
while Maratla (مراطلہ), however their rules about ownership are exactly the same as other three
school of thoughts.
Subject Matter
Same Form or Nature
By Quantity
Mubadla
By Weight
Maratla
Different Form or Nature
Surf
105
‘Similarity of Units Exchanged’ is of primary importance since it requires that both
trading parties be in possession of the money in order to ensure this similarity. In
the absence of this condition, the party which possesses the money will gain a
bargaining advantage over one which does not. Allama Marghinani (RA) confirms
this with the following statement:
-"وال اؽذھب نیظ ثبونی ي اآلخش صى الثذ ي هجل اآلخش رؾویوب نهغبواح كال یزؾون انشثب"
“… and ownership is mandatory on the other side because equality is
proven and Riba is excluded from the transaction. Also because one party
is not superior to the other.”1
SIGNIFICANCE OF STATED CONDITIONS The significance of these stated conditions lies in the fact that failure to comply
with any one of these can open the door for Riba. This means that Riba and
Bay’Surf are closely related; if the units of exchange are identical then any excess
on either side will qualify as Riba Al-Fadl while Riba Al-Nasa will be created in the
case of credit or lack of ownership on either side. For this reason, three of the
Imams discuss Riba and Surf in the same sections in their books. In certain
chapters, Surf is not treated under a separate title but the issues related to Surf
are discussed within the chapters on Riba. Hanafi scholars however discuss the
two topics in different sections. Following is a detailed discussion on the four
conditions:
1ST CONDITION: POSSESSION
This condition refers to the possession of Saman-e-Khilqi by both parties and
means that the trading parties must be in possession of Saman-e-Khilqi at the
time and venue of conducting the trade. This is an important and universal
condition for all forms of Bay’Surf. Regardless of whether this Saman-e-Khilqi is
in the form of coins, utensils, jewelry, bars and regardless of whether these items
on both side are similar or identical, the condition stipulates that they must be
present at the time of the contract.2 This condition has also been made obligatory
----------------------------------------------------------------------------------(۶؍۶) القدير فتح مع ھدايۃ ------------------1
2 --- يتعين کان ان والنہ ، ماروينا الطالق االخر، احدھماواليتعين يتعين او ، کالمضروب اواليتعينان لمصوغ کا يتعينان اکان سواء"
۔"الربا فی للشبھۃ اعتبارا قبضہ فيشترط خلقۃا ثمنا لکونہ التعيين شبھۃ ففيہ
106
due to the possibility that both parties might bind themselves in a contract
despite non-possession of the item that they intend to exchange. This will
constitute sale of debt for debt (ثیغ انکبنئی ثبنکبنئی) which is prohibited in Shariah.
According to a tradition related with Hazrat Ibn-e-Omar (RAA):
ثذی صاد ا یجبع کبنئی ثکبنئی یؼی دیب ملسو هيلع هللا ىلصہی سعول للا : "اعؾبم واث ؽیجہ وانجضاس ػ اث ػش
"ثیغ ػبعم ثآعم وػ ثیغ انـشسوػ :انجضاس
“Prophet Muhammad (SAW) has prohibited sale of credit for credit. As
per tradition from Al-Bazaar, sale of cash for credit and speculative sale
has also been prohibited.”1
If only one side is in possession of the subject matter, then the similarity of
subject matter and its quantity becomes questionable on the other side. This is
also confirmed from the Hadith of six items:
انزھت ثبنزھت يضالثضال وانلنۃ ثبنلنۃ يضالثضم ، وانزشثبنزشيضالثضم وانجش ثبنجشيضالثضم ، وانهؼ "
ثبنهؼ يضالثضم ، وانؾؼیشثبنؾؼیشيضالثضم ك صاد اواصداد كوذ اسثی ، ثیؼوا انزھت ثبنلنۃکیق ؽئزى یذا
"ثیذ، انؾذیش
“if value of ‘Subject Matter’ is based on judgment of trading parties like in case of exchange of utensils
for utensil; or if value of ‘Subject Matter’ is not based on judgment like in case of exchange of coins for
coins; or if ‘items - whose value is judged’ are exchanged for items of identified value (like dirham or
dinar), then all these types of exchanges can be categorized as Bay' Surf as confirmed in a Hadith.
Secondly despite involving Saman-e-Khaliqi, still there remains a chance of Riba even if its value is
judged. Hence due to this possibility, it is mandatory for the trading parties that the ‘subject matter’ is
in their ownership (of the item exchanged)."
مکتبہ تان،باکس کوئٹہ،( ھج۵٢ المتوفی المرغينانی ابوبکر الحسن ابو الدين برھان االسالم شيخ) المرغينانی ، الفتح مع الھدايۃ
(۶؍۶) رشيديہ
(؍۶) الرائق البحر فی کذا
:’للزحيلی وادلتہ االسالمی الفقہ
"(۶٧؍۴)اختلف او الجنس اتحد سواء شرط والتقابض"
:النقود تطور
( عصمت) والحنابلہ والشافعيہ الحنفيہ) الثالثۃ المذاھب فی والحکم"
وجب بفضۃ فضۃ او ببذھ کذھب بجنسھا بيعا اذا والفضۃ الذھب ان ھو
الحلول وجب باآلخر احدھما بيع واذا ، والتقابض والتماثل الحلول
("۴ص) التفاضل وجاز والتقابض
1---- -- المکتبۃ ، شيخوپورہ ، پنجاب( ھج ۰۵ المتوفی العسقالنی حجر ابن العالمۃ) العسقالنی ، الھدايۃ احاديث تخريج فی الدرايہ
(۵٧؍) پاکستان االثريہ
107
“Gold for gold, silver for silver, wheat for wheat, barley for barley, date
for date, salt for salt, must be equal on both sides and hand to hand.
Whoever pays more or demands more (on either side) indulges in Riba.
However gold can be exchanged for more silver, similarly dates can be
exchanged for more barley at a mutually agreed ratio.”1
۔"ثوص يضالثضم ، ك صاد او اعزضاد كھوسثب انزھت ثبنزھت وصب ثوص يضالثضم وانلنۃ ثبنلنۃ وصب"
“Sell gold for gold, and silver for silver in equal quantity. Who ever
demands an excess will be demanding Riba.”2
الرجیؼوا انزھت ثبنزھت االيضال ثضم ، والرجیؼوا انوسم ثبنزھت اؽذھب ؿبئت : ش هبلػ اث ػش ا ػ"
"واآلخش بعض
“Sell gold for gold in equal quantity and don’t sell gold for silver in a way
that one item is present and the other is absent.”3
This condition means that the trading parties must not leave the venue without
taking possession of the gold being exchanged. This is referred to as ‘Iftraq Bil-
Abdan’ (افتراقباالبدان) and means that after the contract has been agreed upon but
before taking final possession of the subject matter, either one or both parties
agree to leave the scene whereby deferring the payment to some other time.
This is not allowed. However, if both parties stay for a longer period of time,
taking a rest or break, or mutually agree to switch the venue, then this condition
would not be considered violated. If the parties take possession of their due
subject matter before leaving the venue, then this would indicate compliance to
the rules of ‘Surf’.
Importance of this Condition: The importance of this condition for Bay’Surf is
evident from the following tradition of Hazrat Omar (RAA) and Hazrat Ibn-Omar
(RAA):
والرجیؼوا انوسم ثبنزھت اؽذھب ؿبئت الرجیؼو ا انزھت ثبنزھت اال يضال ثضم: اث ػش ا ػش هبلػ "
"واآلخش بعض وا اعزظشک ا یهظ ثیزہ كالرظش اال یذا ثیذ ھبد وھبد ای اخؾی ػهیکى انشثب۔
-------------------------------------------0112 الحديث عدد( الھندی المتقی علی الدين عالء) ،المتقی کنزالعمال ---------------1 ------------------------------------------------------------------------الربا۔ باب ، المساقاة کتاب ، مسلم اخرجہ -----------------2 3 - اول طبع ، الريان مؤسسۃ ، لبنان(ھج ٧۶ المتوفی الحنفی الزيلعی ہللا عبد محمد ابو الدين جمال العالمۃ) الزيلعی ، الرأيۃ نصب
(۵۶؍۴) ھج۴۰
108
“According to Hazrat Omar (RAA), don’t sell gold for gold unless in equal
quantities and don’t sell gold for silver if one (party) is missing and the
other is present. And if he (buyer or seller) requests for some time so that
he can go back to his home (before making the payment) then don’t
permit him to do so. This sale should be done on the spot i.e. give and
take at the same time. I say so because I am afraid that you may get into
Riba.”1
It is evident from this tradition that Hazrat Omar (RAA) placed great emphasis on
the condition of possession in Bay’Surf. He did not permit the buyer or seller to
enter his home unless both parties had taken physical possession of the subject
matter in question. Hazrat Ibn-e-Omar (RAA) placed even greater emphasis on
this condition, stating:
والرجیؼوا انوسم ثبنزھت اؽذھب ؿبئت الرجیؼو ا انزھت ثبنزھت اال يضال ثضم: ػ اث ػش ا ػش هبل"
"واآلخش بعض وا اعزظشک ا یهظ ثیزہ كالرظش اال یذا ثیذ ھبد وھبد ای اخؾی ػهیکى انشثب۔
“According to Hazrat Omar (RAA), don’t sell gold for gold unless in equal
quantities and don’t sell gold for silver if one (party) is missing and the
other is present. And if he (buyer or seller) requests for some time so that
he can go back to his home (before making the payment) then don’t
permit him to do so. This sale should be done on the spot i.e. give and
take at the same time. I say so because I am afraid that you may get into
Riba.” 2
Some Critical Issues: When the possession of subject matter was made
mandatory for the validation of Bay’Surf, the following critical issues emerged:
a) Ibra, Hiba or Sadaqa
b) Muqassa
Ibra, Hiba or Sadaqa: These three issues are dealt with the same rule and can be
understood more clearly with the following example. Zaid and Omar do Bay’Surf
of one dinar for another dinar and Zaid requests Hawala from Omar at the time of
the contract. This relieves Zaid from the requirement to pay Omar on the spot.
---------------------------------------------------------------(۶؍۶) القدير فتح فی کذا( ۵۶؍۴) الرأيۃ نصب ------------------1 ---------------------------------------------------------------(۶؍۶) القدير فتح فی کذا( ۵۶؍۴) الرأيۃ نصب ------------------2
109
However, since Omar has not done so he still owes a dinar to Zaid. Now if Zaid
says to Omar ‘I Hiba this dinar to you’ or ‘I give you this dinar in charity’ or ‘I
relieve you from the payment of this dinar’ then this would constitute Ibra, Hiba,
or Sadaqa of the subject matter, which is a dinar. Two situations can now
emerge:
1. If Omar says that I accept this Hiba, Ibra or Sadaqa, then he will be
relieved from the responsibility of paying Zaid. This would render
Bay’Surf as null and void.
2. If Omar refuses to accept Zaid’s offer then the Ibra, Hiba or Sadaqa will
be invalidated and Bay’Surf will not be assumed concluded. Though Ibra,
Hiba or Sadiqa is intended to cancel the contract, it does not do so
because Omar has refused to take this offer. Cancellation of contract by
one party alone is prohibited in Shariah. Contrary to this, if the
possession of dinars is acquired before both parties depart, then this will
validate Bay’Surf.
Replacement of Subject Matter: In the context of the above example, if Omar
offers cloth to Zaid instead of the pre-decided dinar then this will not qualify as
possession and will be considered as non-acquisition of possession. Hence
Bay’Surf will not be assumed concluded. Similarly if Zaid assumes possession of
the dinar before both parties depart, then the contract will be considered
concluded.
Adjustment: The term adjustment within the context of this ruling is used for
creating equal quantities of the subject matter on both sides. Adjustment is of
two types; compulsory or involuntary adjustment and voluntary adjustment.
Compulsory or Involuntary Adjustment: As the name implies, this adjustment
occurs automatically regardless of the will of the parties in question. For instance
Zaid gives Omar a credit of 100 dinars. At a later time, Zaid acquires a credit of
100 dinars from Omar as a result of another transaction. This automatically or
involuntarily leads to an adjustment consequently leaving no dues on either side
since Omar’s debt will be reimbursed whether Zaid or Omar agree or disagree. If
the amount is equal to what was owed, it would balance out the dues. If the
amount was less, then the indebted party would voluntary have to pay the
remainder of the balance. It is however necessary that:
110
1. One party be the creditor and the other the debtor.
2. The nature and type of the amount credited and reimbursed must be the
same. For instance, both should be dirhams or dinars. Similarly the
content of gold or silver in the dinars and dirhams should also be
identical. The quantity of the items do not fall within the context of
adjustment and only their weight needs to be taken into account.
Voluntary Adjustment: Voluntary adjustment is based on a mutual agreement of
the parties involved in the transaction. For instance Omar has to pay 10 dinars to
Zaid and Zaid has to give 40 kg of wheat to Omar. If both parties mutually agree
to cancel each other’s dues, then this will be a voluntary and legitimate
adjustment. Another example in this scenario is that Zaid sells 10 dirhams for 1
dinar to Omar. It is mandatory for both of them to produce the agreed amounts
on the spot.
On the contrary if Omar has produced his one dinar for Zaid but Zaid has yet to
produce his 10 dirhams for Omar, assuming that Omar owes 10 dirhams to Zaid
from a previous transaction, there are three ways of adjusting this payment:
1. Since Omar owed 10 dirhams to Zaid before Bay’Surf, therefore this
adjustment would be ethically correct. It cannot however be considered
technically correct since it means that the transaction will conclude
without Omar obtaining possession of the subject matter. This can be a
voluntary adjustment where it will depend upon the mutual agreement
of the parties, otherwise it will render the transaction null and void.
2. After Bay’Surf, Omar becomes liable to pay 10 dirhams to Zaid, say
because of usurpation. In this case an adjustment would be involuntary
and compulsory.
3. Omar becomes liable to pay 10 dirhams after Aqd-e-Surf or money
exchange contract due to some other contract. For instance Omar
purchases cloth for 10 dirhams from Zaid. Omar is now bound to pay 10
Omar => 1 Dinar
Zaid => 10 Dirhams
111
dirhams to Zaid due to the new sale contract. In this case involuntary
adjustment is not mandatory and adjustment can be made with the
mutual agreement of both parties. This is also confirmed from an
authentic tradition.
In the first and third scenario discussed above, adjustment will be voluntary while
in the second one it will be compulsory or involuntary.1
2ND CONDITION: SIMILARITY IN NATURE OF MONEY
The second condition implies in the context of Bay’Surf that the subject matter be
of the same nature and form. For instance, if dinars are being sold for dinars and
dirhams are being sold for dirhams, then any nature of excess or shortage is
prohibited and will be considered illegitimate. This includes the use of superior
or inferior types of coins. The subject matter could be in the form of utensils,
jewelry, bars or coins. The following Hadith, also quoted earlier, also confirms
and mentions all these types:
عواء ثغواء یذا ثیذ كبرا اخزهلذ ھز االفبف يضال ثضم:( انی ا هبل)انزھت ثبنزھت وانلنۃ ثبنلنۃ "
"ارا کب یذا ثیذ كجیؼوا کیق ؽئزى
“Sell gold for gold and silver for silver … in equal quantities and on the
spot. When the type is different (gold being exchanged for silver) than
sell as you please, however it is still mandatory to sell on the spot.”2
If the nature of the subject matter is different than similarity is not compulsory.
For instance if dirhams are being exchanged with dinars, then excess is allowed as
also confirmed by the quoted Hadith. This means that the trading parities can
mutually agree upon an acceptable exchange rate. However on the spot
possession is still compulsory. The following examples will help the clarify the
concept further:
1. 2 dirhams + 1 dinar for 1 dirham + 2 dinars: This transaction is
considered legitimate according to the majority of Hanafi scholars since
2 dirhams are being exchange for 2 dinars and 1 dinar is being
-------------------------------------(۶٢؍۴) وادلتہ االسالمی الفقہ, (۵۰؍۶) القدير فتح, (؍۶) الرائق البحر ---------------1 ، باب البيوع کتاب فی ابوداؤد ،۰ ،٧۶ حديث المساقاة کتاب فی ومسلم ،۰۴ ،۰ ،۰ باب البيوع کتاب فی البخاری رواہ ---------2
۴۴ ۔۴ باب البيوع کتاب فی الترمذی ،٧
112
exchanged for 1 dirham. Exchange of this nature is allowed because only
the form of the unit of exchange is different.
2. 11 dirhams for 1 dinar + 10 dirhams: This transaction is also considered
correct because 10 dirhams are equated with 10 dirhams and the
leftover dirham is exchanged for 1 dinar. The form is different here and
similarity is not required.
3. 10 dirhams for 9 dirhams + 1kg wheat or 10 dinars for 9 dinars + 1 kg
wheat: An exchange of this nature can result in three possibilities:
a) The price of 1 kg wheat could be equivalent to 1 dirham or 1 dinar in
which case there would be no objection in such a transaction.
b) The price of 1 kg wheat could be less than 1 dirham or dinar. In this
case, a transaction would be allowed but not preferred.
c) 1 kg wheat could be free of cost in which case an exchange would
be prohibited.
In the second case an excess quantity of gold or silver in exchange of 1 kg wheat
is justified since the form differs from gold or silver. However this exchange
would still be considered reprehensible because if it had been allowed then there
would have been a possibility that people would use it as an excuse to indulge in
Riba Al-Fadl or a door to Riba would open. When Imam Muhammad (RA) was
asked about this matter, , "How do you picture this situation in your mind?” ( کیق
(يضم انغجم۔۔۔۔) "He replied, "Just like a mountain (رغذ كی ههجک ؟1.
3RD OPTIONAL CONDITION (KHIYAR-E-SHART)
Before attempting to understand the implication of Khiyar in Bay’Surf, it is
necessary to understand the meaning of the term in general context. A easier
way to approach an understanding is to study the three sub types of the concept:
1. Khiyar-e-Shart
2. Khiyar-e-Roiyyat
3. Khiyar-e-Ae’b
In the literal sense, Khiyar is defined as follows:
---------------------------------------------------------------------------(٧تا۶٧؍۶) القدير فتح مع الھدايۃ -----------------1
113
ؽن انؼبهذ كی كغخ انؼوذ او اينبء نظہوس يغوؽ ؽشػی او"
-"ثوزنی ارلبم ػوذی
“Any trading party that has the right to cancel or initiate the contract,
either because a component of the deal is found to be noncompliant to
Shariah or due to some condition which has been accepted by the parties
at the time of the contract.” 1
KHIYAR-E-SHART
This refers to when Khiyar occurs due to the presence of a particular condition in
a contract. In the absence of this condition, Khiyar would also be absent. This is
defined as follows:
ا یؾزشه كی انؼوذ او ثؼذ انخیبس الؽذ انزؼبهذی او کهیھب"
"كی كغخ انؼوذ واينب ء
"At the time of contract or later, either or both the parties decide on a
condition which can cancel or initiate the contract.” 2
This means that either party is given a right to cancel the contract or continue
with it. According to agreed conditions, either party can use this right to
terminate the contract. For instance Omar tells Zaid that he would like to
purchase Zaid’s watch within three days. If he does not do so within three days,
then Zaid has the right to cancel the contract. It is imperative to define a time
period for Khiyar-e-Shart. According to Imam Muhammad (RA), this period is
three days while for some other scholars it is more than three days.3
KHIYAR-E-ROIYYAT (CONDITION OF VISUAL INSPECTION)
Khiyar-e-Roiyyat is the right of the buyers which is assumed after the visual
inspection of the subject matter. It is defined as:
۔"انؼی انزی ػوذ ػهیہ ونى یش ؽن یضجذ ثہ نهزهک انلغخ او االينبء ػذ سإیۃ يؾم"
"… the right of buyer to cancel or abide to the contract if he hasn't seen
the subject matter before the contract.”
----------(۴؍( )۴۵ دوم طبع ، مقہوی مطبعۃ ، الکويت ،( غدہ ابو الستار عبد الدکتور) غدہ ابو ، العقود فی واثرہ الخيار 1 --- 2 Ibid page 194/1 3 Ibid 103/1
114
This means that if a buyer purchases an item without visually inspecting it first,
such as a modern day online purchases, he has the right to cancel or abide with
the contract after he inspects the subject matter.
KHIYAR-E- AE’B (CONDITION OF DAMAGE OR DEFECT)
Khiyar-e-Ae’b is defined as follows:
۔" يبصجذ ثغجت وـ یخبنق يب انزضيہ انجبئغ ػشكب كی صيب مبہ"
"This condition is based on a violation of the guarantee of the seller i.e.
to provide defect free item within stipulated period of time."1
According to this definition, if the seller has promised to provide a defect free
item to the buyer and the item is found defective at the time of delivery within
the time agreed, then the buyer has the right to cancel the contract.2
In all these conditions there is an option of either cancelling or carrying out the
contract. It is now important to examine how these conditions would apply in
Bay’Surf. As discussed earlier, in Bay’Surf the subject matter must be exchanged
and taken into physical possession by the trading parties at the contract table.
Therefore the implication of Khiyar-e-Shart in Bay’Surf is out of context here due
to the condition of acquiring physical possession of the subject matter. For
instance Omar cannot tell Zaid that he will purchase dirham for dinars or dirhams
from him on the condition that for three days they will both have the right to
cancel or keep the contract intact.
Khiyar-e-Ae’b is however applicable in Bay’Surf. Once both parties acquire the
physical possession of the subject matter, the deal or contract is apparently
concluded. But at a later time if either of the parties discovers that the dirhams
or the dinars they have received during transactions are faulty, then Khiyar-e-
Ae’b will become applicable. Similarly Khiyar-e-Roiyyat becomes applicable in
Bay’Surf at soon as a utensil, bar or jewelry made of gold or silver is exchanged.3
Khiyar-e-Roiyyat will however not be effective when exchanging money for
money such as dirhams for dinars.
----------------------------------------------------------------------------------------------(؍) القدير فتح -------------------1 ------------------------------------------------------(۴٧؍( )۴٧؍۴) الخليل علی الحطاب عن واثرہ الخيار -----------------2 --------------------------------------------------------------------------------(۶۰؍۴) وادلتہ االسالمی الفقہ -------------------3
115
In short, it Khiyar-e-Shart is made part of the Surf contract then it will render it
null and void unless Khiyar-e-Shart is established and dissolved during the
proceeding of the contract and physical possession of the items is acquired by
both parties before they separate. The contract will most definitely be
considered invalid if the meeting among the parties is concluded with Khiyar-e-
Shart. This makes it inadequate for Bay’Surf. 1
4TH CONDITION: AJAL (DEFERRED PAYMENT)
This condition is also insignificant for Bay’Surf since its absence is required and its
presence in the contract will render it void. This is due to the requirement of the
confirmation of the physical possession of the subject matter by both parties
before the conclusion of the meeting. If Saman or unit of exchange is due at a
later time, then it means that that the condition of the physical possession has
been violated. For the same reason, the condition of Ajal is not applicable in
Bay’Surf. It needs to be noted here that Ajal is related to the selling of items of
ordinary nature such as furniture, wheat, cloth etc. at a later date. However in
Bay’Surf, the subject matter could also be the money or Saman itself and this is
not allowed for both parties to accept at a later time unless it has been mutually
agreed upon by the parties at the time of the formulation of the contract. But if
the condition related to deferred payment persists, then the Surf contract will be
rendered void and it would be wrong to apply the condition of deferred payment.
SOME IMPORTANT PRINCIPLES:
a) It is correct to estimate the value of those items without measuring or
weighing for which excess or increase is allowed. On the other hand, it is
imperative to weigh and measure with as much technical precision as
possible the items for which excess is not allowed. This principle is mutually
accepted in all four Schools of Thought. Therefore the sale of gold for gold,
silver for silver, or wheat for wheat with an increase in either side is
illegitimate. However the exchange of gold for silver, or wheat for barley
without exact measurement or estimation of value is permissible.
b) It is prohibited to sell gold for gold without precise measurement of value. If
measurements are made during the proceedings of the contract and the
value is found to be equivalent, then the contract will be ethically correct.
1 Ibid
116
But if this measuring or weighing is done after the meeting has concluded
and the quantities are found to be inequal, the contract will be considered
void.
c) A shirt for a trousers or a copper teapot for a brass utensil can be exchanged
without precise measurement only if the transaction is based on the quantity
and not the weight, length or volume of the items under exchange. This is
because quantity is not an Illah for Riba. But if the exchange is based on the
weight and volume of the subject matter, any excess will fall within the
prohibited boundary; weight or any other form of measurement is
considered the Illah of Riba and hence impermissible.
d) If an item made of impure silver or gold is exchanged with an item of metal,
then the ruling for this transaction will depend upon the level of the purity of
gold or silver. If the content of precious metals is dominant in the subject
matter, then the rules of exchange of gold and silver will be applied. This
would prohibit their exchange without precise measurement of weight. To
the contrary, if impure metal is dominant in the subject matter, then the
rules related to ordinary metal exchange would apply here. For instance if
item A made of gold with a dominant amount of copper is exchanged with
item B also made of copper then the exchange has to be based on the
precise measurement of the weight of both items and no increase will be
permissible. However if item A is exchanged with an item made with any
other metal besides copper, then an excess on either side will be permissible.
e) Silver plated swords are referred to as Saif-e-Mufaddad and gold plated
swords are called Saif-e-Mudahhab. When these swords or other items of
similar nature are being exchanged with gold or silver, then the following two
conditions will be permissible since an excess on either side in allowed in
both these cases:
i) The exchange of a gold plated sword with silver.
ii) The exchange of a silver plated sword with gold.
To the contrary if the situation is reversed where a gold plated sword is
being exchanged with a gold plated one, and a silver plated sword is
being exchanged with a silver plated one then this exchange would have
to comply with the following conditions.
117
i) This Bay’ or sale would be legitimate if the amount of gold or
silver used in the plating of the sword is less than the amount of
gold or silver in the dirham or dinar since the excess gold or
silver in the dirham or dinar will compensate for the cost of the
other accessories related to the sword such as its cover etc.
The scholars of the Hanafi school state, ‘If the subject matter is
an assembly of different items made of different materials,
some of which are similar to the material content of Saman
while other differ, then the Saman will be equated with the
items of similar material as the Saman and the Bay’ will be
correct in this case’. For instance, the silver plating of a sword is
equal to the content of silver found in 50 dirhams and this
sword is purchased with 100 dirhams. The buyer pays 50
dirhams to the seller as Bay’Surf for the silver plating on the
sword and promises to pay the remaining amount later. In the
transaction the buyer assumes the physical ownership of the
silver plated sword. This transaction would be legitimate
because the remaining 50 dirhams are in exchange for the
sword and its accessories. The deal would hence be viewed as
a simple sale with deferred payments which does not make it
obligatory for the buyer to assume spot possession.
ii) The transaction listed above would not be considered
legitimate if the buyer pays less than 50 dirhams since the silver
content of the dirhams would be less than the amount of silver
in the sword. This means that he still owes the owner an
additional amount for the excess silver. This means that the
seller would not be able to acquire complete possession in lieu
of the total silver plating on the sword, hence violating the
condition of spot possession. The sale of the sword is further
analyzed under the following scenarios:
i) If the sword gets damaged and the silver is separated
then the sale will be considered void even if the sale of
the sword is viewed independently.
ii) If the silver can easily be separated from the sword,
then the sale would be correct if the seller can
118
separate 10 gm of silver and sell the sword for say 40
dirhams.
f) Another critical issue here is that if the amount of gold or silver in Saman is
less than the gold or silver plating on the sword then the difference or excess
in this exchange will fall under Riba Al-Fadl and hence will not be permissible.
g) Consider an example of a set of ten utensils in which two are of gold and the
rest are of chinaware. The utensils of gold are equal in weight to 10 dinars
and the set as a whole has a price tag of 20 dinars. If the buyer pays 10
Dinars on the spot and takes possession of the entire set, then this Bay’ or
sale will be correct since the price of the gold utensils has been paid for in
full. This transaction is legitimate since it conforms to the first condition of
Bay’Surf which is to take physical possession right at the time and venue of
the transaction. However the buyer is still indebted to the seller for the
remaining 10 dinars. Since this would constitute a sale of ordinary type,
therefore spot possession would not be compulsory. This is correct as per
the scenario discussed in point (f) since the items made of gold can easily be
separated from the whole set.
h) If the buyer promises to pay the remaining amount at a later time, then this
would constitute Ajal or sale with deferred payment which though invalid for
Bay’Surf, would be valid for a sale of ordinary type.
i) If a piece of jewelry, such as a silver bracelet worth 100 dirhams is purchased
for 50 dirhams, the bracelet will remain in mutual and equal ownership of
both parties until the remaining amount is paid by the buyer.1
SOME IMPORTANT ISSUES IN EXCHANGE OF GOLD, SILVER AND
JEWELRY
The following issues necessitate discussion at this point since they are closely
associated with Bay’Surf:
Case No. 1: If gold is exchanged for gold or silver for silver, then the quantity
should be the same on both sides. It is also necessary for both parties to take
possession on the spot. If silver is exchanged for gold or vice versa, then a
------------(۶۵۶؍۴( وادلتہ االسالمی الفقہ (۴؍۶) الرائق البحر مع کنزالدقائق ،( ۶۵؍۶) القدير فتح مع الھدايۃ -----------------1
119
difference in amount will be allowed but both parties still need to take possession
on the spot.
انزھت ثبنزھت يضالثضال وانلنۃ ثبنلنۃ يضالثضم ، وانزشثبنزشيضالثضم وانجش ثبنجشيضالثضم ، وانهؼ "
ثبنهؼ يضالثضم ، وانؾؼیشثبنؾؼیشيضالثضم ك صاد اواصداد كوذ اسثی ، ثیؼوا انزھت ثبنلنۃ کیق ؽئزى یذا
" ثیذ، انؾذیش
“Gold for gold, silver for silver, wheat for wheat, barley for barley, date
for date, salt for salt, must be equal on both sides and hand to hand.
Whoever pays more or demands more (on either side) indulges in Riba,
however gold can be exchanged for more silver, similarly dates can be
exchanged for more barley at a mutually agreed ratio, but the exchange
must be on the spot.”1
Case No. 2: When gold is exchanged for gold or silver for silver, then the purity of
material content must be similar on both sides. The sale of pure silver or gold
with notably impure silver or gold is prohibited.
ب وهغیبب دساہى دو وصھب كہب ػش ػ رنک ػ انؾؼجی ا ػجذللا ث يغؼود ثبگ لبیۃ ثیذ انبل صیوك"
۔"اوهذ ػهیھب ؽزی یزہت يبكیھب ي ؽذیذ او ؾبط ورخهـ صى ثغ انلنۃ ثوصھب: وهبل
“Sheabi states that once Hazrat Abdullah Bin Masood (RAA) sold dirham
and dinars which were impure to some extent with lesser quantity of
pure dirham and dinar.When Hazrat Omar (RAA) found out he told him
not to do so again. He suggested to heat it to an extent that the
contamination of iron and copper is melted away and pure silver is
obtained and after extraction of pure silver to sell it with silver of equal
weight.”2
االا انذسھى ثبنذسھى وانذیبس ثبنذیبػیب ثؼی عواء :خطت ػشث انخطبة كوبل: يؾذ ث عیشی هبل"
: رضیق ػهیب اوساهب كؼطی انخجیش وبخز انطیت كوبل ػش: ثغواء يضال ثضم كوبل نہ ػجذانشؽ ث ػوف
۔" وذ ؽئذال، ونک اثزغ ثھب ػشمب كبرا هجنزہ وکب نک كجؼہ واھنى يبؽئذ وخز ای
“Muhammad Ibn-e-Sereen (RA) narrated that once in a sermon Hazrat
Omar Bin Khattab (RAA) warned that in sale of dirham for dirham and
sale of dinar for dinar, the amount (weight) on both sides must be equal.
-------------------------------------------۔۴۶۶٢الحديث عدد( الھندی تقیالم علی الدين عالء) ،المتقی کنزالعمال --------------1 ---------------(٢۰؍۴) االسالميۃ والعلوم ادارةالقرآن کراتشی،(العثمانی احمد ظفر عالمہ)العثمانی، السنن، اعالء ------------2
120
Abd-ur-Rehman Bin Aouf (RAA) inquired about sale of impure silver with
pure silver from Hazrat Omar (RAA). He said that it is not legitimate,
however first it should rather be exchanged with other items and after
acquiring their ownership they can be sold again (for pure silver).”1
Case No. 3: One rupee coins are commonly made with metal nowadays and are
similar to ½ rupee or ¾ rupee coins which were used earlier. Today a ten rupee
paper note can be exchanged with these coins. Before the creation of Pakistan,
one rupee coins were made of silver but this is no longer the case. When silver
coins were in popular use, these rules were applied accordingly. Since silver coins
are no longer the norm, the rules of Fuloos of copper are applied on these notes
and coins at present time.
Case No. 4: Credit sale is allowed with coins of gold and silver. However it is
necessary for the buyer to attain possession of the purchased item, commodity or
Fuloos.
انجیغ الھب اكزشهب نواؽزشی يبءح كهظ ثذسھى وهجل انلهوط او انذساہى صى اكزشهب عبص : وكی ؽشػ انطؾبوی "
۔" ػ ػی ثذی
“It is stated is Shrah Tahavee that if a person purchases 100 Fuloos for 1
dirham and if either buyer or seller acquire possession of Fuloos or
dirham respectively and defer the possession of the other item to a later
time, then this sale is legitimate. This is so because the both parties have
mutually agreed on the exchange of subject matter with the other.”2
:"هجل اؽذ انجذنی نب كی انجضاصیۃ عئم انؾبوری ػ ثیغ انزہت ثبنلهوط غئیۃ كبعبة ثبہ یغوص ارا"
“Allama Hanuti (RA) was asked about the credit sale of Fuloos against
gold and he said that it is legitimate only if any of the two parties acquire
possession of the subject matter. As stated in Bazaria, if a person
purchases 100 Fuloos for 1 dirham (or vice versa) then possession by any
of the two parties is sufficient to render the contract legitimate.”
--------------(٢۰؍۴) االسالميۃ والعلوم ادارةالقرآن کراتشی،(یالعثمان احمد ظفر عالمہ)العثمانی، السنن، اعالء -------------1 ----------------------------------------------------------------------------------------- (٧۰؍۶) القدير فتح -------------------2
121
Allama Sarkhasi (RA) concurs with this opinion:
وارا اؽزشی انشعم كهوعب ثذساہى ووذ انض ونى رک انلهوط ػذ انجبئغ كبنجیغ عبئض ، ال انلهوط انشائغۃ "
ص کب نوود ، وهذ ثیب ا ؽکى انؼوذ كی انض وعوثھبووعودھب يؼب والیؾزشه هیبيھب كی يهک ثبئؼھب نقؾۃ
۔" انؼوذ کب الیؾزشه رنک كی انذساھى وانذبیش
“When a person purchases Fuloos for dirham and makes his payment but
the seller does not have Fuloos in his possession at the time of exchange
(he promises to deliver later instead), then this would be legitimate
because Fuloos, if commonly used in society, are also an accepted form
of cash. We have already stated that the rules of contract of Saman are
based on its obligation and existence and it is not necessary for the
health of the contract that Saman be in the possession of the purchaser
at the time of transaction. However this is not true in case of dirhams
and dinars.”1
Since the rules of Fuloos are also applicable on rupees, therefore in the light of
the above statement, the sale or purchase of gold or silver against rupees is also
legitimate. In this case it would be allowed for one party to deliver on the spot
and other to defer payment to a later time. It would however be illegitimate for
both parties to delay the possession irrespective of the duration of delay. This is
because in this case it would be regarded as sale of debt for debt which is
prohibited as per the following Hadith:
"ہی ػ ثیغ انکبنی ثبنکبنی ملسو هيلع هللا ىلص ا انجی:ػ اث ػش سمی للا رؼبنی ػہ"
“Hazrat Abdullah Bin Omar (RAA) in a tradition states that Hazrat
Muhammad (SAW) has prohibited sale of debt for debt.” 2
-----------------(۴؍۴) ھج۴۴ طبع ، دارالمعرفۃ ، انلبن ، بيروت( السرخسی الدين شمس)للسرخسی المبسوط -------------1
المتوفی العسقالنی حجر بن محمد بن علی بن احمد الدين شھاب)الھدايۃللعسقالنی احاديث تخريج فی الدرايۃ ----------------------2
(۵٧؍) پنجاب شيخوپورہ االثريۃ المکتبۃ(ھ۰۵
122
BARTER OF GOLD AND SILVER JEWELRY WITH RAW GOLD AND
SILVER
Sale or purchase of gold jewelry for gold, and silver jewelry for silver is prohibited
if there is excess on either side of the exchange. Making charges and
compensation for wastage must not be in the form of gold but need to be in the
form of cash or Fuloos.
یب ايیش : افغ نیب اومبؽب نقجی نب، ههذ: ػ اثی ساكغ هبنى يشثی ػش ث انخطبة ويؼہ وسم كوبل "
ؼى : انئيی ػذی اومبػ يؼونۃ كب ؽئذ اخزد انوسم واخزد االومبػ كوبل ػش يضالثضم ، كوهذ
ثبؽذی یذیہ واػطی كومغ انوسم كی کلۃ انیضا واالمبػ كی انکلۃ االخشی كهب اعزوی انیضا اخز
۔"ثبالخشی
“Abu Rafa states that Hazrat Omar Bin Khattab (RAA) once visited me.
He brought silver with him and said that please make Pazaib (a chain
worn around feet. I replied that I already have some readymade ones
and if you wish I can exchange them with your silver. Hazrat Omar (RAA)
asked that if I had jewelry of weight equal to the weight of silver he
brought? I replied in affirmation. Hazrat Omar (RAA) then placed his
silver on one side of weighing scale and Pazaib on the other. When the
weighing scale was balanced, he took the Pazaib and handed over the
silver to me.”
ػ اثی ساكغ اہ هبل نؼش ای افوؽ انزھت كبثیؼہ ثوصہ واخز ػبنۃ یذی اعشا هبل الرجغ انزہت ثبنزہت "
۔"اال وصب ثوص وانلنۃ ثبنلنۃ االوصب ثوص والربخز كنال
“Abu Rafa, as per a tradition, told Hazrat Omar (RAA) that I will mold
gold into jewelry and sell it with silver of equal weight, and over it I will
also charge my labor. Hazrat Omar (RAA) replied, ‘Do not sell gold for
gold and silver for silver until and unless quantities (weights) are equal
on both sides, and don’t demand any excess’.”
اؽزغبكبخزد خهخبل ايشأری كی انغۃ انزی اعزخهق كیھب اثوثکش : هبل ملسو هيلع هللا ىلصػ اثی ساكغ يونی سعول للا "
اؽزبط انؾی انی لوۃ كوبل ا يؼی وسهب اسیذ ثھب كنۃ كذػب ثبنیضا : كهویی اثوثکش كوبل يب ھزا كوهذ
یب خهیلۃ : كوشمہ ، كوهذ نكومغ انخهخبنی كی کلۃ وومغ انوسم كی کلۃ كؾق انخهخبنی ؾو اي دا
ملسو هيلع هللا ىلصیباثبساكغ اک ا اؽههزہ كب للا ال یؾهہ عؼذ سعول للا : ھو نک ؽالل ، كوبل ملسو هيلع هللا ىلصسعول للا
۔"انزہت ثبنزہت وصب ثوص وانلنۃ ثبنلنۃ وصب ثوص انضائذ وانغزضیذ كی انبس: یوول
123
“Abu Rafa, who was a free slave of Hazrat Muhammad (SAW), stated
that in the year when Hazrat Abu Bakr (RAA) was appointed as Khalifa, I
was in need of some financial assistance so I decided to sell my wife’s
Pazaib. On my way to the market I encountered Hazrat Abu Bakr (RAA).
On his enquiry I stated my needs. He expressed his wish to exchange the
Pazaib with the silver coins he had. He then brought a weighing scale and
placed the set of pazaib on one side and coins on the other. The weight of
the Pazaib was found to be slightly greater than the silver coins. Hazrat
Abu Bakr (RAA) ripped a piece from pazaib equivalent to the weight
difference and returned it to me. I said that this should be legitimate for
you. He replied ‘You declare this legitimate but Allah doesn’t, I have
heard Rasool Allah (SAW) ordering to sell gold for gold and silver for
silver in equal weights, anyone who gives or takes any excess will taste
hellfire’.”
کذ يغ ػجذللا ث ػش كغبء فبئؾ كوبل یب اثبػجذانشؽ ای افوؽ انزہت صى اثیغ : ػ يغبہذ اہ هبل "
انؾئی ي رنک ثبکضش ي وصہ كبعزلنم ي رنک هذس ػم یذی كھب ػجذللا ث ػش كغؼم انقبئؾ یشدد
انذیبس : یشیذ ا یشکجھب صى هبل ػجذللا ػهیہ انغئهۃ وػجذللا یہب ؽزی ازہی انی ثبة انغغذ او انی داثزہ
"انیکى انیبوػھذبثبنذیبس وانذسھى ثبنذسھى الكنم ثیھب ھزا ػہذ جیب
“Hazrat Mujahid (RAA) states that once when I was in the company of
Hazrat Omar bin Abdullah Bin Omar (RAA), a gold jeweler arrived and
asked ‘Abd-ur-Rehman, I make jewelry and sell it for excess gold and
charge this excess in lieu of my labor’. Hazrat Abdullah Bin Omar (RAA)
told him not to do so. However the jeweler kept on asking, but received
the same reply until Hazrat Abdullah came to the door of the masjid or
near his transport and asked him to sell dirham for dirham and dinar for
dinar such that there was no excess on any side, and said ‘This is what
has been taught to us by Rasool Allah (SAW) and I will also teach you the
same’.”
ػ ػطب ث یغبس ا يؼبویۃ ث اثی علیب ثبع عوبیۃ ي رہت او وسم ثبکضش ي وصھب كوبل نہ اثو انذسداء "
يباسی ثضم ثزا ثبعب كوبل : ػ يضم ھزا االيضال ثضم كوبل نہ يؼبویۃ یھی ملسو هيلع هللا ىلصعؼذ سعول للا
ویخجشی ػ سایہ الاعبکک ثبسك ملسو هيلع هللا ىلصي یؼزسی ي يؼبویۃ اب اخجش ي سعول للا : اثوانذسداء
نہ رنک كکزت ػش انی يؼبویۃ اال یجیغ يضم رنک اذ ثھب صى هذو اثوانذسداء ػهی ػش ث انخطبة كزکش
"ثضم وصب ثوصااليضال
124
“Atta Bin Yasas (RAA) states that Hazrat Maviya Bin Abi Sufiyan (RAA)
once sold a cup of gold or silver for gold or silver coins exceeding the
weight of the cup. Hazrat Abu Darda (RAA) said to him ‘I have heard
Rasool Allah (SAW) prohibiting from such a transaction, and allowing it
only if the weight on both side is equal’. Hazrat Maviya argued and said
that he sees no issue in such a transaction. Hazrat Abu Darda got
infuriated on his reply and said ‘I quote Hazrat Muhammad (SAW) and
you prefer your own opinion … I will not live with you anymore’. Hazrat
Abu Darda (RAA) then moved to Madinah, where he met Hazrat Omar
Farooq (RAA) and explained the situation to him. Hazrat Omar (RAA)
seconded his opinion and wrote a letter to Hazrat Maviya telling him not
to do so unless the weight is equal on both sides.” 1
All these references and traditions clearly specify Shariah’s prohibition on the
exchange of gold or silver jewelry with gold or silver in excess weight even if this
excess is in lieu of the additional labor incurred in the making of the jewelry.
Such an exchange is prohibited even today. In lieu of making charges for labor in
gold or silver, craftsman can accept cash in the form of paper notes
PRACTICAL IMPLICATIONS: The above mentioned restrictions are likely to create certain implications or
cause hindrances in some capacity in modern day transactions. Some of these
with alternate resolutions are discussed below.
1st
Scenario: A craftsman prepares a piece of jewelry with 22 carat gold or an
item with gold as the dominant material and some gems. He finds a buyer who is
willing to purchase the item and pays the making charges on the spot or after a
week. He also agrees to pay the equivalent of gold used in the making in the item
with raw gold. This he proposes to do in a single or multiple installments starting
at a later date.
This sale would be prohibited or illegitimate under the reasons indicated above in
Case No. 2 since the same rule would apply on any items made of materials with
a dominant gold content. Because gold is on both sides of the transaction here
and credit sale of gold for gold is prohibited as discussed in Case No. 1 hence this
-------------------------------------------------------------------(۰۰،۰٢؍۴) السنن اعالء ماخوذمن الکل -----------------1
125
transaction would be illegitimate. The alternate solution here would be for the
trader or buyer to purchase the jewelry against cash or paper notes and make
the payment in single or multiple installments. A credit sale would be allowed in
such a case because there is Saman-e-Khilqi on one side of the transaction and
Saman Urfi or paper currency on the other. Such a transaction is not
characterized as Bay’Surf therefore the credit on one side is legitimate. But it
would still be incumbent upon the buyer to acquire immediate possession of the
jewelry as failure to do so will qualify as sale of debt for debt which is prohibited.
2nd
Scenario: A craftsman prepares a piece of jewelry on order. The buyer placing
the order pays the making charges along with equivalent amount of gold used in
the making immediately upon receiving the jewelry or at a later mutually agreed
time in single or multiple installments. This transaction would also be prohibited
since the gold here is being exchanged for gold and this falls under the category
of Bay’Surf. Since credit is being created here therefore the alternate solution
presented for the scenario above would also be applicable here.
3rd
Scenario: A group of craftsmen invest their money in making jewelry some of
which is of solid gold or silver while some contains real or artificial gems. This
jewelry is then sold to traders and their value is assessed on account of their total
weight. The craftsmen generally exchange their jewelry with pure 24 carat gold
equal to the weight of the jewelry. This weight is inclusive of the weight of the
gems and material wasted during the making process. The making charges, also
determined by total weight, are in the form of cash which the craftsmen get
along with the pure gold. In assessing the making charges, the quality of the
gems used if any, the quality of workmanship, and the overall aesthetic appeal of
the piece of jewelry are all taken into account. The question here is whether or
not it is legitimate to exchange impure gold and gems used in the jewelry with
pure gold.
In attempting to answer this question, it first needs to be determined with surety
that the craftsman preparing the certain piece of jewelry had not taken an order
for this from any trader or buyer but had done so at his own will. In this case the
making charges will be part of the price tag. For instance if the craftsman
demands 50 g of pure gold along with Rs. 2,000 as the making charges, these
charges will not be considered separately but will be viewed as part of the price
tag. If the jewelry with a total weight of 50 g contains 30 g of 22 carat gold and
126
20 g of gems, and the transaction is Naqd-o-Naqd or cost to cost, or the seller
acquires on the spot the pure gold equivalenet to the weight of the impure gold
used in the making of the jewelry, then this transaction would be legitimate. This
is because the 30 g out of the 22 carat gold will be exchanged for 30 g of pure
gold while the remaining 20 g of pure gold, which can also be paid at a later time,
will be in lieu of the gems used in the jewelry and Rs. 2,000 will be the making
charges. In case the piece of jewelry in question is simply gold without gems,
then this transaction would be deemed usurious because 50 g of impure gold in
the jewelry will be exchanged for 50 g of pure gold and the remaining amount of
Rs. 2,000 will constitute Riba as it will not be in lieu of anything. Here the
alternate solution suggested in the first scenario should be applied in order to
avoid complication.
TRADING JEWELRY WITH CRYSTALS WITH GOLD OR SILVER
There is a certain type of jewelry in which crushed pieces of glass are used to
create different designs on the jewelry. This can also be exchanged with pure
gold against the total weight of the jewelry inclusive of the weight of the crushed
glass. This trade would be legitimate only if the items are exchanged on the spot
and there is no credit among the trading parties. The buyer must give gold in an
amount equal to the amount of gold in the jewelry, which could be impure such
as 22 carat.
SOME CRITICAL ISSUES
1. It is permissible to exchange jewelry made with 20 g of gold and a utensil
made with 10 g of silver with a bar of 10 g of gold and a utensil of 50 g of
silver only if the 20 g of gold is put against 50 of g silver and 10 g of silver is
put against 10 g of gold. It is assumed here that the utensils are exchanged
for bars or jewelry. However if it is specifically declared that jewelry of 20 g
of gold is being put against a bar of 10 g of gold and a bar of 10 g of silver is
put against a utensil of 50 g of of silver, then this would constitute a clear
case of Riba.1
الہور،----- ، پارک کريم ، مدنيہ جامعہ داراالفتاء ، عبدالواحد مفتی احکام، اسالمی کے زيورات کے ان اور چاندی سونا، ------1
ء٢٢٧ اشاعت تاريخ
127
2. The following conditions must be kept in mind if for instance a gold ring is
being exchanged with another gold ring:
a) The sale is legitimate if both rings contain diamonds or any other gems
even if their weights differ. However both parties need to acquire
possession on the spot.
b) If both rings are plain and without any gems, then their weight has to be
identical. Any difference in weight will fall within the boundaries of Riba.
c) If one ring has a gem and the other does not, then the weight of the
plain ring has to be greater otherwise the transaction will be usurious
and illegitimate. Both parties also have to acquire possession on the
spot. It is not permissible to promise to deliver or take possession of
items at a later time.
3. If a shirt or shawl with silver embroidery is exchanged with 20 g of silver and
if the silver wire used in the embroidery on the shawl is 10 g in weight, then
the buyer has to pay 10 g of silver on the spot. The remaining 10 g may be
paid at a later time if both parties mutually consent to do so.1
SOME ALTERNATES OF OBJECTIONABLE TRANSACTIONS
1. For exchanging impure or contaminated silver with pure silver, it is
recommended that the impure silver be first sold against cash, which in
turn should be used to purchase pure silver. Here it is important to take
the cash in possession before it is used to purchase the pure silver. 2
2. If gems or decorative glass are embedded in the jewelry, or a utensil
made of another metal is plated with silver, or when silver, gems or glass
are bonded in such a way that they cannot be separated without
damaging the assembly of the item, then the buyer has to present silver
in an amount greater than is used in the item being purchased. If this
amount is less, then the difference would be considered Riba. If the
amount is equal then it means that the buyer is getting gems or glass
without any payment and this would constitute as Riba as well. In order
to avoid Riba, the buyer can offer the remaining amount in cash. For
------------------------------(٢۵ص) باغ، آرام داراالشاعت ، کراچی( علی اشرف موالنا)انویالتھ زيور بہشتی --------------1 2 Ibid
128
instance if the silver in the subject matter is 50 g and the buyer has 45 g
then the difference in cash can be paid to the seller. 1
3. For someone who wants to purchase a gold utensil on credit it is
recommended that the buyer first take a loan in the form of gold coins
or bars equal to the amount used in the making of the utensil and later
return the gold to the lender. The seller can also play the role of the
lender. However the loan contract should be separate and independent
from the sale contract. 2
SALE AND PURCHASE OF GOLD MIXED SAND Gold and silver mixed sand is often purchased to extract the gold and silver from
it. There are certain important issues related to this trade.
1. This sand can be traded against cash.
2. The sale of silver mixed sand with gold or gold mixed sand with silver is
legitimate if both parties take possession on the spot.
3. Sale of silver mixed sand with silver or gold mixed sand with gold is allowed
only if the amount of silver in the sand is equal to the amount of pure silver
used for payment. Same is the case with gold mixed sand. Any difference
here will constitute Riba. The sand here will is considered valueless and the
gold will be traded against gold and the silver will be traded against silver.
EXCHANGE OF OLD JEWELRY WITH NEW When trading old jewelry for new, it is customary to determine the value of the
old jewelry separately and then pay the difference in the value of the old and new
jewelry with cash. If the jewelry in hand is 60 g and was purchased for Rs. 15,000
and the new jewelry of 40 g is estimated to be the same price, then it is often
considered appropriate to barter the old jewelry with the new. This form of
exchange is totally prohibited. The correct manner for such an exchange is to sell
the old jewelry to the trader and then use that cash to purchase the new jewelry.
The exchange of jewelry for jewelry must abide by the following rules:
1. If the jewelry in hand contains only gold which is of lesser weight than the
weight of the new jewelry, then the shopkeeper has the right to ask for
1 Ibid 2 Ibid
129
another piece of jewelry, such as a pair of gold earrings, to cover the
difference in price at the time of the exchange. The buyer can also pay cash
equal to cover this difference in weight.
2. If the jewelry on both sides of the exchange has gems or pearls, then any
difference in the weight of gold on either side will be allowed as this
additional weight will be adjusted against the cost of gems on the other side.
3. If plain jewelry is being exchanged for jewelry with gems, the shopkeeper has
the right to demand additional payments under either of the following
conditions:
a) If the customer wishes to exchange his plain jewelry with one with gems,
the shopkeeper can ask for additional payment if the weight of the new
jewelry is greater than the one in hand.
b) If the jewelry in hand contains gems and the new jewelry is plain then
the shopkeeper can ask for additional payment only if new jewelry is
greater in weight. If the value of the pieces is equal or more, then the
shopkeeper cannot charge anything extra.
ADVANCE CONTRACT WITH SPOT PAYMENT
Trading parties often bind themselves in a legal sale contract stating that they will
exchange gold with cash at a later time at the current market rate of gold valid at
the time of exchange. This contract will be prohibited under the laws of Shariah
as this constitutes sale of debt for debt whereby both parties have declared
themselves liable to pay a certain amount of cash or gold at a future date. The
transaction will only be permissible if both parties do not bind themselves by
contract but promise to make this exchange at a future date. In this case the
rate of exchange can be mutually agreed upon by the parties earlier or at the
time of exchange.
There is another slightly different form of sale transaction commonly carried out
nowadays in which the shopkeeper demands an additional amount or gives a
discount to the seller for buying gold at a later time with the payment due on
delivery. If the buyer terminates the contract before culmination, he is required
to pay the damages or cancellation charges to the seller. Such contracts are
invalid as per Shariah since they are verbal and are usually done in the absence of
witnesses. Furthermore any amount demanded as contract cancellation charges
qualify as Riba.
130
THE ISSUES OF MATERIAL USED IN WELDING
In the craft of jewelry making a metal with a melting point less than that of gold
or silver is used to weld together different pieces of jewelry. For instance,
cadmium is a metal mixed with gold for welding purposes. This further increases
the level of impurity in the gold which cannot be separated by ordinary means.
When such jewelry is exchanged with pure gold equivalent to its weight, it is
sometimes assumed that the pure gold will compensate for the wastage caused
in the making and welding process. Often at the time of exchange the craftsman
also charges additional gold along with the pure gold to compensate for the
wastage occurred in the jewelry making. During such exchanges the making
charges are also charged by the maker in addition to the pure gold taken by him.
These making charges should be in the form of cash. If they are taken as gold,
then this will qualify as Riba, as this would be in addition to the pure gold he has
already charged for the wastage. Furthermore any welding on the jewelry needs
to be done only where necessary lest it increases the impurity of the jewelry. Any
intentionally and unnecessarily welding is prohibited and illegitimate in the light
of Shariah.
WASTAGE It is inadvertent to lose some quantity of gold during the process of jewelry
making. This wastage is in the form of very small particles most of which are
impossible to collect. Gold markets have fixed standards to compensate for these
losses. For instance craftsmen using 10 gms of gold in jewelry making will receive
0.5 g on top of the cost. Similarly on 20 g of gold, the fixed compensation is an
additional 1 g on top of the cost. It is of course not necessary that the actual
wastage is exactly equal to the established norm; it could be more or less than
the standard rate of compensation. Though the near impossiblily of keeping track
of the exact amount of wastage makes the jewelry maker susceptible to loss or
profit, the standard rate of wastage compensation remains fixed. The Shariah
rulings for this compensation are analyzed below:
Case No. 1: A craftsman who makes jewelry with his own gold can exchange it
with either cash or gold. If he is exchanging with cash, he needs to get a lump
sum from the buyer which includes compensation and making charges as well.
For instance both the buyer and seller may mutually agree that the price of a
bracelet of 30 g and 22 carat is Rs. 87,000 (22 carat, 10 g gold being worth Rs.
131
24,000 at the time of this book translation). This price includes the making
charges of Rs. 2,000 per 10 g and wastage compensation of Rs. 1,000 per 10 g as
per market standard.
Case No. 2: If the craftsman wishes to exchange this piece of jewelry with pure
gold, then the weight has to be the same on both sides and the items have to be
exchanged on the spot. The maker cannot demand any excess gold as making
charges or as wastage compensation.
Case No. 3: If the piece of jewelry contains gems, then the craftsman can
exchange it with gold in excess of the amount used in the making of the jewelry.
However both parties need to exchange the items on the spot.
Cast No. 4: If the craftsman has crafted the jewelry with gold provided to him by
the buyer, then the wastage will not be deducted from the making charges. This
is because wastage tends to vary and is hard to measure precisely. Therefore it is
recommended that the buyer forego the amount of gold assumed to be wasted
during the process of jewelry making. This is also to eliminate any possibility of
deducting more wastage than actually occurred.
Case No. 5: Often craftsmen do not use the gold provided by the buyer but use
their own gold equivalent to the amount provided by the buyer. The norm is to
assume that the buyer has loaned the craftsman a certain amount of gold and
which he returns in the form of jewelry. In this case as well the buyer has to
forego the wastage possibly caused in the making process for reasons listed in the
previous case.
Case No. 6: The buyer is the shopkeeper himself who sells this jewelry in the
market. At the time of sale, he gives receipts to his customers detailing the
making charges and compensation of wastage. These amounts are often
deliberately exaggerated to augment profits. This is prohibited under the rulings
of Shariah. The legitimate way of making the same amount of profit is to declare
the compensation of wastage correctly and increase the making charges. This
manner of making a profit is deemed permissible while the former method is
prohibited.
132
SOME CONTEMPORARY MODES OF TRADING GOLD AND SILVER
There are a number of firms operating in the market today which are
characterized as ‘Forex’ or ‘Comex’ trading companies. An analysis of their
method of business reveals that they are illegitimate. For instance any individual
can become a member of these companies for say $10,000. These members are
then guided by the company on how and when to engage in the trading of foreign
currencies and commodities in a manner which ensures profitability on a
continuous basis. Each currency or commodity being traded has a minimum limit
of purchase termed as ‘lot’ which could be worth £62,500 or DM 125,000. These
commodities could be gold, silver, wheat, sugar, cotton or rice. A lot of gold
consists of 100 oz while a silver lot is usually 5,000 oz. When a member shows
inclination to purchase a lot, a company agent books his order in lieu of token
money or a security deposit such as $2,000 which is taken from his membership
fee. The order is then sent to the company head office and the member is
provided a confirmation by the respective agent. This trading is of two types:
1. Cash Trading or Spot Trading: In this type of trading, the ownership of the lot
is immediately transferred to the member.
2. Future Trading: In case of future trading, the company promises to deliver
the lot on a future date at a price fixed at the time of contract.
THE ROLE OF THE COMPANY IN THIS TRADING:
This role has been defined by the company Empire Resources:
“The objectives for which the company is established are as follows: To
install equipment, operate and provide facilities of communication
through monitors and apparatuses link up to as a commission house
between the clients and brokerage house in various finance trading
centers of the world.”
As per this definition, the company acts as a commission agent between its
clients and the various brokerage houses around the world. The company
charges about $50 on every contract which is irrespective of the profit or loss
incurred to the client. The company charges its commission only if the lot is sold
on the day of its purchase. In case of a delay, an amount of $5 is charged per day
133
in addition to the commission. Often the client also gets this interest. According
to Empire Resources:
‘Interest/premium are paid off, charge based on the number of days for a
position trade.’
SPOT TRADING The company facilitates contracts between clients and brokerage houses and
charges commission on each contract. The client is not required to make full
payment in such a contract. Such contracts for gold and silver are deemed
illegitimate for the following reasons:
1. This becomes a sale of debt for debt as the seller and buyer both become
indebted to each other unless either full payment is made or the ownership
of the commodity being traded is acquired. As stated in Addr Al-Mukhtar:
نى ثبع كهوعب ثضهھباوثذساہى او ثذبیش كب وذ اؽذھب عبص وا رلشهب ثالهجل اؽذھب: كی انذسانخزبس"
"یغض
“In a sale of Fuloos for Fuloos or Fuloos for Dirham or Dinar, if either
party makes the payment then the contract is legitimate. However it
would be illegitimate if both parties leave the scene without paying
anything to each other.” 1
According to Allama Shami (RA),
"الہ یکو اكزشاهب ػ دی ثذی وھو ؿیش فؾیؼ"
“This is sale of debt for debt, therefore it is erroneous.”2
2. The client has to pay interest for each day that the payment is deferred,
which is illegitimate. Contrary to this, if the company itself purchases the lot,
then the following possibilities could arise:
a) If a company makes the purchase on its own and then sells it to a client,
it would still cause the above listed problems. Furthermore this
-----------------------------------------------------------------------------------------(٧٢؍۵)الدرالمختار -------------------1 ------------------------------------------------------------------------------------------(٧٢؍۵)ردالمحتار -------------------2
134
situation would void justifications for any commission charged by the
company.
b) If the company makes a purchase on behalf of the client and acquires
the ownership of the lot by paying in full, then this would be sale of debt
for debt and hence prohibited. The company would also still charge
interest from the client on any deferred payments.
FUTURE TRADING
Though future trading may seem like Bay’Salam, in reality it is not because certain
prerequisites necessary for Bay’Salam are absent here such as the fact that a
client can make a deal without making full payment. For Bay’Salam it is also
necessary that the purchased commodity not be sold unless its ownership or at
least the constructive ownership, is acquired. But in the nature of business under
discussion, the subject matter is sold to the other party before the acquisition of
ownership. It is stated in Addr Al-Mukhtar:
"والیغوص انزقشف نهغهى انیہ كی ساط انبل والنشة انغهى كی انغهى كیہ هجم هجنہ ثؾو ثیغ انخ"
“In sale transactions (credit sale or future sale) is it not allowed for the
buyer or seller to further sale or purchase the commodity or money the
ownership of which is yet to be acquired.”1
In context, it needs to be mentioned here that Bay’Salam is prohibited in cases of
gold and silver since it cannot be done with Saman-e-Khilqi. It is however allowed
for other commodities or currencies as confirmed by the following statement
found in Bada’:
وايب انغهى كی انلهوط ػذدا كغبئض ػذاثی ؽیلۃ واثی یوعق وػذ يؾذ الیغوص ثبء ػهی ا انلهوط اصب "
۔"ػذ كالیغوص انغهى كیھب کب الیغوص انغهى كی انذساہى وانذبیش
“As far as the matter of Bay’ Salam of Fuloos is concerned, it is allowed when
traded quantitatively as per Hazrat Imam Abu Hanifa and Abu Yousuf (RA)
but not allowed as per Imam Muhammad (RA).This is so because Fuloos are
------------------------------------------------------------------------------------------(۰؍۵)الدرالمختار -------------------1
135
Asman, therefore Bay’ Salam will not be allowed with them. Similarly Bay’
Salam is also not allowed with dirhams and dinars.”1
“Future contracts are a firm’s commitment to make or accept delivery of a
specified quantity and quality of a commodity at a specific date in future at a
price decided at the time when the commitments were made. The unique
attraction of future contracts is that they offer an efficient and affordable
way of participating in the commodity markets without all the complications
associated with acquiring ownership of physical material, such as
transportation, storage and insurance.
Less than three percent of all future contracts traded each year result in the
delivery of the underlying commodity. Instead, traders generally offset their
future positions before their contract mature realizing the profit or loss which
is the difference between the initial purchase or sale price and the price of the
offsetting transaction.”
ANOTHER MANNER OF COMMODITY EXCHANGE Another modern day common method of gold trading is where the buyer purchases a certain amount of gold without taking physical possession of it. After a few days or weeks when there is a change in the price of gold, the buyer sells this gold back to the trader and receives the difference of value.
For instance Omar purchases 10 g of gold from Zaid on credit and now owes Zaid Rs. 26,000. Both parties also mutually agree that Zaid will retain possession of the gold since payment has not yet been made. After a week Omar asks Zaid to purchase back the gold whose value has now appreciated by Rs.100 per g. If Zaid agrees, he will have to pay Rs. 1,000 to Omar as the new difference in price. In other words, Zaid adjusted Rs. 26,000 against the debt that Omar had taken a week ago and pays him Rs.1,000 due to the increase in the price of gold.
If in case the value of the gold in question depreciates by Rs. 1,000 or Rs. 100 per g, then Omar will be required to pay this difference if Zaid demands. In such a transaction, neither the money nor the subject matter has exchanged hands.
Instead, only debt has been exchanged for debt and this is clearly prohibited by Shariah as already discussed.1
---------------------------------------------------------------------------------------(۰؍۵) الصنائع بدائع -------------------1
136
CHAPTER-6: EXCHANGE OF CURRENCY OR
FULOOS
BAY’SURF AND FULOOS
As established in the chapter four, the scholars of Hanafi, Shafi’i, and Hanbali
Schools all assume the presence of Saman-e-Khalqi on both sides of any
transaction as a mandatory requirement for any exchange to qualify as Bay’Surf.
This view is endorsed by Allama Haskafi (RA), Allama Marghinani (RA), Allama
Nasfi (RA), Allama Ibn-e-Najeem, Allama Ibn-e-Taymiyya, and Allama Zaheli. The
popular books of the Hanbali school of thought, Kashaf Al-Kana, Fiqh Shafia,
Maghni Al-Mahtaj, and Tatoor Al-Naqood further affirm this point. Hence for
Bay’Surf, the medium of exchange has to be Saman-e-Khilqi or gold or silver. In
case of impurity, the content of gold or silver must be more than the content of
the metallic alloy. Fuloos does not qualify for Bay’Surf even if it is in common
usage or contains some fraction of gold or silver. The statement of Kanz Al-
Daqaiq elaborates this point further:
وؿبنت انـؼ نیظ كی ؽکى انذساھى وانذبیش كیقؼ ثیؼھبثغغھب يزلبمال وانزجبیغ واالعزوشاك ثب یشوط "
۔"ػذدا او وصب او ثھبوالیزؼی ثبنزؼیی نکوھب اصبب
"If purity (of gold or silver content) is doubtful, then it will not be dealt
with rules related with dirham and dinar, i.e. an increase or excess will be
allowed during exchange. As per tradition, it would be correct to trade
them according to quantities or weight and since they are Asman
1 Most of the issues on trading of gold and silver discussed in this chapter has been taken from a
journal “Islamic Rulings on Gold, Silver and their Jewelry” by Dr. Mufti Abdul Wahid, Darul-Iftah,
Jamia-e-Madinah, Kareem Park, Ravi Road Lahore, Pakistan.
137
therefore their value will be based on judgment (of the trading parties).” 1
A benefit of not referring to these transactions as Surf is that this creates a
margin of profit in the exchange of items of different nature such as wheat for
bread and allows for Khiyar-e-Shart and deferred payment. Additionally this
allows for the acquisition of item being exchanged by at least one party in order
to avoid sale of debt for debt or ثیغ انکبنئی ثبنکبنئی . This is confirmed by the
following statement from Ftah Al-Taqdeer:
ا یجیغ كهغب ثـیش ػیہ ثلهغی ثـیشاػیبھبالیغوصال انلهوط انشائغۃايضبل يزغبویۃهطؼبالفطالػ انبط "
۔"ػهی عووه هیۃ انغودح يھب كیکو اؽذھب كنال خبنیب يؾشوهب كی انؼوذ وھو انشثب
“It would not be legitimate to trade an unidentified Fals with two
unidentified Fuloos, as Fuloos are equal units, and because the people
agreed to ignore the value of its purity, (If such a trade occurs) then a
Fals will be in excess on one side, which is Riba..”2
This confirms that if a Fals of identified value is traded with a Fals of similar
nature then any excess will undoubtedly qualify as Riba since the value of Fals is
standardized in societies. This exchange would be deemed Riba and is
prohibited. It needs to mentioned here that Riba and Bay’Surf are mutually
exclusive. Therefore it is possible that a form of exchange which does not qualify
as Bay’Surf could still be considered usurious. For instance, any excess in the
exchange of wheat for wheat will be Riba. But at the same time this exchange
does not qualify as Surf. Similarly in the exchange of one Fals with 2 Fuloos, the
additional Fals would be Riba and would hence be prohibited. Hanafi and Maliki
scholars mutually agree on this point.
There are certain scholars who do not concur with this view and consider it
legitimate to exchange Fals or Fuloos with excess Fuloos of similar nature if the
trading parties judge the value of the Fals to be different than what is established
in society. For instance, contrary to the accepted value of 1 dinar to be
equivalent to100 Fuloos, Zaid and Omar mutually agree that the Fuloos owned by
--------------------------------------محمود بن مداح بن ہللا عبد البرکات ابو االمام) النسفی ، البحر مع الدقائق کنز ---------------1
(۵؍۶) ھج۴۰ اول طبع ، العلميۃ دارالکتب بيروت،( ھج ٧ المتوفی النسفی الدين بحافظ المعروف -------------------------------------------------------------------------------------------(۶؍۶) القدير فتح -------------------2
138
Omar are valued at 80 per dinar. They also agree that the Fuloos owned by Zaid
are worth 120 per dinar. In this case it is permissible for Zaid to trade Omar’s 80
Fuloos with his 120. However, such a transaction is still deemed prohibited in the
opinion of Imam Muhammad (RA) since he believes that no individual has the
right to tamper with the value of currency other than what is established as the
norm in society.
According to Alllama Kasani:
ویغوص ثیغ انؼذوداد انزوبسثۃ ي ؿیش انطؼويبد ثغغھب يزلبمال ػذ اثی ؽیلۃ واثی یوعق ثؼذ ا "
یکو یذاثیذکجیغ انلهظ ثبنلهغی ثبػیبھب ، وػذ يؾذ الیغوص ۔وعہ هونہ، ا انلهوط اصب كالیغوص ثیؼھب
وذس ثہ يبنیۃاالػیب ويبنیۃ االػیب کب ثغغھب يزلبمالکبنذساھى وانذبیش ، ودالنۃ انوفق ػجبسح ػب ر
روذس ثبنذساھى وانذبیشروذس ثبنلهوط كکبذ اصبب ، ونھزا کبذ اصبب ػذ يوبثهزھب ثخالف عغھب ، وػذ
يوبثهزھب ثغغھب ؽبنۃ انغبواح، وا کبذ صب كبنض الیزؼی وا ػی کب انذساھى وانذبیش كبنزؾن انزؼی
كکب ثیغ انلهظ ثبنلهغی ثـیش اػیبھب، ورا الیغوص ، والھب ارا کبذ اصببكبنواؽذ یوبثم انواؽذ كیھب ثبنؼذو
"كجوی اآلخش كنم يبل ال یوبثهہ ػوك كی ػوذ انؼبومۃ وھزا رلغیش انشثب انخ
"Items other then eatables, which are among same countable units, as
per Imam Abu-Hanifa and Imam Yousuf, are also allowed to be sold with
the same item with excess, but only in case of spot-exchange. For
example, one coin can be sold with two coins, if they are of same
denomination. But this is not allowed by Imam Muhammad (RA).
Imam Muhammad (RA), holds this opinion because according to him
‘Fuloos’ are ‘Saman’. Therefore they are just like gold and silver and their
sale with excess, as described, is not allowed. Their Samaniat is proven
because they are used to measure the value of items, just like with
dirhams and dinars. Fuloos also serve the same purpose, therefore
Fuloos can be assumed to be Saman. For the same reason if Fuloos are
compared with items of different nature or of same nature in equal
proportions, then they can again be considered Saman. If so, then their
value is not based on the judgment of trading parties, like it is the case
with gold or silver (coins). Therefore the Saman may not be identified,
and if so like Dirham and Dinar, the identification there in would be
ignored. Consequently this makes the exchange of Fuloos for Fuloos
impermissible; because the both are not identified, particularly when
139
they qualify as Saman. This will render into the sale of Fuloos for more
Fuloos, which is an obvious case of Riba..."1
According to the book Hidaya:
الیغوص ، ال انضیۃ رضجذ : ویغوص ثیغ انلهظ ثبنلهغی اػیبھب ػذ اثی ؽیلۃ واثی یوعق ، هبل يؾذ "
ثبفطالػ انکم كالرجطم ثبفطالؽھب وارا ثویذ اصبب الرزؼی كقبس کب ارا کبب ثـیش اػیبھب ، وکجیغ
الوالیۃ نهـیش ػهیھب كزجطم ثبفطالؽھب انذسھى ثبنذسھی ونھب ا انضیۃ كی ؽوھب رضجذ ثبفطالؽھب ار
"وارا ثطهذ انضیۃ رزؼی ثبنزؼیی ۔۔۔كقبس کبنغوصح ثبنغوصری ثخالف انوود الھب نهضیۃ خهوۃ 2
Ftah Al-Taqdeer discusses four forms of exchanging Fals with Fuloos, three of
which are indisputably illegitimate while there is a difference of opinion regarding
the fourth.
Subjected Matter: Exchanged with: Status in Shariah:
Fals of identified
value
Fuloos of identified value
Undisputedly Prohibited and
Illegitimate Fals of judged value Fuloos of identified value
Fals of identified
value
Fuloos of judged value
Fals of judged value Fuloos of judged value Difference of Opinion among
Scholars.3
Allama Sarkhasi (RA) states:
وارا اؽزشی انشعم كهوعب ثذساہى ووذ انض ونى رک انلهوط ػذ انجبئغ كبنجیغ عبئض ، ال انلهوط انشائغۃ "
بئؼھب نقؾۃ ص کب نوود ، وهذ ثیب ا ؽکى انؼوذ كی انض وعوثھبووعودھب يؼب والیؾزشه هیبيھب كی يهک ث
۔" انؼوذ کب الیؾزشه رنک كی انذساھى وانذبیش
“When a person purchases Fuloos for dirham on credit, promising to pay
later, then this would be legitimate because Fuloos if identified value are
اول طبع--- ، کمپنی سعيد ايم ايچ ، کراچی( الکاسانی مسعود بن بکر ابی الدين عالء العالمۃ االمام) الکاسانی ، الصنائع بدائع ---1
ھج۰ -------------------------------------------------------------------------------------(۶؍۶) الفتح مع الھدايۃ --------------------2 ------------------------------------------------------------------------------------------ (۶؍۶) القدير فتح --------------------3
140
also an accepted form of cash. We have already stated that the rules of
contract of Saman are based on their obligation and existence, and it is
necessary for the well being of the transaction that the Saman be in
possession of the purchaser at the time of transaction. However this is
not true in case of dirhams and dinars (if they are on both sides of
exchange).”1
Allama Sarkhasi further states:
"وثیغ انلهوط ثبنذساہى نیظ ثقشف انخ"
“Exchange of Fuloos with dirham is not Bay’ Surf.”2
This indicates that when Fuloos is just on one side, the exchange would not be
considered Bay’Surf. Similarly an exchange where Fuloos are on both sides would
not qualify as Surf either. Three of the four imams agree on this point. The
opinion of the scholars of the Maliki School is as follows:
الیقهؼ ھزا كی هول يبنک ، وھزا : ا زوبثل ، هبل زشیذ كهوعب ثذساھى كبكزشهب هجم ااسأیذ ا اؽ: ههذ "
الخیش كیھب ظشح ثبنزھت والثبنوسم ، ونو ا انبط اعبصوا ثیھى انغهود ؽزی رکو : نی يبنک :كبعذ ، هبل
ۃ او خبرى رھت او اسأیذ ا اؽزشیذ خبرى كن: نھب عکۃ وػی نکشھزھب ا رجبع ثبنزھت وانوسم ظشح ۔ههذ
الیغوص كهظ ثلهغی۔۔۔هبل انهیش ث : رجش رھت ثلهوط كبكزشهب هجم ا زوبثل ایغوصھزا كی هول يبنک ؟ هبل
اھب فبسد عکۃ : عؼذ ػ یؾی ث عؼیذ وسثیؼۃ اھب کشھب انلهوط ثبنلهوط وثیھب كنم اوس ظشح وهبال
۔" يضم عکۃ انذبیش وانذساھى
"I asked: Can I purchase dirham for Fuloos and acquire the psychical
ownership at a later time? He said that this is impermissible by the
verdict of Imam Malik and it is fraudulent. Imam Malik has also told me
that credit sale of gold or silver with Fuloos is not good and even if
people start using hides (animal skin) abundantly as a medium of
exchange or Fuloos, I will still declare their credit sale with gold and silver
as disliked (يكشو).
I asked: If I purchase a gold ring with Fuloos and delay the possession to
another time, then is it permissible for Imam Malik? He said ‘As per
Imam Malik it is not permissible to trade Fuloos with more Fuloos’...
-----------------(۴؍۴) ھج۴۴ طبع ، دارالمعرفۃ ، لبنان ، بيروت( السرخسی الدين شمس)للسرخسی المبسوط -------------1 2 Ibid (24,14)
141
In a tradition, Lais Bin Saad Yahya Bin Saeed and Rabia have cited the
dealings of Fuloos for Fuloos as reprehensible when there is an increase
on one side or if there is credit, and said that Fuloos are now like coins of
dirham and dinar (in usage)." 1
اسأیذ ا : اکش رنک كی انلهوط والاسا ؽشايب کزؾشیى انذبیش وانذساھى ، ههذ: وهبل يبنک "
۔" الیغوص كهظ ثلهغی: اؽزشیذ كهغب ثلهغی ایغوص ھزا ػذ يبنک ؟ هبل
“… and Imam Malik has narrated: I consider it reprehensible when it is in
Fuloos and I don’t consider this matter illegitimate like it is for dirhams
and dinars. I asked that is it illegitimate to sale a Fals for two Fals? He
said that sale of a Fals for two Fals is not illegitimate.” 2
وؽیوخب کهہى اھى کبوا یکشھو : یضیذ ث اثی ؽجیت وػجیذ للا ث اثی عؼلش هبالانهیش ػ "
ارا فشكذ : هبل یؾی ث عؼیذ : فشف انلهوط ثبنذبیش وانذساہى االیذا ثیذ ۔ وهبل یؾی ث ایوة
۔" دسہب كهوعب كالرلبسهہ ؽزی رؤخز کهہ
"All of our mentors discourage sale of Fuloos with Gold and Silver, unless
the transaction is on the spot." 3
These statements of the Maliki scholars affirm their opinion that the presence of
Saman-e-Khalqi is not mandatory for Bay’Surf; the exchange of Fuloos for Fuloos
or Fuloos for Fals also qualifies as Surf and their credit sale is not permissible.
DOES EXCHANGE OF CURRENCY NOTES QUALIFY AS BAY’SURF?
The four established view points on the status of paper notes have already been
discussed in chapter four. These include:
1. Paper notes as a certificate of debt.
2. Paper notes as they come under the category of goods.
3. Paper notes as a substitute for gold or silver.
4. Paper notes as Saman-e-Urfi since they fall in the category of Fuloos.
ھج ۴۵ اول طبع ، العلميۃ دارالکتب ، بيروت ،٧٢ المتوفی االصبحی انس بن مالک االمام) االصبحی ، الکبری المدونۃ --------1
(۶ ،۵؍) 2 Ibid 3 Ibid (6,5/3)
142
1ST GROUP OF SCHOLARS
The first group of scholars hold the view that paper notes are a certificate of debt
and do not qualify as Bay’Surf. This is because possession of Saman-e-Khilqi is
mandatory for both parties and these scholars see paper notes only as certificates
of debt. Since the first viewpoint assumes that the possession of paper notes
does not constitute the possession of Saman-e-Khilqi but are only certificates
with no intrinsic value of their own, therefore these scholars reject the concept of
Bay’Surf as applicable on paper notes.
As stated in Imdad Al-Fatwee:
"Can a person exchange Rs. 100 with another person with an amount
lesser or greater then Rs. 100?"
Answer: Transaction with paper notes is not sale, but Hawala. Therefore
any excess on either side will be considered Riba hence prohibited and
illegitimate for obvious reasons.” 1
Another scholar answers the question as follows:
"The nature of note is that of Hawala, therefore any increase or decrease
in Hawala is Riba, whether conditional or understood." 2
According to Fatawee Dar-ul-Uloom Deoband Ma’roof Ba-Aziz Al-Fatawe:
“Bay’ (of Paper Notes) with a value greater or lesser than what is stated
on it is not correct. It cannot qualify for Bay’ Surf but falls under the
category of Hawala.” 3
It is further stated in Fatawee Rasheedia:
Question: “Is the sale or purchase of paper notes with lesser or greater
quantity allowed or not?”
----------------(٧۶؍) کراچی دارالعلوم مکتبہ ، کراچی( تھانوی علی اشرف محمد موالنا) تھانوی ، الفتاوی امداد --------------1 2 Ibid (78/3) -----------------(۶۶ص) اول طبع ، کراچی داراالشاعت ، کراچی ، صاحب الرحمن عزيز مفتی ، الفتاوی عزيز --------------3
143
Answer: “Sale or purchase of paper notes is not correct even if the
quantities are equal. However it can be done in context of Hawala, which
will be allowed or legitimate. Any increase or decrease on either side will
be Riba hence prohibited.”1
Since these scholars consider paper notes to be certificates of debt, therefore
they do not consider their direct sale or purchase to be legitimate regardless of
quantity. If there is an intention to trade paper notes with paper notes, then this
transaction needs to be conducted as a Hawala and would be legitimate only if
the quantities are equal on both sides of the transaction.
2ND GROUP OF SCHOLARS
The second group of scholars believes that the rulings of Urooz and goods apply
to paper notes. This consequently disqualifies paper notes as Bay’Surf. According
to these scholars, Surf requires money or cash in the form of Saman-e-Khilqi
which should be in possession of the parties involved in the transaction. These
scholars only consider gold or silver as Surf. Allama Ram Pur and Ahmed Raza
Barelvi, scholars of Indian origin, state in one of their journals:
ؼى ، یغوص ثیؼہ ثبصیذ ي سهہ وثبوـ يہ کیلب :ہم یغوص ثیغ انوه ثبصیذ ي سهہ او اوـ ؟ كبهول "
ـ ػهبء ب هبهجۃ ا ػهۃ ؽشيۃ انشثب انوذس انؼہود ثکیم او وص يغ انغظ كب وعذ ا ( انی هونہ)رشامیب
ؽشو انغبء ، وھز هبػذح ؿیش ؽشو انلنم وانغبء ، وا ػذيب ، ؽال، وا وعذ اؽذھب ؽم انلنم و
يخشيۃ وػهیھب رذوس عیغ كشوع انجبة ، ويؼهوو ا ال اؽزشاک كی انوه وانذساہى كی عظ وال هذس ، ايب
انغظ كال ھزا هشهبط ، ورهک كنۃ ، وايب انوذس كال انذسہى يوصوۃ والهذس نهوه افال اليکیم
-"ب، كبر نیظ انوه ي االيوال انشثویۃ انخواليوصو ، كیغت ا یؾم انلنم ، وانغبء عیؼ
“Question: Is it legitimate to sell or purchase paper notes with a lesser or
greater value written on them? In my opinion this is legitimate as per the
mutual agreement of trading parties. All scholars belonging to our School
of Thought confirm this. For Riba Illah is the weight, length (depending
on the object) and its intrinsic nature (material content etc). If these Illah
are present in paper notes then any increase or Nasa is prohibited. If
absent then the transaction (with an excess) will be allowed. If any one of
the conditions is present then increase is allowed but Nasa will be
prohibited. These conditions must not be compromised, as all issues of
---------------------------------------------------------(۴) گنگوہی احمد رشيد مفتی موالنا ، رشيديہ فتاوی ----------------1
144
Riba are based on these conditions. It is very clear that the material
content of dirham and dinar are very different; notes are made of paper,
and dirhams are made of silver. Paper notes are neither weighable nor
measurable, therefore excess and Nasa is allowed without any objection.
Henceforth paper notes are not among those items upon which the
rulings of Riba are applied.” 1
According to an answer stated in Fatawee Rizvia:
“As per the established standards, Fadl and Nasa should both be
considered legitimate in case of paper note.” 2
It is mentioned in Fatawee-e-Sadia:
ل يزبصال او كزؼی اھب عهغ یضجذ نھب يبیضجذ نغبئش انغهغ ي صیبدح ووقب وعواص ثیغ ثؼنھب ثجؼ"
"يزلبمال ي عظ او اعبط انخ
“It has been confirmed that paper note is an asset, therefore it can be
exchanged for lesser or greater value of notes, irrespective of their origin
(dollars for Riyals) or denomination.”
According to a Fatwa by Sheikh Salman Al-Hamdan:
ارا ػهى ھزا كاليبغ ي ثیغ انوسم ػهی اخزالف اواػہ ويغبیبرہ ي انشیبالد او انذبیش او انغیھبد "
ی ي رنک ال انوسم نیظ ثبؽذ انوذی ثبؽذ انوذی انزھت وانلنۃ يزلبمال او غبء والدخم نهشثب كی ؽئ
۔" ي االيوال انشثویۃ وال انشثب يخزـ ثبنکیالد وانوصوبد وانوسم نیظ ثکیم واليوصو
“Riba has nothing to do with the exchange of notes because they are not
among those items for which Riba is prohibited. Riba is particularly
associated with items which are weighable or measurable, whereas
paper notes ares neither of the two.”3
-----------------------------------------------------------(۶۴ص) والدراہم القرطاس احکام فی الفاہم الفقيہ کفل --------------------1
۴۵؍٧) کراچی روڈ جناح اے ايم ، کمپنی پبلشنگ مدينہ ، کراچی( بريلوی رضاخان احمد مولوی) بريلوی ، رضويہ فتاوی ------2
( الصرف باب -----------------------------------------------------------(ھج٧۰؍۶؍)٢٧ العدد السعوديۃ البالد جريدة -----------------3
145
3RD GROUP OF SCHOLARS
The third group of scholars believes that paper notes are a substitute for gold and
silver and hence they apply the rules of gold and silver to them, qualifying the
sale and purchase of paper notes as Bay’Surf. Moulana Abdul Hai Lakhnavi
concurs with this viewpoint. Though he considers paper notes to be Saman, the
rules related to gold and silver are applied to them instead of the rules related to
Fuloos. In his words:
‘Fuloos are artificial money and not Saman-e-Khilqi. Contrary to this
‘Paper Notes’ are not considered Saman-e-Khilqi even thought their
Samaniat is not natural but fabricated. Though sale with an excess is
permissible for Fuloos, it is not allowed for paper notes because Fuloos
are unnatural Saman in both reality and theory. However, they are
erroneously labeled and viewed in a manner which ascribes Samaniat to
them. Hence paper notes are treated as having natural Saman in all
rulings. In the chapter related to Tafadul (تفاضل or excess), these rulings
will be developed in the same context and excess (تفاضل) will be declared
as illegitimate.“ 1
Sheikh Abdul Razzak Afifi also concurs with the above statement:
م انوذیۃ ثذال ػب ؽهذ يؾهہ ي ػالد انزہت او انلنۃ انزی عجوزھب كی نب کب االيش کزنک کبذ االوسا"
انزؼبيم ۔۔۔وػهی ھزا رغت كیھب انضکوح کبفهھب ویوذس كیھب انقبة ثب هذس ثھب كی افهھب ورغشی كیھب سثب
"انلنم وانغیءح2
All these views affirm the opinion of the third group of scholars that since paper
notes are seen to be a substitute for these metals the rules of gold and silver will
apply to them. Consequently, Riba Al-Fadl and Riba An-Nasiyah will also apply to
any transaction involving paper notes in case of an increase of amount on either
side. Hence as per these scholars, the exchange of paper notes qualifies for
Bay’Surf.
----------------------(٧؍) چوک کستانپا ، سعيد ايم ايچ کراچی،( الحی عبد موالنا) لکھنوی الفتاوی، مجموعۃ --------------1 -------------------------------------------------------------(۴ ص) للجعيد والتجاريۃ النقديۃ االوراق احکام -----------------2
146
4TH GROUP OF SCHOLARS
The fourth group of scholars views currency notes as a form of money and hence
treat them as Fuloos as per the rules of Shariah. Therefore their exchange does
not qualify as Bay’Surf.
To surmise, there is only one group of scholars who views the exchange of paper
notes to be Bay’Surf. All four groups present their reasons for rejecting or
accepting the theory:
1. The first group rejects paper notes as Surf due to their belief that these
are certificates of debt. Their exchange is hence rejected as Surf but
accepted as Hawala.
2. The second group disqualifies paper notes as Surf since they consider
these to be goods.
3. According to the third group, paper notes are substitutes for gold and
silver hence allowing for the rulings of gold and silver to apply to these
as well. This is the only group of scholars which accepts the use of paper
notes under Bay’Surf.
4. Though the scholars in the fourth group considers paper notes to be
money, they believe that money has to be Saman-e-Khilqi in order to
qualify as Bay’Surf. Because paper notes are not Saman-e-Khilqi, they
are therefore disqualified from Surf.
Mufti Taqi Usmani concurs with the view of the fourth group of scholars:
صى ا ھز االوسام انوذیۃ وا کب الیغوص كیھب انزلبمم ،ونک ثیؼھب نیظ ثقشف ، ال االوسام انوذیۃ "
نیغذ اصبب خهویۃ واب ھی اصب ػشكیۃ او افطالؽیۃ والیغشی انقشف اال كی االصب انخهویۃ ي انزھت
وانلنۃ
‘Excess is not allowed in the exchange of paper notes neither is their exchange
considered Surf. This is because paper notes are not Saman-e-Khilqi but qualify
as Saman-e-Urfi or are terminologically categorized as Saman. Gold and silver are
Saman-e-Khilqi and are exclusively qualified for Bay’Surf’.1
Syed Muhammad Baqar states the following regarding the exchange of
currencies:
------------------------------------------------------------------------(٧ص) للعثمانی النقديۃ االوراق احکام ------------------1
147
۔"وػهیبد انجیغ وانؾشاء ھز عبئضح ؽشػب عواء کبذ ؽبمشح او العم"
“Their sale and purchase is allowed as per Shariah, irrespective of
whether the transaction is based on credit or occurs on the spot.” 1
This statement indicates that the credit sale of paper notes is allowed and that
this sale will not be considered as Surf.
Sheikh Abdullah bin Salman, a member of Dar ul Afta, Riyadh writes:
شی ا االوسام انوذیۃ کبنلهوط كی هشإانضیۃ ػهیھب كب صجذ نهلهوط ي اؽکبو انشثب ھز انظشیۃ ر"
وانضکبح وانغهى رضجذ نالوسام انوذیۃ يضهھب وهذ هبل ثھز انظشیۃ يغوػۃ کجیشح ي اكبمم انؼهبء و یؼزجش
انؼشمیۃ ، والؽک اہ اهشة انوبئم ثھب كی انغهۃ وعطب ثی انوبئهی ثبنظشیۃ انغذیۃ وانوبئهی ثبنظشیۃ
("۱انوذ انوسهی ؿ)االهوال انی االفبثۃ كی ظشب
‘According to this concept, paper notes are similar to Fuloos due to their
Samaniat. Therefore all rulings related to Riba, Zakat, and forward sale
in transactions conducted with Fuloos will similarly be applied to paper
notes. A large number of reputable scholars concur with this view. There
are two subgroups within this group; (a) those who believe that paper
notes are similar to arz (singular of urooz) and (b) those who consider
them to be certificates of debt. (This point is view is hence balanced
between these two extremes) and in my opinion this viewpoint is
relatively more appropriate and justified.’ 2
According to Sheikh Ahmed Khateeb:
اهبع انلوط ثبنؾبم " )عیغ اؽکبيھب ظبہشا وثبهب كزجی ثغیغ رنک ا انود کب نلهوط انؾبعیۃ كی"
(۸۱ثبنلهوط ؿ انود
‘All explanations clarify that paper notes, both in their endogenous and
exogenous characteristics, are similar to Fuloos made of copper.’ 3
In chapter three, the fourth opinion was preferred and hence will also be
preferred in context of Bay’Surf. Therefore the exchange of paper notes will not
be considered within the scope of Bay’Surf. A detailed analysis on the exchange 1 ------------- -----(۰ص) ھج۴ ششم طبع ، دارالتعارف ، بيروت ، الصدر باقر محمد السيد ، االسالم فی الالربوی البنک -----------------------------------------------------------------------------۔ للقاسمی مباحث فقہی جديد بحوالہ ------------------2 3 Ibid
148
of Fuloos has already been done at the beginning of chapter four and hence will
not be repeated here.
CURRENCY EXCHANGE OR TRADE
It is necessary to discuss the exchange of currencies in the light of Shariah rulings.
It has been established already that currency notes qualify as Fuloos. Not only
does the currency of different regions differs intrinsically, but there are also
differences in opinion regarding the trading of these Fuloos. Imam Muhammad
(RA) and Imam Malik (RA) declare any excess accrued in the exchange of Fuloos
by either one of the trading party as illegitimate. Hazrat Sheikhain (RA) concurs
with this opinion only if the value of Fuloos is not dependent upon the judgment
of the trading parties. In view of this viewpoint, the exchange of currency notes
with any excess would also be prohibited and illegitimate. The basis of this
opinion is the Illah that if the items or subject matter is of similar nature on both
sides of the exchange then any excess will qualify as Riba. Riba is prohibited and
illegitimate and various references from different Arabic journals and books have
already been quoted attesting to this prohibition.
A CONTEMPORARY AND ERRONEOUS VERDICT ON CURRENCY NOTES According to the research of Mufti Rasheed Ahmad Ludhyanvi (RA), a one rupee
coin is Fuloos and paper notes of larger denominations, such as a ten rupee note,
are certificates or receipts of these metallic coins. After his correspondence with
the State Bank of Pakistan, Mufti Ludhyanvi learned that coins and one rupee
notes are equal to the quantum of national output (or GDP). Based on the
quantity of these coins and ‘one rupee notes’, notes of larger denominations are
produced as representative certificates for the coins and rupee notes. His
discussion with the State Bank led to the following conclusions:
1. Metallic coins are Fuloos.
2. One rupee note will be dealt with the rules of Fuloos.
3. Notes of larger denominations are certificates of the first two.
In the light of these conclusions, a ten rupee note is not money itself but is a
certificate of the coins and rupee note. Mufti Ludhyanvi makes the following
comment on the exchange of currencies:
149
“Rules of Fuloos will be applied on a rupee note therefore its exchange
with another rupee note is allowed, but excess or Nasa is illegitimate. If
there is a need for Nasa, then instead of exchange, Istaqraz mode
can be adopted. Therefore exchange of notes (To ask for a loan :استقراض)
of bigger denomination with a rupee note can be done in context of
Istaqraz. Exchange of larger notes is not an exchange of goods for goods,
rather it is an exchange of certificate withf certificates therefore
allowed.”1
This statement highlights the following four modes of exchange:
1. Exchange of one rupee notes with rupee notes is allowed. However
there should be no excess on either side and the transaction has to be
done on the spot.
2. Bay’Nasa is not allowed with one rupee notes. This can be done if one
party loans an amount to the other party such as Rs. 100 notes which are
later returned by the debtor.
3. Spot exchange of single Rs. 100 note with a hundred Rs. 1 notes is not
allowed. This transaction would be possible if a party lends one Rs. 100
note to the other and receives 100 Rs. 1 notes in lieu of the debt.
4. Exchange of a Rs. 100 note is allowed with another note of Rs. 100.
The gentleman’s opinion that all rupee notes and coins are represented in totality
by notes of larger denominations is incorrect since it has been observed hat the
amount of larger denomination notes are not dependent on the quantum of
coins or rupee notes nor are they represented by larger notes. This renders the
foundation of this viewpoint faulty. Also in chapter three, the fourth viewpoint
on paper notes was preferred which further weakens the above stated point of
view. Even if this viewpoint is taken to be correct for the sake of argument, the
fourth mode of exchange stated above will be voided since the sale of debt for
debt is prohibited. The gentleman first declares currency notes of larger
denominations as a certificate of debt and then allows its exchange with a similar
note which clearly violates the stated principle. The preferred mode here would
have been Hawala. In the light of evidence presented, the viewpoint is of little
use.
(۰،٢؍٧)----- ھج۴۵ اول طبع ، چوک پاکستان ، سعيد ايم ايچ کراچی،( صاحب رشيداحمد مفتی)لدھيانوی ، الفتاوی احسن 1
150
THE ISSUE OF POSSESSION IN CURRENCY EXCHANGE
As already discussed earlier, the exchange of Fuloos or currency does not qualify
as Bay’Surf. Theoretically this makes it unnecessary for both parties to ensure
possession of the currency at the time of the exchange. There is also no
compulsion for the transaction to be completed on the spot. The reason for this
is that possession and on the spot nature of transaction is a condition for Surf but
not for an ordinary Bay’. Contrary to this, possession and spot exchange is
considered mandatory for the exchange of currency. Mufti Taqi Usmani had
previously held the opinion that possession by both parties and spot exchange is
not necessary in the exchange of currency and that transactions can be made
with only party in possession of the currency. However, he later changed his
opinion after analyzing a paper written by Mufti Muhammad Shafi Ludhyanvi and
now states that both parties must possess the currency they intend to exchange
on the spot. According to Mufti Rasheed Ahmed:
“Here there is no disagreement that possession at the time of exchange
is mandatory. However in the School of Thought of Sheikhain, there is
another opinion that if value of subject matter is judged by the parties
then possession is not mandatory whereby among the two conditions i.e.
'possession' and 'judgment of value', any one should be present."
رجبیؼبكهغب ثیؼہ ثلهظ ثؼیہ كبنلهغب الیزؼیب وا ػیب اال ا انوجل : هبل االيبو انکبعبی سؽہ للا رؼبنی
كی انغهظ ؽشه ؽزی یجطم ثزشک انزوبثل كی انغهظ نکوہ اكزشاهب ػ دی ثذی ونوهجل اؽذ انجذنی كی
ؼوذ ال اؽزشاه انوجل ي انغبجی ي انغهظ كبكزشهب هجم هجل االخش ورکش انکشخی اہ الیجطم ان
خقبئـ انقشف وھزا نیظ ثقشف كیکزلی كی ثبنوجل ي اؽذ انغبجی ال ثہ یخشط ثہ ػ کوہ اكزشاهب
اہ یجطم ال نکوہ فشف ثم : ػ دی ثذی ، ورکش كی ثؼل ؽشوػ يخزقش انطؾبوی سؽہ للا رؼبنی
(۵؍۵ثذائغ ؿ)سثبانلنم وھو انغظ وھو انقؾیؼ نزک سثب انغبء كی كیہ نوعود اؽذ وفلی ػهۃ
انغظ کب يش كی ثیغ والثذ ي انزؼیی كی ثیغ انلهوط ثضهھب الرؾبد: وهبل االيب و انطؾبوی سؽہ للا رؼبنی
(؍ؽبؽیۃ انطؾطبوی ػهی انذس )انلهظ ثبنلهغی
“On the subject under discussion, according to explanations given by
Imams belonging to all schools of thought, if the value of the item on any
side is judged by the trading parties in items of similar nature, then this
will qualify as Nasa hence illegitimate. There is no justification found for
151
excess on one side and Nasa and the fact is that such a mode of
exchange is against the rules stated by jurisprudence.”1
Justice Mufti Taqi Usmani states in this regards:
“The discussion done by Hazrat Moulana Mufti Rasheed Ahmed
Madluham in his work “Ahsan Al-Fatawee”, Volume 87-7, can be
summarized as follows: For the sake of authentication of such a contract,
possession acquired by any one of the trading parties is not sufficient,
rather both parties must acquire spot possession of the subject matter.
“After analyzing the rationale given by Hazrat Madluham, the author
(Mufti Taqi Usmani) also agrees with the gentleman. In situations where
Fuloos are exchanged with Fuloos of similar nature ( ثیغ انلهوط ثبنلهوط
there is a disagreement among the jurisprudents of Hanafi ,(انزغبوی
School of thought. The rule which I stated earlier was rather based on the
research done in “Tanveer Al-Absar”, “Al-Dar Al-Mukhtar”, and by
Allama Shami; and in the journal “Bada’ Al-Sanaa’” Hazrat Mufti
Madluham has quoted the statement of Allama Kasani (already stated
before).
It can be extracted from this statement that possession by both trading
parties is compulsory whether the transaction is Bay’ Surf or not This is
because the nature of items is similar on both sides therefore Nasiyah is
not allowed. However the scholars who consider possession only on one
side necessary have probably not considered only the delay in possession
without the identification of deferment as Nasiyah. Allama Ibn-e-
Hamaam (RA), in his book “Fatah Al-Taqdeer” volume 288ج5ص, has
refused to consider this as Nasiyah due to the same reason. Allama
Shami (RA) has taken it from the School of Thought of Imam Muhammad
(RA), and if it is correct, then it cannot be nullified as per se. The
statement of Allama Kasani however subjugates it. This makes two
conditions to avoid Nasiyah; (1) both parties must exchange currency,
Fuloos etc before concluding their meeting or (2) if the payment is
required to be deferred then the value of subject matter must be judged
-----------------------------------------------------------------------------------------(۰٧؍٧) الفتاوی احسن -------------------1
152
by the trading parties. Since it is a established verdict that the value of
Fuloos cannot be judged, therefore possession for both parties becomes
compulsory.
As this justification is very concrete, therefore the author (Mufti Taqi
Usmani) announces cancellation of his Fatwa of ‘ثیغ انلهوط ثبنلهوط انزغبوی’.” 1
Here it is important to note that the statements by Mufti Rasheed Ahmed and
Justice Mufti Taqi Usmani are related to the possession of Fuloos at the time of
exchange. Both gentlemen also consider paper currency as Fuloos hence
rendering the rulings related to Fuloos applicable on paper currency as well. This
establishes that for currency exchange transactions to be Shariah compliant, both
parties must possess currency notes and must exchange these currencies before
they leave the venue of the meeting.
EXCHANGE OF CURRENCY NOTES AS CREDIT
Although exchanging currencies in excess and Nasa are not allowed, there are
certain instances in which the need for Nasa arises for which the mode Istaqraz
can be used. Nasa is not prohibited in this mode of exchange. However, no
excess or profit is permitted here since it would qualify as Riba An-Nasiyah which
is illegitimate and prohibited as per the Hadith (کم هشك عش يلؼۃ كھو سثب) discussed
in chapter two. For this reason the scholars who consider the Bay’ of currency
illegitimate also use the mode of Istaqraz. Istaqraz can be understood more
clearly with the help of an example where Omar asks Zaid for Rs. 100,000 to
invest in a business and promises to return this money after a month. This loan
would be permissible if Zaid agrees to take back exactly what he had loaned.
However if he demands even a rupee more from Omar, it will qualify as Riba.
Nasa would be allowed here since this would not be Bay’ of the amount but a
loan given to Omar by Zaid. This is known as Istaqraz.
RULE OF HUNDI IN CURRENCY EXCHANGE
As per the reasons stated by Justice Mufti Taqi Usmani, as discussed above, Hundi
is not allowed in Bay’Surf because there is no concept of possession in Hundi.
------------------------------------------------------۴ کراچی دارالعلوم ھج۴ االولی جمادی شمارہ البالغ ---------------1
153
Hence the mode of Istaqraz can be used here as well. For instance Omar and Zaid
are both living in Pakistan and Omar gives Zaid a loan of 500 Riyals asking that he
return this amount to his father on his visit to Saudi Arabia next month.
Meanwhile Zaid is free to spend this amount as he wishes and is bound to return
the money to his father on his visit to Saudi Arabia. Zaid can also request Omar
the travel expenses incurred if it is legally allowed.
THE DEFINITION OF SUFTAJA
The term Suftaja will be discussed in detail later. At this point it is important to
understand the meaning of Suftaja and its implications in the light of Shariah.
Literal Meaning of Suftaja: Suftaja is a Persian term. Its literal meaning means ‘to
strengthen’.1
Terminological Meaning: In terminological references Suftaja refers to a financial
transaction. For instance Omar loans an amount to Zaid on a ‘condition’ that he
or his representative will return it to Omar or his representative at a specific,
mutually agreed geographical location such as another town, city or country.2
SUFTAJA IN CONTEXT OF SHARIAH AND JURISPRUDENCE Some scholars discuss Suftaja in the chapter of loan while others discuss it in the
chapter of Hawala. To surmise:
1. Majority of scholars believe that Suftaja qualifies as Qard or loan.
2. Some scholars refer to it as Hawala.
3. Some scholars also refer to it as Ijara.
-------------------------------------------------------------------------------( الحوالہ کتاب۰؍۰) ردالمحتار ------------------1
" وغيرہ الفتح فی کما امرہ الحکام بہ القرض ھذا سمی ، المحکم الشئی وھو سفتہ اصلہ ، معرب فارسی ، السفاتج واحدة" ------------------------------------------------------------------------------------------ (۰؍۰) سابقہ حوالہ --------------------2
ان ھی: وقيل ، الطريق خطر سقوط بہ ليستفيد الامانۃ قرضا يدفعہ وانما صديقہ الی ليدفعہ قرضا ماال تاجر الی يدفع ان وصورتھا’’
‘‘ کفايہ الطريق خطر سقوط بہ ليستفيد ، المقرض يريدہ بلد فی المستقرض ليقضيہ انسانا يقرض
المنيريۃ الطباعۃ ادارة ، دمشق ، ھج۶٧۶ المتوفی النووی شرف بن الدين محی زکريا ابو امام) للنووی ، واللغات االسماء تھذيب.
(۴٢؍)
(٢ص) ھج۴۰ اول طبع ، دارالقلم ، بيروت ، النووی ، التنبيہ تحرير
وفائدتہ بدلہ اليہ ليدفع آخر بلد فی وکيلہ الی المال لصاحب کتاب ھی ، والجيم ساکنۃ فاء بينھما فوق المثناة والتاء المہملۃ السين بفتح’’
‘‘۔ الحمل ومؤنۃ الطريق خطر من السالمۃ
154
SHARIAH RULINGS ON SUFTAJA There is a difference of opinion among scholars regarding the rulings related to
Suftaja. One faction considers Ijara not permissible and reprehensible. This
group includes Imam Ibn-e-Sereen, Imam Qatadah, Imam Sha’bi, Imam Nakh’l. Of
the four imams, Imam Abu Hanifa (RA) and Hazrat Imam Shafi’i (RA) concur with
this opinion. According to some references, Imam Malik (RA) also holds the same
opinion.1 The second group considers Suftaja legitimate and includes some of the
companions of the Holy Prophet (PBUH) such as Ibn-e-Abbas (RAA), Ibn-e-Zubair
(RAA), Hazrat Ali (KAW) and Hazrat Hasan Ibn-e-Ali (RAA). The group of Tabe’een
also includes Abd-ur-Rehman Bin Aswad, Ayub, Imam Suri, Imam Ishaq, Imam ibn
Hanbal, and the scholars Allama Ibn-e-Qadama, Abu Ya’li, Imam Ibn-e-Tamiyya,
and Imam Ibn Al-Qeem (RA).
SUMMARY OF THE VIEWPOINT OF THE FIRST GROUP The objective of Suftaja is ‘Suqoot-e-Khatr-e-Taqreeq’ or a type of benefit
acquired by the creditor due to the loan he has given. This has been bluntly
declared prohibited as illustrated by the Hadith that ‘any benefit over a loan is
Riba’. Companions of the Prophet (SAW) disliked loans which yielded benefits. It
is stated in the Ibn Abi Shaeba:
"کبوا یکشہو کم هشك عش يلؼۃ: ػ ػطبء هبل"
“Hazrat Atta states that companions of Prophet (SAW) considered all
such loans as reprehensible which could yield some sort of benefit.”2
1----- -------------- ، افريقہ جنوبی ، ھج المتوفی الصنعانی م ھما بن عبدالرزاق ابوبکر حافظ) الصنعانی ، الرزاق عبد مصنف
(۴؍۰) ھج٢ اول طبع ، العلمی المجلس
(٢۴؍( ) العالمگيريۃ) الھنديۃ الفتاوی
‘‘ نفعا جر قرض عن ملسو هيلع هللا ىلص رسول نہی وقد الطريق خطر سقوط المقرض بہ استفاد قرض وھو السفاتج وکرہ’’
(۵۵؍۶) الفتح مع الھدايۃ
‘‘الخ الطريق خطر سقوط المقرض بہ استفاد قرض وھی السفاتج ويکرہ’’
(؍۵) الخرشی
(٢۵؍) للدردير الصغير الشرح
(۴؍) مصر،( شيرازی سحاقا ابو امام) الشيرازی ، المھذب
(٢؍) العربی التراث داراحياء ، بيروت( الخطيب الشربينی محمد شيخ) ، الخطيب ، المحتاج مغنی والعلوم- القرآن ادارة ، کراچی ، ھج۵ المتوفی شيبہ ابی بن محمد بن عبدہللا ابوبکر حافظ) العبسی ، شيبہ ابی ابن مصنف -----2
(۰؍۶) ھج۴۶- ولا طبع ، االسالميۃ
155
Also any loan contract is based on Ihsan and Taburru’. Therefore if it is
conditioned with Suftaja, then it will deviate from its actual purpose which is not
correct.
ILLAH OF PROHIBITION OF SUFTAJA
Three points are stated in this context:
1. The popular Illah, Jar-e-Manfea’t.
2. Prevention from Kalfat-e-Qard where some scholars explain that if the
item being loaned is heavy and requires effort or Kalfat to transport,
then it is not permissible to loan such as item with the condition of
Suftaja.1
3. Hazrat Imam Malik (RA) states that ‘Tagauyyur-e-Saman’ is another of its
Illah. If the value of the loaned item is different at the place where the
item is due to be returned, then this will cause a variation in the amount
of the loan which is impermissible.2
EXEMPTIONS ( اد اعزضبء ) The scholars who consider Suftaja to be prohibited state the following two cases
in this context:
1. Suftaja is legitimate if it is agreed upon after the loan has been given.
This is because the objective now is not benefit but Ihsan and Taburru’.
The previously stated Hadith condemns the benefit [which is Mashroot
and Ma’ruf, if not then it will qualify as Ihsan and Taburru’]. Hazrat Ibn-
e-Abbas and Ibn-e-Zubair (RAA) have a similar viewpoint on Suftaja.3
1------------- ---------------------------(۵؍) ھج۴ سوم طبع ، االسالمی المکتب ، بيروت ، المقدسی قدامہ ابن ، الکافی
۔ الجواز فعنہ مؤنۃ لحملہ يکن لم فان ، لذلک يجز لم نفع اليہ حملہ فی بلد الی سفتجۃ فيہ ويکتب آخر بلد فی يوفيہ ان شرط وان
والدراہم بالدنانير السفاتج فاما آخر بلد فی ذلک يعطيہ ان علی بلد فی ومؤنۃ حمل لہ شيئا الرجل يقترض ان واليجوز: عبدالبر ابن وقال
الکافی بحوالہ۴ص للجعيد النقديۃ االوراق احکام) الخ اصحابہ من طائفۃ ذلک واجاز يحرمھا ولم بھا العمل مالک کرہ فقد
(٧۰،٧٢؍
--------------------------------------------------------------(۴ص) للجعيد والتجاريۃ النقديۃ االوراق احکام -----------------2 ----------------------------------------------------------------------------------(٢۴؍) العالمگيريہ الفتاوی ------------------3
‘‘ الحوالہ کتاب فی ، الکافی فی کذا بہ فالبأس ظاہر عرف فيہ والکان مشروطۃ المنفعۃ تکن لم فان
(٢۵؍٧) الصنائع بدائع
(۵؍) قدامہ البن الکافی
156
2. If there is a threat of robbery or loss, then Suftaja is allowed.1
Circumstances such as these are very common in the present day and age hence
the relaxation granted by the Maliki and Hanbali Schools of Thought can be
adopted during time of need. Additional implications of Suftaja will be discussed
under money order.
VIEWPOINT OF THE SECOND GROUP
Certain companions of the Prophet (SAW) like Hazrat Ibn-e-Abbas (RAA), Hazrat
Ibn-e-Omar (RAA) consider Suftaja legitimate. Some Tabe’een like Ibn-e-Sereen
(RA) also agree that Suftaja and similar modes are legitimate. 2 The strongest
justification presented in support of this legitimacy is that Suftaja allows both
parties to enjoy the benefit over the loaned amount; both the debtor and
creditor gain something out of the transaction. When the creditor pays the fee,
he gains the advantage of ‘Suqoot-e-Khatr-e-Taqreeq’. For this reason it is not
prohibited in Shariah since both parties benefit from the transaction.
Allama Ibn-e-Qadama states:
وانقؾیؼ عواص الہ يقهؾۃ نھبي ؿیش مشس ثواؽذ يھب وانؾشع الیشد ثزؾشیى انقبنؼ انزی ال "
ينشح كیھب ثم ثؾشوػیزھب وال ھزا نیظ ثقوؿ ػهی رؾشیہ والكی يؼی انقوؿ كوعت اثوبء
۔"ػهی االثبؽۃ
“The intention behind Suftaja is a proof of its validity because it
benefitsboth parties and none of them suffer any loss. Shariah also
permits matters in which there is no loss and declares them permissible.
Also its nature is not expressly mentioned in Shariah, therefore it is
compulsory to maintain it over ibaha (permissibility).” 3
Allama Ibn-e-Taymiyya concurs with this viewpoint:
ونک هذیکو كی انوشك يلؼۃ نهوشك کب كی يغئهۃ انغلزغۃ ونھزا کشھھب ي کشھھب ، وانقؾیؼ اھب "
۔" الرکش ال انوزشك یزلغ ثھب اینب كلیھب يلؼۃ نھب عیؼب
-------------------------------------------------(؍۵)دارصادر ، بيروت ، المالکی الخرشی للعالمۃ الخرشی --------------------1
"الخ المقرض اليہ يذھب الذی المحل طرق جميع فی الخوف يغلب االان ای الخوف يعم االان" ---------------------------------------------------------------------------------- (۴؍۰) عبدالرزاق مصنف ----------------------2 ---------------------------------------------------------(۴) النقديۃ االوراق احکام بحوالہ) قدامہ البن المغنی ----------------3
157
“… and some time the debtor also gains over a loan, like in case of
Suftaja. This is probably why some scholars consider it reprehensible
when actually it is not reprehensible. As the creditor is also the
beneficiary, hence both parties gain something.” 1
In the same context, Allama Ibn-e-Al-Qeem states:
انغواص ، وهہ اث انزس الہ يقهؾۃ نھب كهى یلشد انوشك ۔۔۔وانلؼۃ انزی رغش انی ( اؽذ)ہ وسوی ػ"
انشثب كی انوشك ھی انزی رخـ انوشك کغکی داسانوزشك وسکوة دواثہ واعزؼبنہ وهجول ھذیزہ كبہ
ب ػهیھب كھی ي عظ ال يقهؾۃ نہ كی رنک ثخالف ھز انغبئم كب انلؼۃ يؾزشکۃ ثیھب وھب يزؼبو
-"انزؼبو وانؾبسکۃ
“… and justification of Imam Ahmad (RA) refers to Ibn Al-Manzer (RA), as
both parties reap the benefit, not just the creditor. The sole gain of
creditor qualifies as Riba, like using the property or transport of debtor,
accepting gifts from him,or asking him favors. The debtor gains nothing
from it, only the creditor enjoys the benefits. But here (in case of Suftaja)
the benefit is mutually shared, therefore it will rather qualify as
cooperation and partnership.” 2
All this evidence from jurisprudence indicates that the prohibition of Suftaja in
Hadith is from the benefit which is earned solely by the creditor. However if both
parties become beneficiaries, then this would be beyond the condition specified
in the Hadith.
ANALYSIS AND DEBATE The second viewpoint is contrary to the apparent meaning of the stated Hadith.
For instance if this point is assumed correct for the sake of argument, then the
interest charged on all business loans would also be considered legitimate since
these loans yield benefit for both parties. This means that it would be allowed for
a businessman to earn by investing the money in profitable ventures and pay the
profit to the bank in the form of interest. This becomes a risky situation as any
agreement with the second viewpoint will render legitimate all interest based
business loans offered by the commercial banks nowadays. This makes
concurrence with this viewpoint a dodgy issue. There is also a possibility that the
-----------------------------------------------------------------------------------(۵۵؍) الفتاوی مجموعۃ ------------------1 -----------------------------العلميۃ۔ دارالکتب ، بيروت ، المعبود عون مع داود ابی سنن علی القيم ابن الحافظ شرح --------------2
158
viewpoint of the companions of the Prophet (SAW) has been rendered legitimate
under some under context where it could be some other form of Suftaja or could
have been allowed only in the case of security threat. The best option here is not
to take this viewpoint as it is. The safest course of action would be to consider
Suftaja reprehensible in all ordinary matters and its use should be considered
permitted only in times of acute need.
MONEY ORDER
Money order is a way to dispatch money from one place to another. When
money orders are sent through post offices, a form has to be submitted with the
money at the post office. The post office charges a fee proportionate to the
amount of money being sent and issues a receipt. The money is then transferred
to the desired destination and an acknowledgement note is sent to the
dispatcher after confirmation of delivery. If the money is lost during the dispatch,
the post office is liable to compensate for the loss. The question here is whether
the money handed to the post office is a loan or a deposit. If it is a loan, then the
dispatcher will be the creditor and the post office will be the debtor. If it is a
deposit, then the dispatcher is Musta’ajir or employer and the post office is the
Ajeer or employee. In the latter scenario, the currency notes will have to be
stored separately in a sealed envelope so that they do not mix with other money.
This is to ensure that the same notes with the same serial numbers are
dispatched to the destination. However this does not happen in reality.
According to Imam Abu Hanifa (RA), if the money is treated as a deposit and is
misplaced by the post office then the post office is not liable to compensate for
the loss even though the post office is the guarantor. Keeping the related rulings
in view, it is more appropriate to consider the post office a debtor of the amount.
This could result in two scenarios:
1. The fee which the post office demands is in addition to the amount
being transferred. Since the principal amount is a credit for the post
office, therefore any increase over it would be prohibited and
illegitimate as it would constitute Riba.
2. This situation can be categorized as Suftaja since it consists of Suqoot-e-
Khatar-e-Tareeq or the avoidance of risk. This is not allowed either since
as per Shariah any increase on credit is Riba.
159
This issue is addressed in Imdad Al-Fatawee as follows:
“Any increase in a loan is Riba as per Shariah principles. First it should be
evaluated that the principal amount given to the post office is a loan or a
deposit? As we know that the post office has to compensate the loss of
principal, which indicates that this amount is not a deposit but a loan or
credit. The fee which is required to be paid by the dispatcher in excess to
the loaned amount is prohibited. Even if it is not considered a fee, then
according to Shariah principles any excess on a credit is Riba, which in
context of ‘Suftaja’ with ‘Suqoot-e-Khatr-e-Taqreeq’,(to avoid the risk of
a way) is also not advisable .”1
The following solutions are recommended for the situation:
1. The fee demanded by the post office should not be considered part of
the loan but should be declared a ‘service charge’ to cover the clerical,
operational and logistic expenses incurred in the process of money
transfer.
2. This matter is not Suftaja which depends on Suqoot-e-Khatar-e-Tareeq
(which has already been discussed in detail earlier) but to the contrary
the objective is to deliver money to a destination. This is referred to as
Isal or transfer and charging a fee is allowed in conducting matters of
Isal.
This issue has been discussed in Ahsan Al-Fatawee as follows:
‘In the author’s point of view if the objective of money transfer is not Suqoot-e-
Khatre-e-Taqreeq but Isal only then it cannot be considered a reprehensible form
of Suftaja. Though the two terms may seem similar, there is a difference in mea
ns and end. For a local loan the extra money or fee is for safe keeping the
amount and hence should not be considered Riba over a loan. The author
confirms this view through research of footnote of Moulana Fatah Muhammad
Taib (RA) stated in Hashiah Takmalta Umdah Al-Raiya of ‘Shrah Waqiah’ in which
different types of rulings related to money order and Hundi are discussed.’
----------------------------------------------------------------------------------------(۴؍) الفتاوی امداد -------------------1
160
نیظ ي ھزا وال نہ ؽکى ؽکى ( ثھذی يی آسڈس )ویغت ا یؼهى ا انزی كی صيبب انغبح كی نغبب "
ػهۃ انکشاہۃ ھی انلغ عواء کب : انغلبرظ ، ال انغلبرظ کبذ نغووه خطش انطشین ورا نهوفول ، كب ههذ
ہ والاعشػهیہ ، الہ نیظ كی وعغ ثهی ونک انخطش يب الیغوص انکلبنۃ ث: نغووه انخطش او نهوفول ، ههذ
وايب االیقبل رؾم االعشح ػهیہ ویک انؼھذح ػهیہ االغب اال دكغ انهقوؿ وانؾلع اب ثلنم للا رؼبنی
"كالیهضو ي انہی ػ لغ عووه انخطش کشاھۃ اعشح االیقبل انخ1
It can be concluded from the statement of Moulana Fatah Muhammad Taib that
regardless of whether the objective is Suqoot-e-Khatr-e-Taqreeq, the debtor gets
a profit in both cases and this is prohibited as it qualifies as Riba. Suqoot-e-Khatr-
e-Taqreeq falls within the meaning of Kafalat which is impermissible since it is not
premeditated. Demanding a fee for Kafalat is prohibited in Shariah. However
Kafalat over Isal is permissible as this is premeditated if decided earlier by the
parties. Therefore a previously decided fee for this is allowed. This means that
the prohibition of Suqoot-e-Khatr-e-Taqreeq does not imply a prohibition of Isal
as well. If the money qualifies as Suftaja, then according to Balva Aamma matters
and in cases of acute necessity, a ruling may be devised for the sake of
permissibility in the light of other related verdicts. As discussed earlier, some
scholars consider Suftaja permissible.
According to Imdad Al-Fatawee:
‘Even if any of the four Imams is in favor of Suftaja, even then the use of
Suftaja will be permissible only when needed.’ 2
It is further stated in Ahsan Al-Fatawee:
‘If it qualifies as Suftaja, then it is considered permissible by Imam
Ahmad (RA). Violation of the rule is permitted in cases of acute need’.3
To surmise, the issue of money order is legitimate. It is permissible to send
money via money order and any fee charged by the post office in this context is
legitimate. Bank drafts fall under the same rulings as money order and hence are
also legitimate.
---------------------------------------------------------------------------------(۰ ،٧؍٧) الفتاوی احسن ------------------1 ----------------------------------------------------------------------------------------(۴۵؍) الفتاوی امداد -------------------2 ---------------------------------------------------------------------------------------(٢؍٧) الفتاوی احسن -------------------3
161
EXCHANGE OF CURRENCY OF DIFFERENT COUNTRIES
As previously discussed, currencies of different countries differ by nature of
values corresponding to the economy of the respective country. Similarly the
Pakistani rupee differs from the US dollar and Saudi riyal and its value depends
upon the macro economic factors of Pakistan. At present almost all countries
follow the floating exchange rate regime which is contrary to the fixed exchange
rate system where all currencies were pegged to the dollar which in turn was
fictitiously pegged to gold. The fixed exchange rate system dissolved following
the abolishment of the Brettonwood Agreement. Presently the rate of exchange
of a particular currency depends upon the demand of the currency which
dominates the foreign exchange reserves of the respective country, which are
dollars in case of Pakistan. Since there isn’t any fixed standard, therefore the rate
of exchange fluctuates continually depending upon the forces of demand and
supply. This fluctuation and consequent variation in value differs with every
currency, leading to contrasting values between currencies. It is for this reason
that currencies cannot be assumed to be identical or have similar natures.
The exchange of currencies is possible under an exchange rate mutually agreed
among the trading parties. For instance a single dollar is exchanged with Rs. 83
and so forth. Since this exchange is not Bay’Surf therefore Nasa and their credit
sale is permissible. However this permissibility should not be confused with the
statement of Mufti Taqi Usmani, discussed earlier in the chapter, in which he
prohibits Nasiyah in Fuloos. This is because Mufti Usmani insists on spot
exchange of Fuloos or currencies of the same origin and nature such as Pakistani
rupees with Pakistani rupees. However here the discussion is centered on the
exchange of currencies of different origin such as Pakistani rupees with American
dollars. The opinion on this varies among scholars of different schools of thought.
OPINION OF HANAFIA SCHOLARS According to the Hanafi scholars, the sale of one Fals with two Fuloos is
illegitimate because they are of the same nature. Hence the additional Fals in
this transaction qualifies as Riba. Similarly the exchange of Rs. 25 with Rs. 20 is
not permissible as the additional Rs. 5 would be considered Riba. This exchange
would be permitted if currencies of similar or different denominations but of
different nature are being exchanged. For instance Rs. 25 can be exchanged with
20 or 50 Japanese yen.
162
OPINION OF MALIKIA SCHOLARS The scholars of Maliki School consider currency to be among the items upon
which the rules of Riba are applicable. However they consider any difference in
the exchange of currencies of different origins permissible and not Riba, as per
the opinion of the Hanafi scholars also.
OPINION OF SHAFI’I AND HANBALI SCHOLARS The Shafi’i and Hanbali scholars concur with the views of the scholars from the
Hanafi and Maliki Schools of Thought. However they insist upon the additional
following conditions for such exchange: 1
1. At least one party must possess or deliver the currency on the spot so as
not to violate the Hadith defined principle of ‘no sale of debt for debt’.
2. The ownership of the currency being sold is mandatory (ثیغ هجم انوجل).
The absence of this condition in the transaction is considered a violation
of another Hadith. Therefore the trade of any currency not yet acquired
cannot be done in lieu of a promissory receipt, a concept commonly
used in currency markets.
RULES PERTAINING TO HUNDI IN CURRENCY EXCHANGE
It has now been established that currencies of different origins differ intrinsically
and their credit sale and Nasa are permissible. This means that there is no issue
in this regard as far as Hundi is concerned. For instance, Omar sells 1,000 Riyals
in Saudi Arabia to Zaid and asks him to deliver the Riyals in Pakistani Rupees
16,000 to his family in Pakistan. This deal would be permissible only if Zaid
acquires spot possession of the Riyals at the time of making the contract.
Whether or not such a contract is permissible by local laws also needs to be taken
into consideration as otherwise it would be considered a violation of the local
law.
------------------------------------------------------------------------(ص) للعثمانی النقديۃ االوراق احکام -----------------1
(۴۰ص) حکم کا کرنسی اور نوٹ کاغذی
(٢۰؍٧( )ٹاؤن بنوری فتوی) الفتاوی احسن
(۰ص) االسالم فی الالربوی البنک
چہارم جلد مباحث فقہی جديد
163
SOME MISCONCEPTIONS AND CLARIFICATIONS 1. Some scholars assume that the credit sale of one currency with another
is usurious and hence illegitimate. For instance Omar sells $50 to Zaid
on credit. This would be Rs. 4,000 as per the exchange rate of Rs. 80 per
dollar. After five days Zaid wishes to return the amount but the
exchange rate has gone up to Rs. 83 per dollar. Zaid pays back the $50
as per the running exchange rate of Rs. 83. The additional Rs. 150 he
pays to Omar are considered Riba and hence illegitimate by some
scholars. In reality since the nature of both currencies differs, this excess
is allowed and will not be considered Riba even if it is in the form of
credit.1 Furthermore Zaid is obliged to return the $50 to Omar even at
the current rate since both parties had mutually consented to do this,
whether in the form of $50 or the Rupee equivalent. Therefore in terms
of value there is no increase over the principal amount.
2. Some scholars declare the credit sale of currencies as illegitimate.
According to them the exchange of currencies is Bay’Surf and requires
possession on both sides and spot exchange. These scholars do not
consider permissible any loan or credit in the exchange of currencies. In
context it is stated in the book ‘Shariah Standards’ (انؼبییش انؾشػیۃ):
۔۔۔۔۔۔ا یزى انزوبثل :رغوص انزبعشح كی انؼالد ؽشیطۃ يشاػبح االؽکبو واننواثو انؾشػیۃ اآلریۃ"
-"هجم رلشم انؼبهذی عواء کب انوجل ؽویویب او ؽکیب
“Trading of currencies is correct only if the following conditions is met;
the trading parties must exchange the currencies before concluding their
meeting, whether the possession is physical or legal.”2
It is also mentioned in ‘Tatoor Al-Naqood’ (رطوس انوود):
هیۃ انخزهلۃ وعت انؾهول وارا اخزهق انغغب کب یجیغ انزھت ثبنلنۃ او ثبنؼالد انوس"
"وانزوبثل وعبص انزلبمم
“In case where the nature of subject matter is different, like exchange of
gold for silver, or in case of paper currencies, which compulsorily need to
--------------صديقی ہللا نجات ڈاکٹر, از اشکال ، ء٢٢ جون، ، مئی ، اپريل شمارہ ،۵ص ونظر بحث رسالہ -------------1 بحرين ، والمراجعۃ المحاسبۃ ھیءة ، ھج۴،۵ص الشرعيۃ المعايير --------------------------------------------------------2
164
be in cash form, possession must be acquired by both parties; however
excess on any side may be allowed.”1
Any argument in this matter can be resolved by considering the fact that for
Bay’Surf it is mandatory for both parties to possess Saman-e-Khilqi. If either of
the two sides possesses Saman-e-Urfi (costmary) then the exchange will not
qualify as Bay’Surf. Additionally, possession by only one party will be required,
credit will be allowed, and only one side needs to acquire spot possession while
the other party has the option to wait for some time for the payment with mutual
consent.
It is stated in Ftah Al-Qadeer:
ط او انذساہى صى اكزشهب عبص انجیغ نواؽزشی يبءح كهظ ثذسھى وهجل انلهو: وكی ؽشػ انطؾبوی "
۔" الھب اكزشهب ػ ػی ثذی
‘It is stated in Shrah Tahavee that if a person purchases 100 Fuloos for 1
dirham and if either buyer or seller acquires possession of Fuloos or
dirham and the other party defers possession to a later time, then this
sale would be legitimate. This is because both parties have mutually
agreed on the exchange of one subject matter with the other.’ 2
In the above case Saman-e-Urfi is being exchanged with Saman-e-Khilqi.
Therefore possession by only one party is considered necessary. Allama Shami
(RA) has quoted three traditions with reference to this. Among these only the
one which confirms unilateral possession is accepted as appropriate by the
greater majority of scholars:
۔" كقبس انؾبفم ا يب كی االفم یلیذ اؽزشاهہ ي اؽذ انغبجی ويب كی انغبيغ اؽزشاهہ يھب"
“It can be extracted from Kitab Al-Usl that possession on only one side is
sufficient and Al-Jamia’ tells us that possession is mandatory by both
parties.”3
------------------------------------------------------------------------------(۴۵ص) االسالميۃ الشريعۃ ضوء فی النقود تطور 1 -------------------------------------------------------------------------------------------(٧۰؍۶) القدير فتح -------------------2 ------------------------------------------------------------------------------------------(۴؍٧) ردالمحتار -------------------3
165
Allama Shami (RA) further quotes from Bazazia:
:"عئم انؾبوری ػ ثیغ انزہت ثبنلهوط غئیۃ كبعبة ثبہ یغوص ارا هجل اؽذ انجذنی نب كی انجضاصیۃ"
‘Allama Hanuti (RA) was asked about the credit sale of gold against
Fuloos and he confirmed that it is legitimate but possession should at
least be unilateral. As stated in Bazazia, if a person purchases one
dirham for 100 Fuloos then it is sufficient for one party to acquire
possession. The case would be similar if gold and silver are sold for
Fulooos.’
Allama Sarkhasi concurs with this opinion:
وارا اؽزشی انشعم كهوعب ثذساہى ووذ انض ونى رک انلهوط ػذ انجبئغ كبنجیغ عبئض ، ال "
انلهوط انشائغۃ ص کب نوود ، وهذ ثیب ا ؽکى انؼوذ كی انض وعوثھبووعودھب يؼب والیؾزشه
"هیبيھب كی يهک ثبئؼھب نقؾۃ انؼوذ کب الیؾزشه رنک كی انذساھى وانذبیش
“When a person purchases Fuloos for dirhams and the Fuloos are not in
the custody of the seller, then it would be legitimate for him to pay
dirham to the seller. This is because Fuloos are Saman like cash. As
explained, the rule of contract of Saman is Wujoob or being mandatory
and Wodood or existence and the validity of the contract does not
require that the Saman be in the possession of the seller. The case would
be similar with transactions of dirham and dinar.” 1
In the light of the above statements, it is quite clear that it is not mandatory for
both parties to have possession of the subject matter even if Saman-e-Khilqi is
present on one side of the transaction. If instead of Saman-e-Khilqi, paper
currencies like Pakistani rupees or Saudi riyals are used on both sides, possession
would still be required by just one party for the same reason.
(۴؍۴) ھج۴۴ طبع ، دارالمعرفۃ ، لبنان ، بيروت( السرخسی الدين شمس)للسرخسی المبسوط -------------------1
166
SALE OF CURRENCY AT A RATE DIFFERENT THAN THE OFFICIAL
RATE
The next logical question in the discussion would be, whether or not it is
permissible to exchange currencies at rates different than those established in
the market by governments. For instance if the official rate is Rs. 80 per dollar,
then would it be legitimate for anyone to sell $1 for Rs. 83 or Rs. 77. When this
question is viewed in the light of the recently discussed principles, then there is
no problem with such an exchange. This is because different currencies differ in
nature and value. Therefore any exchange rate by mutual consent of both parties
is permissible. There is no prohibition on any such exchange by Shariah and
hence no variation in the rate of exchange which differs from the official rate of
exchange will be considered Riba. However there are certain other reasons why
such an exchange is not deemed permissible.
1. Such an exchange should be avoided as it is likely to be used as an
excuse for Riba.
2. Prices of some items are mandatorily fixed by governments. Currency is
one of these items and it is an important civic duty to obey these
fixations. Therefore:
a) It is a matter of principle for the public to follow all laws which are
not in violation with the Shariah
b) It is an understood social agreement between people and their
governments that they will abide by the laws established in that
society unless those laws contradict the Shariah in any manner.1
In some instances there are different exchange rates of the same currency
circulating in the same market. The details of this will be discussed later.
CREDIT SALE OF CURRENCIES OF DIFFERENT ORIGIN
The possibility of exchanging currency with similar currency with time difference
has already been discussed. The exchange of currencies of different origins is
also permitted on similar grounds. For instance if Omar loans $100 to Zaid for a
1 ---------------------------------------------------------------------------- (۴ص) کاحکم کرنسی اور نوٹ کاغذی
167
month and Zaid returns the amount in Pakistani rupees, then this exchange is
permissible under the following conditions:
1. Both parties agree at the time of the contract that the borrowed money
will be returned in a certain currency.
2. Though there wasn’t any such understanding at the time of the deal, the
creditor agrees to accept or the debtor agrees to return the money in
the requested currency at the time of return.
The second condition here is undisputedly correct. However the first condition
will have a condition of nullification as it is a credit based transaction. The
contract itself won’t be nullified but the condition of return in a certain currency
will be open to nullification. This means that Zaid can return the money in dollars
to Omar and is not bound to return the money in Pakistani rupees only. In the
first scenario, unless Zaid returns the amount in the same currency in which it
was borrowed, he will be required to pay in the different currency according to
the running exchange rate. For instance if at the time of loan the exchange rate
was Rs. 80 per dollar and the running rate at the time of return is Rs. 83 per
dollar, then Zaid is required to return the loan according to Rs. 83 per dollar if he
intends to pay in rupees. However if he is returning the money in dollars then he
will return $100 only. The Shariah rule regarding loans states:
"انوشوك رونی ثبيضبنھب"
“For a loan, payment should of equal value.”
According to Justice Taqi Usmani in the discussion on the issue of indexation:
"ال انوشوك یغت كی انؾشیؼۃ االعاليیۃ ا رونی ثبيضبنھب"
“It is important from the Shariah point of view that the payment of the
loan should be in equal value.” 1
This rule emphasizes that either Zaid pays $100 to Omar after a month or pays
him the rupees equivalent to $100 dollar as per the current exchange rate. It will
not be permitted for Zaid to insist on paying on the older exchange rate of Rs. 80
per dollar as then Omar will not receive an amount equal to $100. Similarly Omar
(ص)النقديۃ االوراق احکام ---------------------------------------------------------------------------------------------------1
168
cannot insist on an exchange rate higher than the market rate since this would be
in excess of the amount loaned and will qualify as Riba. In this context, there is a
difference between a loan and a sale transaction. In a sale transaction any
difference in the quantity being exchanged is allowed and will not qualify as Riba.
However, in cases of currency exchange this difference in quantity is not
permissible as per the above discussed reasons. For credit, any excess on either
side is prohibited and illegitimate.
To surmise, when the principal balance and the payback amount are in different
currencies, then the running exchange rate at the time of return has to be
upheld. Any variation in the payback amount which differs from the market
exchange rate will be considered an impermissible difference in the principal loan
which needs to be returned. Exchange rates can occur in the following three
forms:
1. Bank rate.
2. Open market rate.
3. A rate in between the above two.
Bank rates and open market rates differ slightly, giving trading parties a certain
limit within which the payback amount may be calculated. For instance if the
bank rate is Rs. 82 per dollar and the open market rate is Rs. 83 per dollar, then
the parties are allowed to mutually agree on an exchange rate which falls
anywhere between these two amounts. No rate beyond this range will be
permissible in currency conversion.
‘TWO WAY PROMISE’ IN INTERNATIONAL CURRENCY TRADE
Importers and exporters use the facility of foreign exchange core for their LC and
import/export contracts. This facility is greatly significant for traders as otherwise
it would be very difficult for them to estimate and prevent losses that can
potentially occur due to fluctuations in the value of foreign currencies. Here the
importer has to pay the supplier in the international market in dollars or some
other foreign currency. This payment is made after the importer receives the
required documentation from the supplier. But before any payments can be
made, the importer first has to acquire the required foreign currency. Similarly
169
the exporter also receives his money in dollars which he later sells in order to
purchase local currency.
In conventional interest or Riba based financial systems, importers and exporters
generally make a forward contract with banks under the following conditions
after opening the LC:
1. The duration of the contract is no less than one month.
2. If payments are made before a month’s time, then the spot interbank
exchange rates on the day of payment will be considered. According to
the standard process, forward contract is concluded automatically on
the predetermined date.
The conventional process of forward contract is as follows:
1. An importer is required to pay $1 million to a supplier in Taiwan after 90
days. However the importer does not know the exchange rate of dollars
in advance and hence cannot plan ahead. He is also not allowed by law
to directly purchase and hold this large amount of currency. Even if it
had been legal, it still wouldn’t be wide to block such substantial liquid
cash for 90 days which would rather be invested in business. For all
these reasons, he would prefer to avail the facility of forward contract as
offered by a certain local bank, referred to as Bank A.
2. It is now assumed that the spot exchange rate of a dollar is Rs. 80 on the
day of the contract. After the contract, Bank A purchases $1 million at
this rate from the open market and immediately sells it to Bank B at the
same rate under the condition that regardless of what the exchange rate
is after a month, Bank A will repurchase this amount back from Bank B at
the rate of Rs. 81 per dollar.
3. Bank A now makes a contract with the importer that after 90 days have
elapsed, the bank will sell him these dollars at the rate of Rs. 81.1 per
dollar. The additional Rs. 0.1 per dollar will be the bank fee for the
transaction. A question that can be raised here is why Bank A would
want to involve Bank B in the transaction when it could have dealt
directly with the importer at the same rate, earning Rs. 1 per dollar as a
profit.
4. There are two scenarios which are likely to emerge in this context:
170
a) After 90 days the importer pays Rs. 81.1 million to Bank A who in
turn pay Rs. 81 million to Bank B to purchase the dollars at the
predetermined rate. Rs. 0.1 million is the fee retained by Bank A
and the $1 million are provided to the importer. This concludes the
contract as per agreed conditions.
b) After 20 days, before the period of 90 days has elapsed, the
importer requests Bank A to cancel his contract. In this case he will
have to pay a penalty in rupees equivalent to the difference in the
agreed rate of Rs. 81.1 and the lesser of the following two amounts:
i. The market rate on the day of the cancellation of the
contract or
ii. The market rate of dollar when the contract was written
For instance, at the time of contract the exchange rate is Rs. 80 per dollar and
after 20 days it is Rs. 81 per dollar. At the time of contract the importer had
agreed to purchase the dollars at Rs. 81.1. After 20 days at the time of contract
cancellation the importer in required to pay Rs. 1.1 million ({Rs. 81.1 – Rs. 80 = Rs.
1.1} x 1 million) as a penalty.
This was the conventional interest based procedure of currency purchase for
international payments. The Shariah alternate for this addresses the important
issue of where the interest is in this process and how this is avoided in Islamic
bank processes. According to Shariah analysis, the importer made a contract to
purchase the dollars before 90 days which brings the dollars in his constructive
possession. However, since he hasn’t yet paid yet, therefore these dollars will
qualify as a loan. In case of cancellation of the contract, the penalty will become
an excess over this loan and will hence qualify as Riba. The following steps are
taken by Islamic banks in order to counteract this issue:
Step 1: The importer contacts the Islamic Bank with the same request. The
Islamic Bank now contacts Conventional Bank for a ‘Two Way Promise’, which is
different than a contract. Under the ‘Two Way Promise’ Islamic Bank agrees to
purchase $1 million from Conventional Bank at a rate of Rs. 81 per dollar after 90
days. The present exchange rate is Rs. 80 per dollar and Conventional Bank
purchases this amount from the market immediately so that it can be sold to
Islamic Bank after 90 days.
171
Step 2: Islamic Bank and the importer now enter a ‘Two Way Promise’ that after
90 days the importer will purchase $1 million from Islamic Bank at the rate of Rs.
81.1 per dollar so that Rs. 0.1 is the bank’s profit over each dollar. Here there are
no questionable issues related to the first step. However in the second step,
Islamic Bank will proceed as follows:
1. Islamic Bank will enter into a Forward Contract with Conventional Bank
that it will sell the $1 million no longer required by the importer after 90
days to Conventional Bank. It is assumed that the predetermined rate of
exchange between the two banks is Rs. 79 per dollar.
2. Islamic Bank will charge a penalty from the importer over the violation of
the ‘Promise’. As mentioned earlier, this ‘Promise’ differs in nature from
a conventional contract. The amount of penalty will be equal to the loss
incurred by Conventional Bank at the rate of Rs. 2 per dollar (Rs. 81 – Rs.
79).
3. After 90 days have elapsed, Islamic Bank will purchase the dollars at a
rate of Rs. 81 per dollar and will then sell it to Conventional Bank at Rs.
79 per dollar.
In the conventional method, the sale contract legally obliges both parties to
transact at a future date. This is not allowed as per Shariah rulings and it also
contains the anomaly of Bay’A’ina or credit sale. The alternate process proposed
by Islamic Bank does not contain this anomaly and also avoids sale contract for a
future date. As an alternative, it employs the approach of a ‘Two Way Promise’.
Sale contracts for future dates are prohibited in Shariah. However there is a
disagreement of scholars over the issue of trading parties promising to do a
contract at later dates and then charging penalties in case of violation. There are
two viewpoints in this regard:
1st
Opinion: The party who breaks the promise is not obliged to pay any penalty
or compensation to the other party. This viewpoint is established in all five
conferences of Majma’ Al-Fiqah Al-Islami in Jeddah. The basis of this viewpoint is
the verdict of Imam Malik (RA) in which he declares illegitimate ‘Two Way
Promises’ of all such matters or contracts which do not take place at the current
time but are expected to conclude in the future. For instance in Shariah the sale
of edible items is prohibited before they come into the possession of the seller
due to the possibility of uncertainty. Hence ‘Two Way Promises’ are also not
172
applicable here. However there are two opposing verdicts on this issue; one
which declares such contracts impermissible and one which deems it permissible.
According to Aezah Al-Masalik (اینبػ انغبنک):
االفم يغ انواػذح ثب ال یقؼ وهوػہ كی انؾبل ؽبیۃ ۔:انوبػذح انخبيغۃ وانغزو "
نہ ووهذ ذاء انغؼہ وػهی يبنیظ ػذک وي صى يغ يبنک انواػذح كی انؼذح وػهی ثیغ انطؼبو هجم هج
۔وكی انقشف يؾہوسھب انغ ،وصبنضھب انکشاھۃ وؽہشد اینب نغواص كی انؾبل وؽجھذ ثؼوذ كیہ رؤخیش
"وكغشد ثہ انذوۃ1
:وكی انووای انلوہیہ
۔"انلشع انخبيظ یکش انوػذ كی انقشف ػهی انؾہوس وهیم یغوص وهیم یغ"2
:العاليیهشاساد يغغ انلوہ ا
انواػذح وھی انزی رقذس ي انطشكی رغوص كی ثیغ انشاثؾۃ ثؾشه انخیبس انزواػذ ی کهیھب :صبنضب "
اواؽذھبكبرا نى یک ھبک خیبس كبھب الرغوص ،ال انواػذح انهضيۃ كی ثیغ انشاثؾۃ رؾجہ انجیغ ثلغہ ،ؽیش
ػ ثیغ االغب يب ملسو هيلع هللا ىلصھبک يخبنلۃ ھی انجی یؾزشه ػذ ئز ا یکو انجبئغ يبنکب نهجیغ ؽزی الرکو
۔"نیظ ػذ3
The Shariah council of ھیءح انشاعؼۃوانؾبعجۃ نهئعغبد انبنیۃ االعاليیۃثؾشی also concurs
with this verdict:
ھیءح انشاعؼۃوانؾبعجۃ نهئعغبد انبنیۃ االعاليیۃثؾشی کی يغهظ ؽشػی ے ثھی اعی کو اخزیبس
:ب ہےکی
الھب (انئعغۃ وانؼیم )ال یغو ص ا رؾزم وصیوۃ انوػذ او يب كی ؽکھب ػهی يواػذح يهضيۃ نهطشكی "
یغوص افذاسانواػذح ي انئعغۃ وانؼیم اآليش ثبنؾشاء (/)جیغ لغہ هجم انزهک ۔رؾجہ ؽیئز ػوود ان
۔" ارا کبذ ثؾشه انخیبس نهزواػذی کهیھب او اؽذھب4
In the same context, it is mentioned in انؼبییش انؾشػیۃ Arabic:
رؾشو انواػذح كی انزبعشحكی انؼالد ارا کبذ يهضيۃ نهطشكی ونوکب رنک نؼبنغۃ يخبهش ھجوه "
۔"انؼهۃ، ايب انوػذ ي هشف واؽذ كیغوص ونوکب يهضيب5
ء٢۰اول------ طبع ، االسالمی التراث رباط، ، امارات عرب متحدہ( يحی بن احمد العباس ابو) الونشريسی المسالک، ايضاح ----1
(٧۰ص) اول طبع ، دارالقلم ،بيروت ، ھ ٧۴ متوفی المالکی الجزی احمد محمد بن محمد القاسم ابو) الجزی ، الفقہيۃ القوانين 2
(۶۶ص)ء٢٧٧ -----------------------------------------------------------------------العربيہ السعوديہ ، جدہ۴؍۴ قرار قرارات، -------------------3 --------------------------------------------------(۶) بحرين بالشراء، لآلمر المرابحۃ لصيغۃ الشرعيۃ المتطلبات ------------------4 ---------------------------------------------------------------------------(۰ص) ، بحرين ، الشرعيۃ المعايير -------------------5
173
It is further stated in the same book:
1انهضيۃ كی يجبدنۃ انؼالد ھو يبػهیہ عہوس انلوہبء ۔ ال انواػذح انهضيۃ ي هشكی رؾشیى انواػذح"
"رؾجہ انؼوذ انخ انجبدنۃ
An analysis of the opinions of various scholars discussed above establishes a ‘Two
Way Promise’ to be an illegitimate contract. This is because it is akin to a sale
contract in which the item or subject matter promised to be sold is not yet in the
possession of the seller and the sale is conditioned to occur in the future. Such
contracts are undisputedly illegitimate.
2nd
Opinion: According to this opinion, any penalty or compensation in a ‘Two
Way Promise’ is allowed if the promise is violated by either party. This point of
view is held by the Hanafi and the Shafi’i scholars as stated in the following
statements:
:كزبوی خبیہ ػهی ھبيؼ انھذیۃ
وا رکشا انجیغ ي ؿیش ؽشه صى رکشا انؾشه ػهی وعہ انواػذح عبص انجیغ ویهضيہ انوكبء ثبنوػذ ال "
۔"عۃ انبطانواػذح هذ رکو الصيۃكزغؼم الصيۃ نؾب2
:وكی ؽشػ انغهۃنالربعی
وا رکش انجیغ ي ؿیش ؽشه صى انؾش ه ػهی وعہ انواػذح كبنجیغ عبئض ویهضو انوكبء ثبنوػذ ال انواػیذ "
هذ رکو الصيۃكزغؼم الصيۃ نؾبعۃ انبط ۔۔۔۔۔۔۔وهبل
ضو انوكبء وهذ یهضو انوػذ وا رکش انجیغ ثال ؽشه صى رکش انؾشه ػهی وعہ انواػذح عبص انجیغ ون: ثؼذ اعطش
-"كیغؼم ھب الصيب نؾبعۃ انبط انیہ3
According to Tatoor Al-Naqood ( انوود رطوس ):
ھی انواػذح ػهی انقشف ورنک ثب یزلن انؼیم يغ انقشف ػهی ا یؾزشی يہ : انقوسح انخبيغۃ "
عزشنیی او ثبنشیبل ، كبرا ؽم االعم اننشوة نهقشف اثشيب ػوذ ثؼذ ؽہش يضال وذا ثبآلخش کبنذوالس ثبال
انقشف ثیھب وروبمبثبنغؼش انؾبمش۔
ویهغؤانزغبس ػبدح انی ھز انقوسح العزخذايھب كی ػهیبد االعزیشاد وانزقذیش ؽزی ینوا رغھیض انؼهۃ
االعجیۃ انالصيۃ نهوكبء ثبنزضايبرھى انغزوجهۃ۔
نقؾۃ نوعود ؽویوۃ انقشف وؽشهہ وانواػذح انغبثوۃ عبئضح الؽئی كیھب ػذ اکضش ا: وؽکى ھز انقوسح
وارا رواػذ انشعال انقشف كالثؤط ا یؾزشی : انؼهبء ، وي ـ ػهی ھزا انؾبكؼی سؽہ للا ؽیش هبل
ؽضو انشعال انلنۃ صى یوشاھب ػذ اؽذھب ؽزی یزجبیؼبھب ویقؼب ثھب يبؽبء ا، کب ـ ػهی رنک اث
-------------------------------------------------------------------------------------(۵ص) الشرعيۃ المعايير --------------------1 -----------------------------------------------------------------(۶۵؍) العالمگريہ ھامش علی الخانيہ الفتاوی ------------------2 --------------------(۴۵؍) اسالميہ مکتبہ ، کوئٹہ ، پاکستان( االتاسی خالد محمد العالمہ) االتاسی ، المجلۃ شرح ----------------3
174
وانزواػذ كی ثیغ انزھت ثبنزھت او ثبنلنۃ وكی ثیغ انلنۃ ثبنلنۃ وكی عبئش االفبف االسثؼۃ ثؼنھب : كوبل
ثجؼل عبئض رجبیؼب ثؼذ رنک اونى یزجؼبیؼب الہ نى یؤد ہی ػ ؽئی ي رنک ۔۔۔۔۔ والدنیم نجؼل انبنکیۃ
-"ػهی کشاہۃ ھز انواػذح اوكغبدھب1
The summary of these statements confirms that the scholars from these two
schools of thought consider it appropriate for both parties to establish a ‘Two
Way Promise’ and also pay any compensation or loss incurred if this promise is
violated. This point of view is also shared by Sahib-e-Itar Al-Hadiya ( فبؽت ػطش
.(انھذایہ2 Justice Mufti Taqi Usmani concurs with the opinion and states:
وا ػجبسح هبمی خب سؽہ للا ثقلۃ خبفۃ فشیؾۃ كی ا انواػذح یک ا رغؼم الصيۃ ػذ انؾلیۃ "
الثؤط ثغؼهھب الصيۃ ػذ انؾلیۃ نؾبعۃ انبط ، نؾبعۃ انبط،وانواػذح اب رکو ي انطشكی كزجی اہ
"والؽک ا انؾبعۃ كی انضاو انواػذح ظبہشحانخ
“The statement of Qari Khan Sahib is appropriate in a specific context
that the ‘Two Way Promise’ has been allowed by Hanafi Scholars for the
sake of need of public. This is further confirmed that this kind of promise
is due to ‘Tarfeen’ as this is indeed for peoples’ need, and there is no
doubt that the requirement for allowing it is very clear.”3
ANALYSIS AND PREFERENCE OF THE SECOND VIEWPOINT The second viewpoint is preferred by the author as well, since the matter is not
Mansoos (منصوص) but Ijtihadi or a Shariah compliant innovation in rules. Hence
considering the need of the time, the compensation of loss has been permitted in
a ‘Two Way Promise’. This will however apply only when one party in the
contract is genuinely suffering a loss because of the other. The first viewpoint
compares the two way promise with future contract of items which are not in the
possession of the trading parties. This comparison is not very sound because the
rules and consequences in the case of a contract differ. These differences are as
follows:
1. A promise is just a kind of assurance by both parties to each other that
they will bind themselves into a contract in the near future. This means
---------------------------------------------------------------------------------------(۴۰ ص) النقود تطور -------------------1 --------------- يوپی ، ديوبند القرآننشر مکتبہ( لکھنوی صاحب محمد فتح موالنا بحرالعلوم) لکھنوی ، الھدايۃ عطر -------------2
(۴۵تا۴ص)ھندوستان۔ ---------------------------------------------(۴ص) کراچی دارالعلوم جامعہ مخطوطہ، ، والمناقصۃ التوريد عقود ----------------3
175
that both parties will conduct a transaction as per the promise on a
predetermined date.
2. The ownership of the subject matter is shifted to the buyer immediately
after he signs the contract. In the sale of a future sale contract, the
subject matter comes into his constructive ownership. Physical
ownership is acquired only after the buyer makes the payment to the
seller against the subject matter.
For instance if a person purchases a house or a car and promises to pay the
required amount at a later time, he becomes a creditor immediately after signing
the contract and the asset will be considered in his ownership. Consequently all
laws which are applicable on a creditor will be applied to him; he will not be liable
to pay Zakat over the amount he owes to the seller and if he becomes a defaulter
due to unforeseen circumstances, he will be treated accordingly.
Contrary to this a ‘Two Way Promise’ does not pass on the ownership of any item
or asset to the other party. Hence none of the same laws or consequences are
applicable here as in the previously discussed case. If as per their promise, both
parties agree to enter a contract on the decided time, then the appropriate rules
and regulations will become applicable on them. 1
EFFECTS OF PENALTY IN A TWO WAY PROMISE Penalty is a way of forcing both parties to honor their promise and refrain from
violating it. If the promise is broken by either party for any reason, then as per
the law the violator will be bound to compensate for the losses incurred by the
other party. This is supported by the following Hadith:
"المشس والمشاس كی االعالو"
“There is no harm in Islam and also it doesn’t allow harm to others.”2
The above analysis and discussion confirms that the ‘Two Way Promise’ is the
preferred way of currency exchange in conducting international monetary
transactions.
--------------------------------------------------------------------------------(۵ص) والمناقصۃ التوريد عقود ------------------1
---------------------------------------------------------------------(۰؍) الھدايۃ احاديث تخريج فی الدرايۃ -----------------2
176
A NEW INTERNATIONAL MODE OF CURRENCY TRADE
The business of currency trade has expanded exponentially where the current
total size of the currency market trading is in trillions of dollars. According to
some estimates, this makes it the largest business in the world. The sale or
purchase decision of any currency in this business is based on the fluctuation of
currency prices in the international market. These fluctuations depend upon the
health of the respective economies to which the currencies belong. This
information is generally published from the USA and is available on the Internet
in real time. However, individuals cannot trade in currency directly but have to
go through different brokerage houses and their agents. The details on this have
already been discussed in the last chapter that any person can become a member
of client of a brokerage house by submitting a fee of say $1,000 which would be
5% of the lot size of the dollar currency. After gaining membership, the person
can ask the agent to purchase a lot of say $200,000 on his behalf. In other words,
he has been allowed to purchase a lot only on the basis of the 5% of the total
amount which he invested as token money. After doing so, the client can trade it
as he pleases.
The main objective of the trader or the client is to maximize his profit and
minimize any possible losses. In order to do so he also continually refers to the
opinions of experts in the field on how different currencies are likely to fluctuate
in the near future. In addition to this, he keeps an eye on the news about the
economies of different countries and the health of their currencies. He also
keeps track of the exchange rates to help forecast expected future values of
various currencies in the near future. After a detailed analysis of the market, he
decides to purchase or sell his ‘lot’ of currency and informs his agent on his
decision. As obvious, physical possession of the lot never occurs here and only a
constructive ownership of the lot is transferred to the client in such a way that he
reaps the profit or bears the loss which incurs due to the fluctuation of the value
of the respective currency. For instance if a person purchases a ‘lot’ of dollars at
an exchange rate of Rs. 81 per dollar and sells this lot at the rate of Rs. 81.1 per
dollar, this yields him a profit of Rs. 0.1 per dollar or Rs. 20,000 over trading the
lot of $200,000. Similarly if the value of the dollar declines to Rs. 80.9 per dollar
than a loss of Rs. 0.1 is incurred.
177
The agents in the business offer certain facilitations to the trader or client which
allows him to ‘trade’ single lots. These facilitations include:
1. Trading on a phone call.
2. Access to the market where the trading is performed.
3. Access to required information through the Internet.
4. A grantee for say $200,000.
On each trade the agent receives a fixed fee regardless of whether the client
earns a profit or suffers a loss. If for instance a client waits for five days before
selling his lot, he has to pay $20 per day to his agent who makes $100 in five days.
Such business deals are not permissible from the Shariah point of view for the
following reasons:
1. The lot is not specifically allocated to the client and its value is just
written on the client’s account. Only the profit and loss incurred during
the trading is received by the client. This makes this transaction a form
of gambling.
2. For constructive ownership of currency, it is not sufficient that only the
profit or loss incurred due to fluctuating exchange rates be borne by the
client. The necessary condition here is that either the client or his agent
takes the physical possession of the currency so that if the currency is
destroyed or stolen due to unforeseen circumstances, the client would
be liable for the loss. Also from the Shariah point of view, any item
other than currency such as cereals may be valued on the basis of
information available about their specification. For instance the value of
wheat can be determined from its quantity, date of production or
remaining shelf life etc. Contrary to this, currency cannot be valued
unless and until its possession has been acquired by the client or his
agent.
3. In the process of trading described above, the client only pays $1,000
while the remaining is paid by the agent. This means that the client is
indebted by an amount of $199,000 in an lot size of $200,000.
Furthermore the client also doesn’t acquire the ownership of the lot as
required by Shariah hence making the agent liable to pay the required
amount to the client. This creates a situation equivalent to the sale of
debt for debt (ثیغ انکبنئی ثبنکبنئی) which is prohibited in Shariah.
178
4. The fee which the agent charges over the lot amount qualifies as Riba
since the lot amount is basically a credit given to the client. Secondly,
this fee is a ‘guarantee fee’ ( انکلبنہاعشد ػهی ) from the Shariah point of
view. Both these conditions are not acceptable as per Shariah rulings.
179
CHAPTER-7: VALUE OF MONEY
As discussed earlier, the value of paper currency in prior times was pegged to the
value of gold and silver. Later when paper currency was no longer backed with
gold or silver, its potential to purchase goods and services became the standard
of its value. This is generally referred to as ‘purchasing power’ or انؾشائیۃانووح in
Arabic. Today money does not possess any intrinsic utility where unlike gold and
silver it cannot be used for making utensils, jewelry, or microprocessors. Silver
has been known for its antibacterial properties since ancient times and even at
present it is used as a raw material in a variety of sterilization tools and utensils in
industrial and domestic settings. To the contrary paper currency has never
possessed such redeemable properties and its sole use has always been as a
medium of exchange in trade.
The value of money is also a function of its demand and supply relative to that of
other goods and services. When over a period of time a greater quantity of
money is needed to purchase a certain commodity, then its value or purchasing
power is said to have decreased. If the case is to the contrary where less money
is required to purchase the same commodity, then the value or purchasing power
is said to have increased. For instance, if in 2007 a certain item was priced at Rs.
100 and if in 2008 the same item had the price tag of Rs. 120, then it is concluded
that the value of Rupee has decreased. This indicates that the cost of
commodities or services have an inverse relationship with the value of money.1
---------------------------------------------------------------------------------(۴٧ص) زروبنکاری تعارف ------------------1
(۴٧؍) معاشيات کتاب
(٧ص) النقديۃ االوراق احکام
(۴۵ص) حکم کا کرنسی اور نوٹ کاغذی
: والبنوک النقود فی مقدمۃ
(۶٧ص)‘‘ودللنق الشرائيۃ القوة ۔ای والخدمات السلع بسائر المبادلۃ فی النقود سلطان عن عبارة بانھا النقود قيمۃ’’
180
TYPES OF FLUCTUATION IN VALUE OF MONEY
Fluctuation in money values is not a recent phenomenon but has been
experienced ever since money has been in use. For this reason jurists have done
detailed discussions on this subject in countless books and related texts. These
discussions will be reviewed here thoroughly in order to derive Shariah compliant
rules and regulations for trade during inflation and deflation. An overview of
these discussions is also necessary since the fluctuation of the value of currency
has serious implications for the overall economic health of any given society. In
context of fluctuations, the following four types are generally observed:
1. Inqita’-e-Zar or Forfeiture.
2. Kasad-e-Zar or Depression.
3. Ifrat-e-Zar or inflation.
4. Tafreet-e-Zar or deflation.
FORFEITURE OR INQITA’-E-ZAR
In jurisprudence, forfeiture refers to a situation where money is pulled from the
market and is held by money changers or by the general public. Allama Shami
(RA) defines it as follows:
"وا وعذ كی یذانقیبسكۃ وانجیود انخا الیوعذ انوذ كی انغوم "
Introduction to Economic Principles, Page-332
The Theory of Money and Credit, Page-117
Purchasing Power
Prices of Goods and
Services
181
"If money is not found in markets but is held by money changers or in the
homes (of general public)."1
According to Allama Zarrkani and Bnani:
"هوط ۔ؽی انوجل كی ؿیشھباہ االؼذاو عهۃ كی ثهذرؼبيم انزؼبهذی وا وعذد۔انل"
‘Forfeiture is a condition in which money disappears from the city where
it is needed and Fuloos is available at the time of possession in some
other city.’ 2
OPINIONS OF JURISTS OF DIFFERENT SCHOOLS ON IMPLICATIONS OF
FORFEITURE ON TRADE According to Imam Abu Hanifa (RA), forfeiture renders a sale contract null and
void. However certain other scholars and the three other Imams (RA) differ in
opinions;
According to Allama Shami (RA):
: یلغذ انجیغ ، وهیم : ا اوطؼذ ثب الروعذ كی انغوم ونووعذد كی یذ انقیبسكۃ او كی انجیود ، كویم "
-"رغت كی آخش یوو االوطبع وھو انخزبس
"In a situation of forfeiture, i.e. if money is not available in the markets
though available at money changers or is in personal custody of public
then the sale contract will be considered as null and void. Now the price
and payment of the item being sold becomes compulsory (i.e. payment
should be made to the seller) according to the value of money identified
on the day the forfeiture occurred. This verdict is the most preferred."3
He further states:
-"كب اوطغ رنک كؼهیہ ي انزہت وانلنۃ هیزہ كی آخش یوو اوطغ وھو انخزبس"
1--------------------------------------------------------------------------------------------------------------- (۴؍٧) ردالمحتار----------------------------------------------------------------(۶؍۵) البنانی بحاشيۃ خليل علی انیالزرق شرح -----------------2
دوم طبع--- ، دارالمعرفۃ ، بيروت( عابدين بابن المعروف امين محمد عالمہ)،شامی الحامديۃ الفتاوی تنقيح فی الدريۃ العقود ---3
(۰؍)
182
"If money is gone then the payment in gold and silver (coins) is
compulsory for him (buyer) as per the value of money identified just
before the occurrence of forfeiture and this is an appropriate rule." 1
Allama Shami (RA) writes in one of his magazines:
-"وا اوطغ ثؾیش الیوذس ػهیھب كؼهیہ هیزھب كی آخش یوو اوطغ ي انزھت وانلنۃ ھو انخزبس"
"In case of forfeiture, when money is nowhere to be found, it is
compulsory for him (buyer) to make the payment in gold and silver, as
per the value of money identified just before the forfeiture occurred. This
is a correct rule."2
He further states in the same magazine:
-"وا اوطؼذ رهک انذساہى انیوو کب ػهیہ هیۃ انذساہى هجم االوطبع ػذ يؾذ وػهیہ انلزوی"
"If dirhams are completely gone today, then before this disappearance
the price of dirham is compulsory on him (buyer). This is the opinion of
Imam Muhammad (RA) and there is also a Fatwa attesting to this."3
Imam Abu Yousuf (RA), Imam Muhammad and the three other Imams agree that
the price of goods or services established just before the forfeiture is the
compulsory and fixed price for payment and the sale contract remains intact.
There is however a disagreement regarding the ‘occasion’ which needs to be
considered in order to determine this price. According to Maliki scholars, the
payment is mandatory as per the price and the value of money identified at the
time that the purchase decision was made. For Shafi’i scholars the payment
should be as per the value at the time the seller demands the payment from the
buyer. In case of Bay’Moa’jjal or credit sale, the payment is to be made as per
the value of money at the time the payment is due. For Hanbali scholars and
Imam Muhammad (RA), the right price is the one valid on the day before the
forfeiture. For Hanbali scholars the payment is mandatory in the exact equivalent
of the currency or Misl such as gold and silver if available. For Imam Abu Yousuf
--------------------------------------------------------------------------------------------(۴؍٧)حتارالم رد -------------------1 ----------(۵۰؍) ء٢٧۶ اکيڈمی سھيل الہور،پاکستان، ، عابدين ابن رسائل ضمن ، النقود مسائل علی الرقود تنبيہ -------------2 ----------------------------------------------------------------------(۵٧،۶؍)النقود مسائل علی الرقود تنبيہ ------------------3
183
(RA) the payment is to be made as per the value of money valid on the very day
of the contract. In short:
Imam Abu Hanifa: The contract will be considered null and void.
Imam Malik: The valid price will be the one determined at the time of
the purchase decision.
Imam Shafi’i: The price valid at the time the payment is due or is made.
Imam Hanbal and Shafi’i: The price valid just before the time of the
forfeiture.
Imam Abu Yousuf (RA): The valid price will be the one at the time the
payment for the contract is being made.
According to Allama Shami (RA):
وايب انکغبد واالوطبع كبنزی یظہش ا انجیغ الیلغذ اعبػب ارا عیب وػبيہ ورنک الھى رکشواكی انذساہى "
هول انقبؽجی ثؼذيہ وھو هول : هول اثی ؽیلۃ ثبنجطال وانضبی : االول: انزی ؿهت ؿؾھب صهضۃ اهوال
: یوو االوطبع ، وكی انزخیشح: ی واؽذ ، نک هبل اثویوعق ػهیہ هیزھب وهذ انجیغ وهبل يؾذ انؾبكؼ
-"انلزوی ػهی هول اثی یوعق وكی انززۃ وانؾزبس وانؾوبئن ثوول يؾذ یلزی سكوبثبنبط
"At the time of forfeiture or depression the sale contract is not rendered
as null and void as per see, when the parties specify a particular form of
money, as there are three verdicts of jurisprudents in case if dirhams are
falsified. Imam-e-Azam (Imam Abu Hanifa RE) declares it (the contract)
as null and void, and the other scholars declare it otherwise. Same is the
opinion of Imam Shafi’i and Imam Ahmed.
Imam Abu Yousuf (RA) states that the price decided at the time of
contract is obligatory, and Imam Muhammad (RA) states that the price
which was identified just before forfeiture is compulsory. Fatwa stated in
'Zakhira' is based on the verdict of Imam Abu Yousuf (RA) and the Fatwa
which is stated in 'Tatimma Muhtar' and 'Haqaiq' is as per the verdict of
Imam Muhammad (RA), which is for the sake of the ease of public."1
THE BASIS OF THE VERDICT OF IMAM ABU HANIFA:
According to Imam Abu Hanifa, if there is no longer any money, then Saman has
also been abolished. Since Bay’ or sale is not possible without Saman, therefore
--------------------------------------------------------------------------(۶؍) النقود مسائل علی الرقود تنبيہ --------------------1
184
the contract will be rendered null and void. In the same context, Imam Abu
Yousuf (RA) focuses on the time of the contract because he believes that the
buyer is obliged to pay what was agreed at the time the contract was made.
Therefore the value of money at the time of contract is considered a critical point
in payment by Imam Abu Yousuf (RA). According to Imam Muhammad (RA), the
value of money at the time of forfeiture should be the one considered for
payment. This is because the buyer is handicapped just after the forfeiture but
was able to pay just before it. Therefore as per Imam Muhammad (RA), the time
just before the forfeiture is considered in determining the payment value.
MALIKI SCHOOL OF THOUGHT:
There are two opinions in the Malikia school of thought on the issue:
a) The time of the decision of trade by the buyer and seller is considered.
b) Whichever of the following two occasion is further away is considered:
i) The time when the payment was due.
ii) The time when the forfeiture occurred.
ا ػذيذ انلهوط ثبنکهیۃ كی ثهذ انزؼبهذی وا وعذد كی ؿیشھب ، : كی انؾشػ انکجیش وؽبؽیۃ انذعوهی"
يبهیۃ انؼؾشح ي : كبنویۃ واعجۃ ػهی ي رشرجذ ػهیہ يب رغذدای یذكؼھب يبرغذدوظہش ي انؼبيهۃ ، كیوبل
، يضالكیذكغ انذی صبیۃ ي رهک انذساہى صبیۃ دساہى : انذساھى انزی ػذيذ ثھز انذساہى انزی رغذدد كیوبل
اصب ػؾش ، دكغ اصی ػؾش يھب وھکزا: هیزھب : انزی رغذدد وارا هیم
رؼزجش انویۃ وهذ اعزبع االعزؾوبم ای انؾهول ویوو انؼذو ، كبنؼجشح ػذ ثبنزبخش يھب ، كب : وهبل خهیم
بہش ، وا روذو اؽذھب ػهی اآلخش كبنؼجشح کب انؼذو واالعزؾوبم ؽقالكی وهذ واؽذ ، كباليش ظ
ثبنزبخشيھب ارالیغزؼب االكی وهذ انزبخش يھب ، كب اعزؾوذ صى ػذيذ اػزجشد انویۃ یوو انؼذو ،
وا ػذيذ صى اعزؾوذ اػزجشد انویۃ یوو االعزؾوبم ، ونى یزکش انخهیم انوول انؼزذ۔
ا ػذيذ كبنواعت ػهی ي رشرجذ ػهیہ : وو انؾکى ۔۔۔وهبل انخشؽیانؼزذ ا انویۃ رؼزجش ی: وهبل انذسدیش
هیزھب يب رغذد وظہش ، ورؼزجش هیزھب وهذ اثؼذ االعهی ػذ رخبنق انوهزی ي انؼذو واالعزؾوبم ۔۔۔وكی
وھزا کهہ ػهی يخزبس انقق خهیم ھب رجؼبالث انؾبعت رجؼب نهخی واث يؾشس ، وانزی : ؽشػ انضسهبی
وھو انقواة وهبل : س اث یوظ واثو ؽلـ ، ا انویۃ رؼزجش یوو انؾکى ، هبل اثو انؾغ انؾبرنیاخزب
-"وھو ظبہش انذوۃ: انجشصنی1
From the above statement, it can be concluded that the first opinion is more
established and authentic in the Maliki school.
-----------(۶؍۵) خليل مختصر علی الزرقانی شرح ،( ۵۵؍۵) الخليل علی الخرشی ،(۴۵،۴۶؍) قیالدسو حاشيۃ --------------1
185
OPINION OF THE SHAFI’I SCHOLARS: According to the Shafi’i scholars, if Misl or alternative mode of payment is not
available then the payment value before the forfeiture will be considered valid.
However if an exact Misl is available, then spot payment is compulsory via the
alternative mode of payment. For instance, dirham and dinar are the Misl for
Fuloos or two fifty rupee notes are Misl for a single hundred rupee note.
Allama Ramli (RA) states in this context:
-"كب كوذ ونہ يضم وعت واالهیزہ وهذ انطبنجۃ"
‘If money is no longer available and if the exact alternate or Misl for it is
available then spot payment becomes compulsory. If Misl is not
available, then the value at the time just before the forfeiture will be
mandatory on the buyer (at a later time).’ 1
According to Ibn Hajra Al-Haetmi (RA) states:
-"انضهی ونو وذا اثطهہ انغهطب الہ اهشة انی ؽوہویشد وعوثب ؽیش االعزجذال انضم كی "
"The payment must be made in an alternate currency (like dollars) if the
governor cancels the local money, as this protects the rights of the
seller."2
In the words of Allama Seoti (RA):
ا ػذيذ انلهوط انؼزن كهى روعذ افالسعغ انی هذس هیزھب ي انزہت وانلنۃ ، ویؼزجش رنک یوو انطبنجۃ "
-"انخ
"If old Fuloos disappears and become extinct, then the payment will be
due in gold and silver as per the value identified just before forfeiture."3
OPINION OF HANBALI SCHOLARS:
التراث احياء ، بيروت( ھج۴ المتوفی الرملی العباس ابی بن محمد الدين شمس) الرملی ، المنہاج شرح الی المحتاج نہايۃ -------1
(٢٢؍) العربی ------------------------(۴۴؍۵()الشافعی الھيتمی حجر بن احمد عالمہ) الھيتمی ، الشروانی شيۃحا مع المحتاج تحفۃ --------------2 3------- -------- المکتبۃ ، بيروت( ھج ٢ المتوفی السيوطی بکر ابی بن الرحمن عبد الدين جالل عالمہ) السيوطی ، للفتاوی الحاوی
ھج۴ اول طبع ، العصريۃ
186
The opinion of the Hanbali scholars is similar to that of Imam Muhammad (RA);
the value just before the forfeiture will be considered valid. Allama Bahoti (RA)
states in this context:
ػوص انؾئی ػوصا ي رؼت ػض كهى یوعذ ، واػوصی انطهوة يضم : كب اػوص انضم هبل كی انؾبؽیۃ"
اػغضی نلظب ويؼی ، نضو انوزشك هیزہ ، ای انضم یوو اػواص ، الھب ؽیئز صجزذ كی انزيۃ ، ویغت ػهی
۔"ہ کبنـقتانوزشك سد هیۃ يبعوی رنک ای انکیم وانوصو الہ اليضم نہ كن ثویز
“If the alternate is also nullified … then the debtor will be obliged to pay
the exact equivalent (Misl) of the amount which was valid at the time
just before forfeiture. Payment will also be due for those items which are
not priced on the basis of their weight, length or volume. (In cases of
non-payment) this matter will be considered similar to ‘Ghasab’ (theft).”1
DEPRESSION
Depression occurs when the public loses confidence in the currency to such an
extent that they stop using it entirely. Allama Ibn-e-Abedeen states:
-"ا رزشک انؼبيهۃ ثھب كی عیغ انجالد: وانکغبد "
‘Depression occurs when the use of money is discontinued from all
cities.’ 2
Depression differs from forfeiture in the sense that in forfeiture money
disappears or is withdrawn from the market. To the contrary, in depression the
money remains in the market but is not used. This phenomenon also evaporates
the Samaniat of Zarr-e-Istilahi or fiat currency and places it into the category of
goods. The scholars from the Hanafi School have similar rules for dealing with
forfeiture and depression:
1. For the Hanafi scholars, existing contracts become null and void when
depression occurs. However if money is still being used even if just at a
few locations, then some Hanafi scholars agree to the validity of
contracts while others maintain that these contracts will be rendered
ھج٢۴- الحکومۃ مکتبۃ ، المکرمۃ مکۃ ، ھج۴۶ المتوفی البہوتی يونس بن منصور)البہوتی القناع،ا متن عن القناع کشف -----1
(؍) ------------------------------------------------------------------------------------------- (۴؍٧) ردالمحتار -------------------2
187
void. When contracts are considered void and the subject matter is still
available then the buyer has to return it to the seller. If the subject
matter is not available due to consumption or sale to another party, then
there are two possible conditions:
a) If the item in question is measurable or weighable such as 5 kg
wheat, then its equivalent needs to be returned to the seller.
b) If the item in question is not weighable or measurable, such as
livestock or a car, then any item equivalent to its price will have to
be returned to the seller. In matters involving credit or dowry, the
money which has been subjected to depression would be
considered for the reimbursement.
2. Hazraat Sahibeen unanimously agree that a contract is not automatically
voided in case of depression but the seller has the right to declare it null
if he desires. If he does not declare it null, then the buyer will be obliged
to make the payment if the seller demands. There is however a
difference of opinion regarding the determination of the payment value:
a) As per Imam Abu Yousuf (RA), the payment value identified at the
time of the contract will be considered valid.
b) According to Imam Muhammad (RA), the value just before the
occurrence of the depression will be considered valid. Of these two
cases, this verdict of Imam Muhammad (RA) is considered
confirmed and more authentic.
In one of his statements pertaining to forfeiture and depression, Allama Shami
(RA) also asserts that the two incidences are similar in nature:
"واالوطبع ػ ایذی انبط کبنکغبد"
On the same page he adds,
"واالوطبع کبنکغبد"1
Allama Kasani (RA) has conducted a detailed analysis of the subject and concludes
the following:
--------------------------------------------------------------------------------------------(۴؍٧) ارردالمحت ------------------1
188
یلۃ سؽہ للا ،وػهی انؾزشی سد انجیغ ا ونواؽزشی ثلهوط بكوۃ صى کغذد هجم انوجل الغخ ػذ اثی ؽ"
الیجطم انجیغ ، وانجبئغ ثبنخیبس ا : کب هبئب وهیزہ او يضهہ ا ھبنکب، وػذ اثی یوعق ويؾذ سؽھب للا
ؽبء كغخ انجیغ وا ؽبء اخز هیۃ انلهوط۔
فطالػ انبط ، كبرا رشک ا انلهوط ثبنکغبد خشعذ ػ کوھب صب ال صیزھب صجزذ ثب: وؽغۃ اثی ؽیلۃ
انبط انزؼبيم ثھب ػذدا كوذ صال ػھب فلۃ انضیۃ ، والثیغ ثالص ، كیلغخ مشوسح۔
انزيۃ ويبكی انزيۃ الیؾزم انھالک، كالیکو انکغبد ا انلهوط كی: اوال: وؽغۃ اثی یوعق ويؾذ
خزهیۃ انلهوط۔۔۔ھالکبثم یکو ػیجبكیبیوعت انخیبس ، ا ؽبء كغخ انجیغ ، وا ؽبء ا
ا انواعت ثوجل انوشك سديضم انوجوك وثبنکغبد ػغض ػ سد انضم نخشوعھب ػ سدانضیۃ : وصبیب
وفیشوسرھبعهؼۃ ، كیغت ػهیہ هیزھب کبنواعزوشك ؽئیب ي رواد االيضبل وهجنہ صى اوطغ ػ ایذی
انبط ۔
، كبػزجش اثویوعق وهذ انؼوذ الہ وهذ وعوة صى اخزهق اثویوعق يؾذ كیبثیھب كی وهذ اػزجبس انویۃ
انض ، واػزجش يؾذ وهذ انکغبد وہوآخش یوو رشک انبط انزؼبيم ثھب ، الہ وهذ انؼغض ػ انزغهیى ،
ونواعزوشك كهوعببكوۃوهجنھب كکغذد ، كؼهیہ سديضم يبهجل ي انلهوط ػذدا كی هول اثی ؽیلۃ واثی
۔"بیوعق ، وكی هول يؾذ ػهیہ هیزھ
“If anyone purchases an item with Fuloos and the Fuloos become
worthless due to depression before the payment is made, then as per the
opinion of Imam Abu Hanifa (RA), the sale contract will be nullified and
the purchased item must be returned to the seller. In case the purchased
item has been consumed or is no longer in the possession of the buyer
then he will have to return an item of equivalent value or amount to the
seller. Hazraat Sahibain think otherwise; the sale contract will not be
voided in case of depression but the seller will have the right to either
continue with the contract and receive payment in Fuloos or declare it
null. As per Imam Hanifa (RA), Fuloos disqualifies as Saman in times of
depression and their Samaniat is based upon public trust. Hence when
the public loses confidence and discontinues their use, then their
Samaniat is no longer valid. In this case, because a sales transaction is
not possible in the absence of Saman, therefore the contract or
transaction will be rendered null and void.
The first rationale presented by Hazraat Sahibain in this context is that
Fuloos falls in the category of Wajib Fe zzemma or owed by the debtor.
Under this assumption, Fuloos cannot be considered entirely worthless
but imperfect. Due to this, the seller will have the option to nullify the
contract or continue with it by demanding an alternate mode of
payment. Secondly, the debtor is also bound to return what he owes in
189
exact equivalent. However due to depression, he is unable to return this
debt in the same currency since the Samaniat of this currency is now lost.
The debtor is now bound to return his credit with an alternate item of
equal value. The case will be similar with the credit of items which
qualify as Misl which have been consumed or lost.
The opinion of Hazraat Sahibain differs regarding the occasion which
determines the value of the payment. According to Imam Abu Yousuf
(RA) the occasion when the contract was made is the time when the
value of Samaniat of Saman is ascertained. To the contrary Imam
Muhammad (RA) believed that the time just before the depression is the
occasion which should determine this value since this is when it is
possible to accept the payments. If a loan has been given in Fuloos in use
and these Fuloos are no longer accepted in the market after the
depression, then as per the opinion of Imam Abu Hanifa (RA) and Imam
Abu Yousuf (RA), the alternative of Fuloos need to be returned to the
creditor. As per Imam Muhammad (RA), the debtor is required to return
something of equal value.’ 1
The summary of the discussion done in Hashia Ibn-e-Abdeen and Fatawee
Alamgeeria in this context is as follows:
“If depression occurs while sale is being made against dirhams ‘having
lesser silver then other contents’ or done with Fuloos for that matter, and
the payment has not yet made to the seller (in case of credit sale), then
the contract will be considered as null and void. It is mandatory for the
buyer that he may now return the subject matter if it is still present. If
not then he has to return its equivalent. However if the buyer doesn’t
have it in his possession anymore then nothing is due on him. This is the
verdict of Imam Abu Hanifa. On the contrary as per Hazrat Sahibain, sale
contract is not rendered void in cases of depression, as only the
acceptance of payment is now difficult. However if the depression ends
after sometime then this difficulty will evaporate. Henceforth the sale
contract will not be considered voided. As per Imam Abu Yousuf (RA),
the payment as per the value identified at the time of contract will be
1----------------------------------------------------------------------------------------------------------- (۴۵؍٧) الصنائع بدائع
190
mandatory for the buyer and Imam Muhammad (RA) asserts that the
value identified at the time just before depression should be considered.
It is stated in ‘Zakheera’ that Fatawee is based on the verdict of Imam
Abu Yousuf (RA). Further it is stated in ‘Muheet’, ‘Tatma’ and ‘Haqaiq’
that Fatwa is based on the verdict of Imam Muhammad (RA) for the
convenience of public.”1
Imam Abu Hanifa’s (RA) rule that an alternate item needs to be returned to the
seller or Hazraat Sahibain’s (RA) directive that the value of the item needs to be
returned is for the sale contract and for the purpose of reimbursement of credit
in times of depression. As already discussed, there is a disagreement here about
the time of the determination of value. 2 In one verdict presented at the end of a
statement in Bada’, Imam Muhammad (RA) and Imam Abu Hanifa are seen to
concur on the issue of credit.
OPINION OF MALIKI AND SHAFI’I SCHOLARS
According to the Maliki and Shafi’i scholars, a sale contract is not deemed null or
void in instances of depression but the buyer will be required to make the
payment with the same coinage which has been discontinued from use. However
according to a verdict of the Shafi’i School, the seller holds the right to either
accept the same coins and complete the sale transactions or to reject and nullify
the contract. As stated in Shrah Zarrqani:
وا ثطهذ كهوط رشرجذ نؾخـ ػهی آخش ای هطغ انزؼبيم ثھب ثبنکهیۃ ، كبنضم ػهی ي رشرجذ كی ريزہ "
-"هجم هطغ انزؼبيم ثھب
“If the Fuloos in which the payment was due are totally discontinued
from use due to depression, then the payment needs to be made using an
alternative of the Fuloos identified before discontinuation.” 3
It is similarly stated in Hashia Dasooti:
ا ثطهذ كهوط او دبیش او دساہى رشرجذ نؾخـ ػهی ؿیش كوطغ انزؼبيم ثھب ، وي ثبة اونی ارا رـیشد "
-"رشرجذ كی ريزہ هجم هطغ انزؼبيم ثھب او رـیشھب هنبء انضم ػهی ي ثضیبدح او وـ ، كیغت
------------------------------------------------------------------------------------(۵؍) الھنديہ تاویوالف( ۴؍٧) ردالمحتار 1 --------------------------------------------------------------------------------------------------------------(۵٧؍) الرقود تنبيہ 2 --------------------------------------------(۵۵؍۵) خليل علی الخرشی فی کذا( ۶؍۵) خليل علی الزرقانی رحش ----------------3
191
“If Fuloos, dirhams or dinars due for payment are nullified in event of
depression, then the payment will have to be made in an alternative
medium of exchange.” 1
However, to the contrary, Makh Al-Jaleel states:
“If a specific currency is discontinued which was used in sale of goods or
for lending purpose, then in this case no other form of currency will be
used as an alternate (the same currency would be used rather).”
Similarly, Al-Ma’yar states:
-"واكزی اثوانونیذ انجبعی اہ الیهضيہ االانغکۃ انغبسیۃ ؽی انؼوذ"
“Abu Al-Waleed Baji (RA) has given a Fatwa that the buyer must make
the payment in the same coinage which was in use at the time of
contract.”2
Al-Majmu’, the renowned book of Fiqh Al-Shafia, states:
ونو ثبع ثوذ يؼی او يطهن وؽهب ػهی وذ انجهذ كبثطم انغهطب انؼبيهۃ ثزنک انوذ نى یک نهجبئغ االرنک "
"انوذ ھزا ھوا نزہت
‘Unless the trader specifies the unit of currency such as rupees or dollars
etc, it is understood that the mentioned price will be in the currency
identified in the region where the trading is taking place such as rupees
in Karachi or pound sterling in London. Consequently, the seller will
receive this currency even if it is later cancelled by the governor. This is
the established opinion.’ 3
It is similarly mentioned in the Rozatal Talbain:
ونو اهشمہ وذا كبثطم انغهطب انؼبيهۃ ثہ ، كهیظ نہ االنوذ انزی اهشمہ ـ ػهیہ انؾبكؼی سمی للا "
-"ػہ
-------------------------------------------------------------------------------------- (۵۴؍) الدسوقی حاشيۃ -------------------1 --(۶۴؍۶) ھج۴ االسالمی دارالغرب ، بيروت( ھج٢۴ المتوفی يحی بن احمد) الونشرييسی ، معربال المعيار -------------2
--------------- ، بيروت ، ھج ۶٧۶ المتوفی النووی شرف بن الدين محی ابوزکريا) النووی ، المھذب شرح المجموع -------------3
(؍٢)دارالفکر
192
‘Even if the money given as credit is later cancelled by the governor, the creditor
will receive the same form of money or coin which was extended as credit. This
point is established by Imam Shafi’i (RA).’ 1
Al-Majmu’ also states:
"وؽکی انجـوی وانشاكؼی وعھب ا انجبئغ يخیش ا ؽبء اعبص انجیغ ثزنک انوذ وا ؽبء كغخہ"
‘And Baghvi and Rafae’ prescribe another way whereby the seller either
has the right to continue with the transaction with the same form of
money or cancel the contract’. 2
In the light of all these statements, it is hence concluded that the scholars of the
Maliki and the Shafi’i Schools assert that in situations of depression, the seller has
to accept the same form of money which has been discontinued from use. This
rule applies equally to matters of sale or credit. This also confirms that the
Shafi’i and Maliki scholars have different rules regarding forfeiture and
depression.
OPINION OF HANBALI SCHOOL OF THOUGHT The scholars of the Hanbali School agree that the value of the items in the
contract must be returned to the seller. However there is a difference of opinion
on how this should be accomplished:
1. The valid value will be the one just before the occurrence of the
depression. This is asserted by Imam Muhammad (RA) and is a
established opinion among these scholars.
2. The value at the time of the contract will be the one considered, as
asserted by Imam Abu Yousuf (RA).
3. The valid value will be as per ‘Waqt-e-Khusoomat or of the time when
the case is presented to the judge.
According to Allama Ibn-e-Qadama:
ا کب انوشك كهوعب او يکغشح كؾشيھب انغهطب ورشکذ انؼبيهۃ ثھب الہ کبنؼیت كالیهضيہ هجونھب ، "
: ویکو نہ هیزھب وهذ انوشك عواء کبذ ثبهیۃ او اعزھهکھب ـ ػهیہ اؽذ كی انذساہى انکغشح ، كوبل
------------------------------------------------------------------------------(٧؍۴) للنووی نالطالبي روضۃ --------------------1 -----------------------------------------------------------------------(۰؍٢) للنووی المھذب شرح المجموع ------------------2
193
اہ : ا ، ورکش اثوثکش كی انزجیہ یوويھب کى رغبوی یوو اخزہب صى یؼطیہ ، وعواء وقذ هیزھب ههیال او کضیش
یکو نہ هیزھب وهذ كغذد ورشکذ انؼبيهۃ ثھب ، الہ کب یهضيہ يضهھب يبدايذ بكوۃ ، كبرا كغذد ازوم انی
-"هیزھب ؽیئز کى نوػذو انضم انخ
‘If trade is discontinued in the market after the governor cancels the
Fuloos or bits of dirhams, then this will be considered a falsification of
the monetary unit and it will not be compulsory on the concerned party
to accept them. In this case the debtor will have to pay the value of the
credit which was identified at the time the debt was incurred regardless
of whether he still possesses the money or has spent it. Imam Ahmad
(RA) explains this in Daraham Mukssarah where according to him the
value of the payment is determined as per the date or time when the
debtor promised to return the credit. Whether the value of the credit has
reduced or increased has no bearing upon this original value of credit.
Abu Bakr states in Tambia that the time just before the depression is to
be considered in determining the value of the credit as this is what the
debtor would have returned if the depression had not occurred.
Consequently, in case of depression, the value has to be determined as if
the real money is no longer in existence.’1
ا کب انوشك كهوعب اودساہى يکغوسح كیؾشيھب ای یغ انبط ي انؼبيهۃ ثھب انغهطب او بئجہ عواء "
ارلن انبط ػهی رشک 2
وزشك انویۃ ػ انلهوط انؼبيهۃ ثھب او ال، الہ کبنؼیت ، كالیهضيہ هجونھب ، كهه
"وانکغشح كی ھز انؾبل وهذ انوشك انخ
According to Allama Mardaovi:
نویۃ عواء ارلن انبط ػهی رشکھب انقؾیؼ ي انزہت ا نہ ا)ا کب كهوعب اويکغشح كیؾشيھب انغهطب "
او الوػهیہ اکضش االفؾبة 3
: وھو انقؾیؼ ػذی ۔۔۔وهیم : ۔۔۔ وهبل كی انغزوػت ، وعضو ثہ کضیش يھى ،۔
"نہ انویۃ وهذ انخقويۃ
All these statements confirm the opinion of Allama Ibn-e-Qadama and further
emphasize the importance of time in determining the value of due payment.
ھج٢ دارالکتابالعربی ، بيروت ، المقدسی قدامہ بن الدين وشمس قدامہ ابن الدين موفق) المقدسی الکبير، الشرح معہ المغنی 1
(۶۵؍۴)---------------------------------------------------------------------------------(؍) للبہوتی القناع کشاف ------------------2 --------------------------(٧؍۵)ھج٧۶ اول طبع سليمان بن علی الحسن ابی الدين الءع)المرداوی ، االنصاف --------------3
194
SUMMARY
To surmise, Imam Abu Hanifa (RA) considers Bay’ automatically nullified in cases
of forfeiture and depression. This requires the buyer to return the purchased
item, its equivalent, or its price to the seller if the possession of the item had
been assumed before the payment was made. To the contrary, though the other
Imams and a wide majority of scholars and jurists concur that this nullification
would not occur automatically, there is a difference of opinion on determining
the value of the due payment:
1. Imam Abu Yousuf (RA) asserts that in both cases, forfeiture and
depression, the value of the payment as determined at the time of the
contract should be honored.
2. According to Imam Muhammad (RA), the time just before the forfeiture
or depression is relevant in determining this value and his Fatwa is based
on this opinion. The Hanafi scholars concur with this view and have
established similar rules regarding forfeitures and depression.
3. The remaining three Imams differ in opinion along the following lines:
a) For the Maliki scholars, the time when the decision about the
contract was made is relevant and the money of the same form is
required to be returned as was used at the time of the contract.
b) For the Shafia scholars, the time when payment was due is
considered relevant in case of forfeiture. In case of depression, the
same form of money is required to be returned which was in use at
the time when the contract was prepared.
c) The scholars of the Hanbali School consider the time just after the
forfeiture as relevant in determining the value of the due payment.
Out of the three different opinions regarding depression, the most
accepted is the one which considers the time just before the
depression as most relevant in determining the value of due
payment.
The same details listed above apply to matter related to credit as well. It is only
for Imam Abu Hanifa (RA) that the same form of money is required to be
returned as was in use both in forfeiture and depression.
195
Phenomenon Imams (RA) Verdict
Forfeiture
Imam Abu Hanifa Sale Contract is nullified, form of money should be same for payment of loan
Imam Malik Value of payment at the time of decision to be considered for either sale or credit.
Imam Shafi Value at the time when payment is due.
Hanbali and Imam Muhammad (RA)
Value just before forfeiture, as per Imam Muhammad (RA) the Seller will have the right to choose.
Imam Abu Yousuf (RA)
Value at the time of contract, the seller will have the right to continue or cancel the contract.
Depression
Imam Abu Hanifa Contract is nullified; form should be same for payment of loan.
Malikia and Shafia Payment to be made in the same coinage established at the time of contract
Imam Abu Yousuf (RA)
Value at the time of contract, also the seller will have the right to continue or cancel the contract
Hanbali and Imam Muhammad (RA)
Value just before depression, as per Imam Muhammad (RA) the Seller will have the right to chose
An analysis of these opinions reveals that when an economy is in depression, the
verdict of Imam Muhammad (RA) or Imam Abu Yousuf (RA) is more convenient
and practical in determining the mode and value of payments against loan or sale
contracts. This implies that the value of currency at the time of the contract will
be considered relevant in determining the due amount after the occurrence of
depression. This is seen as the just and fair way for the concerned parties to
receive what is owed to them.
196
INFLATION
Before the Shariah stand on inflation is examined, it is first imperative to
understand the definition, types, and root causes of inflation from the standpoint
of contemporary economics. As for the definition of the term, economists have
consistently remained in a near continual dispute over the issue The term
inflation was first introduced by the neoclassical economists where according to
them inflation occurred when ‘due to sharp increase in money supply, the prices
of goods and services also escalated sharply’. Contemporary economists view
this definition as one of the most significant. Some modern economists define
inflation as a ‘constant and continuous rise in the prices of goods’.1 Also, the
definition of inflation in ‘The Theory of Money and Credit’ does not confine the
phenomenon to the change in the value of money alone. 2
CHARACTERISTICS OF INFLATION Regardless of differing opinions on various aspects of inflation , all economists
concur with the following three of it’s characteristics:
1. Increase in prices where inflation invariably results in an increase in the
prices of goods and services.
2. Increase in the circulation of money which occurs as a result of fiscal
deficit. This is when the government starts to spend more than the tax
revenue by borrowing from banks and other financial institutions against
various forms of bonds. This situation leads to a surge in the credit
money in the economy, ultimately increasing inflation.
3. Inflation itself causes more inflation where once after taking root, it
becomes its own breeding ground. This is a cyclic process and unless
strategic timely measures are taken to contain it, its intensity continues
to increase after each cycle.
-----------------------------------------------------------------------------------۰ص زروبنکاری تعارف ----------------------1
2 The Theory of Money and Credit, page 272: "An increase in the quantity of money that is not offset
by a corresponding increase in the need for money, so that a fall in the objective exchange value of
money must occur."
197
COMMON TYPES OF INFLATION There are different types of inflation, each with its own level of intensity. Some
common types of inflation are briefly discussed here:
1. Creeping Inflation: Creeping inflation is the lowest in intensity and hence
not considered dangerous for the economy. It is generally less than 3%
increase over the previous year’s value of money.
2. Trotting Inflation: This type of inflation fluctuates at an annual rate of
3% to 6%.
3. Running Inflation: Running inflation reflect a 10% annual increase in
prices.
4. Hyper Inflation: In situations of hyper inflation, the prices increase 20%
to 30% or even more every month.
5. Stagflation: Stagflation refers to an economic situation in which inflation
and economic stagnation occur simultaneously and remain unchecked
for a significant period of time. According to economists there are two
main reasons for stagflation. Stagflation can result when an economy is
slowed by an unfavorable supply shock such as an increase in oil prices in
an oil importing country. This tends to raise prices while slowing the
economy down by making production less profitable. This type of
stagflation creates a policy dilemma since the efforts targeted to fight
inflation actually worsen the stagflation and vice versa. The second type
of stagflation is the result of inapt macroeconomic policies. This also
creates inflation at the same time. For instance central banks can cause
inflation by allowing excessive growth of the money supply and the
government causes stagflation by the excessive regulation of the goods
and labor markets. In combination, these factors result in stagflation.
THE REASONS FOR FLUCTUATION IN THE VALUE OF MONEY The general notion related to fluctuation in the value of money is that it is
caused by changes in money supply. However, there are certain other reasons
this could also lead to this fluctuation:
1. Production of Goods: When the increase in the production of
agricultural and industrial goods becomes relative to the amount of
money in circulation, the prices of goods consequently reduce whereby
198
increasing the purchasing power of money. Similarly, any reduction in
the supply of goods relative to money supply increases the prices of
goods hence reducing the purchasing power of money.
2. Increase in the Circulation of Money: The idea of an increase in the
circulation of money should not be confused with an increase in money
supply. Increase in the circulation of money means that people start to
save less and spend more in any given economy. This increases the
demand for goods and services even if the amount of money in an
economy does not increase. Consequently, this increase in spending
increases prices and reduces the value of money. Similarly, if the
circulation of money is reduced where people prefer to hold on to their
money rather than spend it, then the value of money increases
eventually reducing the process of goods and services in the economy.
3. Population: If the production of goods does not increase despite an
increase in population, then the demand for goods and services
increases consequently increasing prices and reducing the value of
money in the economy.
4. Fluctuation in Demand and Supply: It is possible for the demand and
supply of commodities to fluctuate due to unforeseen circumstances
such as wars or natural disasters. This has an abrupt negative impact on
prices and affects the value of money accordingly.
5. Federal Budget: As discussed earlier, an increase in government
spending over the generated revenue results in a fiscal deficit in an
economy which the government tries to remedy by borrowing from
banks and financial institutions. This allows the government to spend
more, increasing money circulation and leading to inflation.
6. International Trade: Economies are likely to face trade deficits when
imports exceed exports since this reduces the demand for local currency
as compared to foreign reserves. This eventually leads to a reduction in
the value of money and leads to inflation.
7. Taxation: An increase in taxes on local and imported goods can lead to
an increase in prices, hence causing inflation.1
------------------------------------------------------------- ------------------------------(۵۰ ص) دوم حصہ معاشيات کتاب 1
199
DEFLATION
As the term suggests, deflation is the opposite of inflation and occurs when the
prices of goods and services reduce whereby increasing the value of money. In
short, a reduction in money supply relative to the supply of goods eventually
lowers prices.
“Deflation signifies a diminution of quantity of money which is not offset
by a corresponding diminution of the demand for money so that an
increase in the objective exchange value of money must occur.”1
IMPLICATIONS OF FLUCTUATION IN THE VALUE OF MONEY
Fluctuations in the value of money affect all sectors in any given society to an
extent where the phenomenon is considered to be the greatest predicament of
conventional economic systems. Some repercussions of this fluctuation are
discussed as follows:
EFFECT ON DIFFERENT FORMS OF LOANS Creditors in an economy probably suffer the most in times of inflation when there
is a decrease in the value of money. For instance, if a person has loaned an
interest free Rs. 1 million to his friend for a year, the value of this amount would
be reduced equivalent to the percentage of inflation in the economy. Contrary to
this, in times of deflation the creditor will benefit from this deal since the
purchasing power of money would have increased. However this happens only in
rare instances.
EFFECT ON WAGES OR SALARIES Workers and employees are severely impacted during inflation because though
their wages and salaries remain consistent throughout the year, the prices of
goods and services rise steadily by a certain percentage causing financial loss to
this salaried class. Just like creditors have the right to receive their loaned
amounts back in full, it is the right of workers and employees to receive their due
compensations. However in times of inflation, their wages do not complement
the rise in the prices of goods and services. The negative impact of the
1 The Theory of Money and Credit, page 272
200
fluctuation in the value of money is not limited to just salaried workers and
creditors but have adverse consequences for industrialists, farmers, production of
goods, distribution and circulation of money, on investment and employment
generation.
There are certain groups in society such as industrialists and traders who actually
benefit from inflation because the increase in the price of goods boosts their
profits. Inflation also directly impacts the demand for goods because people
increase their spending, fearing even higher prices in the future. Hence they
prefer to spend at the moment and avail the present day prices rather than save
and spend more in future. This increase in the demand of goods accelerates
production encouraging investors and industrialists to invest more in order to
expand their production capacities. Though this tends to positively affect
employment, it is a negligible advantage because inflation produces income
disparity where the industrialist and businessmen can adjust their profits by
adjusting the prices of their goods as and when desired. This creates an
imbalance in the distribution of money supply in the economy.
INFLATION AND DEFLATION ACCORDING TO SHARIAH
The Arabic word for inflation is Rakhs (رخص) or Tazakhum ( خمتض ) while for
deflation the words Ghala’ (غالء) or Inkimash (انكماش) arabic are used. The words
Rakhs and Ghala’ have been used in jurisprudence literature since antiquity while
Tazakhum and Insmash are more commonly seen in recent literature. Rakhs
means ‘reduction in price’ referring to depreciation of money or a reduction in its
value. Similarly Ghala’ means ‘increase in price’ or the fact that money has
become more expensive and has increased in value. The literal meaning of the
word Tazakhum is also ‘expansion’ where contextually it symbolizes an expansion
in the supply of money. Literally, Inkimash means ‘contraction’ referring to a
contraction in the supply of money. In Shariah there are two verdicts related to
the increase or decrease in purchasing power or the value of money. The first
verdict is held by the majority of scholars and Imams while the second opinion is
only held by Imam Abu Yousuf (RA).
OPINION OF SCHOLARS ON THE EFFECT OF INFLATION ON TRADE CONTRACTS Maliki, Shafi’i, Hanbali and Hanafi scholars concur on the point that fluctuation in
the value of money does not affect the amount of payment due on the buyer at
201
the time of contract. Therefore any changes in the value of money which occur
later will not be considered because there is no consideration for economic
inflation and deflation in Shariah. As per the viewpoint of the majority of
scholars, the payment of credit sales, loans and wages are not to be compensated
on the value scale. For instance, even if at the time of a certain contract the
value of 100 Fuloos was equal to 10 dirham and at the time of payment it reduced
to 5 dirhams or vice versa, only the 100 Fuloos will be returned without any
increase or decrease in this initial principal amount. In other words, the payment
will not be adjusted or discounted to make it equivalent to the current day value
scale.
As stated in Shrah Al-Zarqani:
وا ثطهذ كهوط رشرجذ نؾخـ ػهی آخشای هطغ انزؼبيم ثھب ثبنکهیۃ واونی رـیشھب ثضیبدح او وـ يغ "
ثوبء ػیھب ، كبنضم ػهی ي رشرجذ كی ريزہ هجم هطغ انزؼبيم ثھب او انزـیش ، ونو کبذ ؽی انؼوذ يبءح دسہى
"، صى فبسد انلبثہ کب كی انذوۃ ای او ػکغہ الھب ي انضهیبد
‘If the Fuloos which are due are rendered as Matrook Al-Ta’mal or
obsolete, then this rule already incorporates the fluctuation of the value
of Fuloos. Here the debtor or buyer will have to pay the exact amount,
even if at the time of contract the value of Fuloos was equal to one
thousand dirhams and later it was reduced to one hundred dirhams only.
This is because Fuloos are among Misliat (مثليات)”.1
According to Hashia Dasooti:
ارا ثطهذ كهوط رشرجذ نؾخـ ػهی ؿیش ثوشك او ثیغ او کبػ او کبذ ػذ ودیؼۃ ورقشف كیھب ، "
وکزا نو دكؼھب ن یؼم ثھب هشامب ، كبنواعت انضم ػهی ي رشرجذ كی ريزہ ، ونو کبذ انلهوط ؽی انؼوذ
۔"ہى صى فبسد انلبثہيبءح ثذس
‘If the Fuloos which are due for the payment of loan, sale or dowry or
which were kept as Wadea’t (deposit) have either been spent or invested
in Mudarbat by the keeper and are later rendered entirely obsolete, then
the payer is required to pay the exact equivalent of the amount even if a
----------------------------------------------------------------------------------------(۶؍۵) الزرقانی شرح -------------------1
202
dirham was exchanged with sixteen Fuloos earlier and are later
exchanged for one thousand.’ 1
It is further stated in Makh Al-Jaleel:
ہى كهوعب ، وھو یويئز يبءح كهظ ثذسہى صى فبسد يبئزی كهظ ثذسہى كبب یشدػهیک يضم ا اهشمزہ دسا"
-"يباخز الؿیش رنک
“If you loaned Fuloos (500 in quantity for e.g.) instead of dirham and if at
that time one dirham was equal to 100 Fuloos and when the payment
was due one dirham became equal to 200 Fuloos, then you will receive
the same amount of Fuloos from the debtor. Other than this he owes
nothing to you.”2
According to a statement in Al-Ma’yar, in cases of fluctuation of money the same
amount of money will be due later as was borrowed rather than the value of the
currency at the time of return:
عئم عؼیذ ث نت ػ سعم ثبع عهؼۃ ثبنبهـ انزوذو ثبنؾهول كزبخش انض انی ا رؾول انقشف وکب "
رنک ػهی عہۃ كجبیھب یونی نہ وػ سعم آخش ثبع ثبنذساہى انلهغۃ كزبخش انض انی ا رجذل كجبیھب یونی
نؾزشی ثبنضايہ يبنى یذخم ػهیہ كی الیغت هجم انؾزشی االيباؼوذ انجیغ كی وهزہ نئال یظهى ا: كبعبة -نہ
-"ػوذ
As per Allama Seoti (RA):
ا ثبع ثشهم كهوعب كھزا نیظ نہ االسهم صاد عؼش او وـ ۔۔۔كب ثبع ثبنق كهوعب اوكنۃ او رھجب صى یزـیش "
-"جیغ والػجشح ثبهشأانغؼش كظبہش ػجبسح انشومۃ انزکوسح ا نیظ نہ االيبیغی انلب ػذ ان
“If Fuloos are exchanged in lieu of a ‘Ratl’ then the buyer will get the
same Ratl despite the value decrease or increase. Therefore if gold, silver
or Fuloos are exchanged against one thousand units (of a currency) and
the price later changes, then as per a statement from ‘Al-Roza’ the buyer
will still get the same one thousand units and the fluctuation of value will
not be taken into account.”3
-------------------------------------------------------------------------(يسير بتصرف ۴۵؍) الدسوقی حاشيۃ ------------------1 ------------------------------------------------------------------------------------------(۵۵؍) الجليل منح -------------------2 ---------------------------------------------------------------------------------------(٢٧؍) للفتاوی الحاوی -------------------3
203
According to Allama Ibn-e-Hajr:
-"ویشد وعوثب ؽیش الاعزجذال انضم كی انضهی الہ اهشة انی ؽوہ"
“In case of ‘Misli’, Misl should be returned, as it is not allowed to replace
the Misl with its value as this is more fair and just for the concerned
party.”1
As per the opinion of Allama Ibn-e-Qadama:
وايب سخـ انغؼش كالیغ عواء کب ههیال او کضیش ا الہ نى یؾذس كیھب ؽئی اب رـیش انغؼش ، كبؽجہ "
-"انؾطۃ ارا سخقذ او ؿهذ
“When the price reduces, then it is not a problem. Whether the reduction
is less or more, as there isn’t something new in it, only the rate has been
changed, it is just like increase or decrease in price of wheat.”2
It is stated in Shrah Al-Majla:
کغذد كؼهیہ يضهھب کبعذح والیـشو هیزھب ، اعزوشك ي انلهوط انشائغۃ وانؼذانی ای انذسھى انـبنت ؿؾھب ك"
كالػجشح ثکغبد وؿالء وسخقہ ، وھزا ػذ اثی ؽیلۃ وکزا کم يب یکبل ویوص نب يش اہ ينو ثضهہ
-"سؽہ للا رؼبنی
‘If a person takes a loan in legally identified Fuloos, say 1000 Fuloos,
and then the economy suffers depression, then the debtor will pay equal
to the amount he borrowed. Despite the Fuloos being rendered obsolete
later, he will not be liable for their value. This rule applies to all
measurable or weighable items. As already stated, the replacement of
these items should be with items of equal value and the impact of
depression or fluctuation will be taken into consideration . This is the
verdict of Imam Abu Hanifa (RA).’ 3
VERDICT OF IMAM ABU YOUSUF’S (RA) SCHOOL OF THOUGHT: According to Imam Abu Yousuf (RA), in cases of fluctuation in the value of money
the buyer or debtor has to make the payment as was valued at the time when the
-----------------------------------------------------------------------------------------(۴۴؍۵) المحتاج تحفۃ -------------------1 ------------------------------------------------------------------------------------(۴۴؍۶) قدامہ البن المغنی ------------------2 ------------------------------------------------------------------------------(۴۰؍) لالتاسی المجلۃ شرح ------------------3
204
contract was made. In this school of thought, all the Fatwas and practices are
derived from this verdict. This verdict is contradictory to the previously discussed
viewpoint.
According to Allama Shami (RA):
هونی وهول اثی ؽیلۃ كی رنک عواء ، ونیظ نہ : ارا ؿهذ انلهوط هجم انوجل او سخقذ ، هبل اثویوعق "
ػهیہ هیزھب ي انذساہى یوو وهغ انجیغ ای كی فوسح انجیغ ویوو وهغ انوشك : ؿیشھب صى سعغ اثویوعق وهبل
هیزھب : نیظ نہ ؿیشھب ، وانضبی : هوال ، االولای كی فوسح انوشك ، وثہ ػهى ا كی انشخـ وانـالء
"یوو انجیغ وػهیہ انلزوی
‘If the value of Fuloos fluctuates before the seller takes possession of
goods, then Imam Abu Yousuf (RA) had previously agreed with Imam Abu
Hanifa (RA) that Fuloos in the same amount need to be considered for
payment. Imam Abu Yousuf (RA) later reconsidered this viewpoint and
declared that it would be compulsory to make the payment in dirhams as
per their value at the time of the sale contract. In case of credit, the
time when the credit was given needs to be taken into account in order
to calculate this value. This reveals two verdicts for inflation and
deflation; the first demanded that payment be exactly equivalent of the
principal amount while the other, on which the Fatwa is based, agrees on
the adjustment as per the value of currency at the time of the contract.’ 1
In the opinion of Allama Ibn-e-Abedeen:
ارا ؿهذ هیۃ انلهوط او ازوقذ ، كبنجیغ ػهی ؽبنہ والیزخیش انؾزشی ، ویطبنت ثبنوذ ثزنک انؼیبس انزی "
ؿهذ انلهوط اوسخقذ كؼذااليب و االول : کب وهذ انجیغ ، کزا كی كزؼ انوذیش ، وكی انجضاصیۃ ػ انهزوی
ھب ي انذساہى یوو انجیغ وانوجل وػهیہ انلزوی ، ػهیہ هیز: نیظ ػهیہ ؿیشھب ، وهبل انضبی صبیب: وانضبی اوال
وھکزا كی انزخیشح وانخالفۃ ثبنؼضو انی انی انزوی ، وهذ وهہ ؽیخب كی ثؾش وهش كؾیش فشػ ثب
-"انلزوی ػهیہ كی کضیش ي انؼزجشاد كیغت ا یؼول ػهیہ اكزبء وهنبء انخ
“The sale contract will not be nullified in case the value of Fuloos
fluctuate; the buyer will not have the right to nullify the contract and will
be required to make the payment as per the value determined at the
time of contract. In the same context it is stated in Fatah Al-Qadeer, in
‘Bazzazia’, and a reference is made from ‘Al-Mantaqi’, that if the value of
-------------------------------------------------------------------------------------------(۵۰؍) الرقود تنبيہ -------------------1
205
Fuloos is increased or decreased then as per the first and third Imam, the
buyer will only pay the same Fuloos whose value has changed. However
later the third Imam (Abu Yousuf RE) said that the buyer will have to
make the payment in dirhams as per the value valid at the time of
contract, and Fatwa is also based on this opinion. Similarly it is stated in
‘Zakhira’ and ‘Khulasa’ as well as in a reference from Mantaqi, also
quoted and explained by our Sheikh in his Behr (بحر), that in many of the
authentic books the same verdict (of Imam Abu Yousuf (RA)) has been
the basis of Fatwa. Therefore for Fatwa and Qaza the same verdict
should be trusted.”1
As stated in Al-Uqood Duriryia:
رغت هیزھب یوو : نیظ نهجبئغ ؿیشھب ، ای یغت ػهی انؾزشی سد انضم ، وهیم : وا سخقذ او ؿهذ كویم "
-"انجیغ او یوو انوجل كی فوسح انوشك ، وػهیہ انلزوی
“If the value of Fuloos has increased or decreased, then as per a verdict
the seller will get the same Fuloos i.e. buyer will pay the Misl (exact
alternate). According to another verdict the payment will be based on
the value at the time of contract or the time when the loan is given, and
the same has been used for formulating the Fatwa.”2
Allama Ibn-e-Abedeen has referred to the statement of Allama Gazi (RA) that the
Fatwa is based on the verdict of Abu Yousuf (RA). Allama Ghazi states:
وهذ رزجؼذ کضیشا ي انؼزجشاد ي کزت يؾبئخب انؼزذح كهى اس ي عؼم انلزوی ػهی هول اثی ؽیلۃ سمی "
ثہ کب یلزی انوبمی االيبو، وايب هول اثی یوعق كوذ عؼهوا انلزوی ػهیہ كی کضیش ي : للا ػہ ، ثم هبنوا
-"انؼزجشاد كهیک انؼول ػهیہ
“I (i.e. Imam Gazi RA) have gone through lots of books written by my
mentors. I have never seen anyone other than Qazi Imam (RA) to have
given any Fatwa based on the verdict of Imam Abu Hanifa. As far as the
verdict of Imam Abu Yousuf (RA) is concerned, a number of authentic and
-------------------------------------------------------------------------------------------(۶؍) الرقود تنبيہ -------------------1 ---------------------------------------------------------------------------------------(۰ص) الدريۃ العقود -------------------2
206
noble books contain Fatwas based on it. Henceforth the verdict of Imam
Abu Yousuf (RA) should be trusted.”1
The details and rulings on depression, inflation, and deflation which have so far
been discussed are related to Saman-e-Urfi or fiat currency and not to Saman-e-
Khilqi or gold and silver. This is because the Samaniat of gold and silver never
fluctuates with inflation or deflation nor does it disintegrate with depression
hence causing no loss to the trading parties. In case of credit and sale contracts
in which gold or silver are used as the medium of exchange, the Misl needs to be
returned to the buyer or lender and its replacement with any other item of equal
value is of no significance. This is contrary to Saman-e-Istelahi and Urfi where
depression, inflation and deflation have noticeable impact on their value which
results in loss to the trading parties. For this reason, Imam Abu Yousuf (RA),
holds the said verdict in order to protect the interest of the trading parties. The
Hanafi Fatwa is also based on this verdict for the same reason and is close to the
temperament of the Shariah where the primary concern is the protection of the
rights of the trading parties against potential loss.
CORRECT ELABORATION OF THE VERDICT OF IMAM ABU YOUSUF (RA): In the Hanafi School, the verdict of Imam Abu Yousuf (RA) is most revered where
in cases of fluctuation in the value of Fuloos, the Misl will not be returned but the
payment will be equal to the value agreed at the time of the contract. This does
not imply that the same rule is also valid for currency notes in which case in times
of inflation, the payment of a loan would be adjusted as per the reduction or
increase in the value of the paper currency. For instance, Omar loans Zaid Rs.
1,000 for one year. At the time of loan repayment the value of Rs. 1,000 reduces
by a certain amount due to inflation. Now Omar might demand Zaid to
compensate for the lost value by asking for an additional Rs. 100 on top of Rs.
1,000 since Omar calculates the reduction to be about 10% over the past year. If
this had been allowed, it would open the door for Riba in transactions. Since it is
prohibited, it becomes even more critical to analyze how paper currency differs
from Fuloos in context of the viewpoint of Imam Abu Yousuf (RA).
The first point that needs to be clarified is that Fuloos, which was used in ancient
times, are not the exact equivalent of paper currency even though the two are
-------------------------------------------------------------------------------------------(۶۵؍) الرقود تنبيہ -------------------1
207
similar. Hence the Fatwa of Imam Abu Yousuf (RA) which refers to Fuloos cannot
be applied per se to the paper currency in use today. This is because the value of
Fuloos in earlier times was not only linked with dirham and dinar or silver and
gold but were also used as loose change for silver and gold coins. However this
value of Fals was not based on its intrinsic value but was the value ascribed to it;
it was Saman-e-Istelahi. For this reason this value tended to fluctuate over time.
For instance if one dirham was exchanged for ten Fuloos at a certain time, it was
probably exchanged for twenty Fals after a year. Hence the value of Fals was
subject to the forces of demand and supply as well.
Given this fluctuation, the debtor or buyer was required to make his payments as
the per the value of Fuloos equivalent in dinar and dirhams at the time of the
contract. For instance, when a person took a loan of 100 Fuloos, they were equal
to 10 dirham. After the period of one year, at the time of loan repayment, this
initial value was reduced to 5 dirhams. As per the verdict of Imam Abu Hanifa
and Fatwa of the Hanafi School, the debtor has to return 200 Fuloos as their value
would be equal to 10 dirhams. However the paper currency in use today is not
directly related to or associated with Saman-e-Khilqi or gold and silver nor is it
considered loose change for dirham or dinar. Paper currency is Saman in itself
and hence differs from Fuloos in the context of this discussion. It is also not
possible to calculate their value exactly at a given point in time. Currency notes
in use today have no fixed scale to determine their value. The fact is that this
value is assessed and estimated through power to purchase goods and services
which is not a credible approach from the Shariah point of view.
In short, the verdict of Imam Abu Yousuf (RA) applies to Fuloos used in ancient
times which are not the exact equivalent of currency notes. For this reason, the
ruling is not applicable on currency notes and the payment against a loan will not
be calculated as per their initial value but Misl or exact amount will be paid, as
acknowledged by the majority of jurists. Therefore in cases of inflation or
deflation, Imam Abu Yousuf’s (RA) verdict cannot be applied to adjust the amount
of currency notes to make the value equivalent to the principal amount at the
time of return.1 Before further analyzing this subject in the light of Shariah and
before attempting to understand Shariah rulings regarding the payments of
----------------------------------------حکم کا کرنسی اور نوٹ کاغذی, (۴ص) للعثمانی النقديۃ االوراق احکام ---------------1
208
wages and loans in times of inflation and deflation, it is important to discuss how
the value of paper currency is calculated today.
PRICE INDEX
It is a common and understood practice that the value of goods and services is
measured through a monetary unit. For instance, a car can be worth Rs.
500,000.00 and a 40 kg bag of wheat could be worth Rs. 800. The value of money
can similarly be evaluated by reversing this equation or through its capacity or
power to purchase goods and services. Based on this rule, economists have
devised a system to measure or calculate the ability of currency to purchase the
most commonly used goods and services in a country. The price index of this set
of items is tracked periodically and compared over a base year, hence the use of
the term ‘index’. Price index is also referred to as the index number and is
currently the most common method for measuring the value of a monetary unit.
PROCESS OF CALCULATING PRICE INDEX No currency has any value unless it exhibits the capacity to purchase goods and
services in times of need. This implies that currency notes have both a face value
and a real value. The face value of a currency note is the denomination printed
on it and this remains unchanged. Contrary to this, the real value is likely to
change over time with changes in its capacity to purchase a set of goods and
services, referred to as basket of goods in contemporary economics. For instance
Zaid has a disposable income of Rs. 10,000 per month. Here Rs. 10,000 is the face
value of this income whereas the real value would be assessed by what Zaid is
able to purchase with this amount at a certain point in time. For instance Zaid
could use this amount to purchase the following goods and services:
40 kg wheat
20 m cloth
20 kg mutton
5 kg pulses
5 kg sugar
500 g tea
Rent of the house
Educational expenses of his two sons
209
Medical expenses
Transportation expenses
The above is an example of basket of goods and services as this is what Zaid could
buy his with Rs. 10,000. It is important to understand here that each item in the
basket of goods and services differs by virtue of importance. For instance wheat
is more important than cloth and cloth is more important than transportation
expense. There are always some items which are essential for survival while
others could be done without. Hence an increase in the price of sugar is less
likely to affect one’s life versus an increase in the price of wheat. For this reason
economists use the weighted average for each item when calculating their impact
on the value of money. These weights are also referred to as the weights of
commodity and the index is termed as weighted index number. Contrary to this,
if different items are treated equally then the index is called simple index
number.
Following is the process for calculating the index:
1. A list of items most commonly used by the public is prepared.
2. Depending on its importance, each item is assigned a weighted average.
3. A base year is selected with the following criterion for selection:
a) No unusual economic event should have occurred in that year.
b) Inflation should have remained within acceptable range.
c) The country should not have faced any famine or war.
d) There should not have been any unusual excess or shortage in
production.
4. Another year to be compared with the base year is selected.
5. Percentage change in the prices of individual items is calculated between the
base year and the comparison year.
6. Each percentage change is discounted by the weighted average of each item.
7. The result of each item is then added to calculate the price change of the
basket of goods and services.
210
Consider the following example:
Items Weight Price in Base
Year (2007)
Price in
Comparison
Year (2009)
%-Change
Result =
Weight x
(%-Change)
Wheat 23% 40 kg = Rs. 700 40 kg = Rs. 800 14.2% 3.3%
Pulses 12% 5 kg = Rs. 450 5 kg= Rs. 600 33% 4.0%
Cloth 15% 5 m = Rs. 800 5 m = Rs. 1000 25% 3.8%
Sugar 8% 5 kg = Rs. 120 5 kg = Rs. 200 66% 5.3%
Meat 12% 8 kg = Rs. 650 8 kg = Rs. 800 23% 2.8%
Education
Expense 18% Rs. 2000 Rs. 2500 25% 4.5%
Travel Expense 12% Rs. 3000 Rs. 4000 33% 4.0%
In the ave example, the first column lists the items to be included in the
basket of goods and services.
The second column lists the percentage contribution toward each item from
the salary. This is known as the weight and its total is 100%.
The third and fourth column list the prices of these items in the base year
and in the comparison year respectively.
The fifth column lists the percentage change which occurred during that
period.
The sixth column multiplies the percentage change with the weight of the
respective item.
The summation at the bottom of the sixth column (27.5%) shows the average
change in the value of the basket of goods and services over the period of
2007 to 2009.
The resulting 27.5% indicates that the basket of goods and services which was
supposedly obtainable at a price of Rs. 100 in the year 2007 was later available in
2009 for Rs. 127.5. In other words the value of currency decreased by 27.5% over
211
this period. For instance, a person earned Rs. 15,000 per month in 2007. In 2009
the face value of his salary increased to Rs. 18,000 per month. However in real
terms, his salary would be calculated as follows:
Year Face Value Change in
Value
Real Value = Face
Value / Change in
Value
2007 Rs. 15,000 1.0 Rs. 15,000
2009 Rs. 18,000 1.27 Rs. 14,173
In other words, his Rs. 18,000 are equal to Rs. 14,173 in real terms with reference
to his base value of Rs. 15,000 in 2007. This makes a very strong case for the
advocates of interest based loans who assert that the returned amount should be
adjusted on the positive side so that it is equivalent to the real value of the
principal amount. For instance, Omar gives a loan of Rs. 15,000 in 2007 to Zaid
for two years. The real value of this loan amounts to Rs. 19,050 (Rs. 15,000 x
1.27) two years later. The question is whether this is permissible from viewpoint
of Shariah.
SELECTION OF ITEMS FOR THE INDEX: It is understood that since the needs and requirements of individuals vary over
time, therefore the basket of goods and services will also differ at different times.
However, for the calculation of the price index, the basket of goods and services
is assumed to be fixed and valid for the majority of people. Hence it is likely that
this list of items might contain certain goods and services which may not be valid
for all individuals because it is not possible to precisely address everyone’s needs
all the time. Also due to technological advancement or the introduction of
substitute goods in the market, the given list of items may become obsolete with
time and may need to be revised. Given all these reasons, it can be assumed that
the list of items is based on a guesswork of the optimal needs of individuals at a
certain time.
ESTIMATION OF WEIGHT OF ITEMS: The weight of the items included on the list is also the result of estimates and
assumptions and is hence likely to differ between different individuals. For
instance, educational expenses may be more important for a student than for a
person who has already completed his education. Similarly, bus fares will be
212
irrelevant for a person who uses a bike or car for transportation. On the same
note, some people prefer to eat rice on a regular basis while others are more
inclined towards wheat. This establishes the fact that the weight calculation of
each item is also based on an average or the best possible estimate.
ESTIMATION OF PRICES OF SELECTED ITEMS: The prices of item are likely to fluctuate over time and between various
geographical locations. Therefore in calculating the price index of a country, the
average prices of goods and services is also derived from estimates and
assumptions. The above listed three points illustrate the level of guesswork and
assumptions employed in the calculation of the price index. Even when utmost
care is taken to calculate as precisely as possible, there still remains an inevitable
chance for error. However Shariah demands an absolutely accurate calculation of
value or quantity which is not possible in price indexing, as illustrated by the
above explanations. This is the major reason why the use of price index to adjust
or discount the amounts of loan payments and credits is not permissible from the
Shariah point of view. 1A declaration in this context was given in a conference of
the Islamic Jurisprudence Academy, Jeddah in Kuwait from 1st
to 6th
Jamadi-ul-
Auola, 5th
to 10th
December 1988. The declaration stated:
عبدی االونی ۶انی ا يغهظ يغغ انلوہ االعاليی انؼوذ كی دوسح يئرش انخبيظ ثبنکویذ ي "
:و ۔۔۔هشس يبنی ۳۱۱( دیغجش)کبو االول ۵انی ؍ھظ ۸۳
یغوص سثو انؼجشح كی وكبء انذیو انضبثزۃ يب ھی ثبنضم ونیظ ثبنویۃ ال انذیو انضبثزۃ رونی ثبيضبنھب ، كال
۔ "انذیو انضبثزۃ كی انزيۃ ایب کب يقذسھب ثغزوی االعؼبس وللا اػهى
“For the payments of loan or credit (in currency notes) Misl will be
considered not its value, as Misl is taken into account while payments of
loan and credit. Therefore payment of loan or credit cannot be linked to
price index, for that matter.”2
---(۴٢؍) ء٢٢۴ کراچی پبلشرز اسالمک ميمن ، کراچی( عثمانی تقی محمد مفتی جسٹس) عثمانی ، مقاالت فہقی ------------1 -------(۶ص) ء٢۰۰؍ ھج۴٢ الثالث الجزء ، الخامس العدد ، الخامسۃ لدورةا ، االسالمی الفقہ المجمع مجلۃ ------------2
213
LINKING DEBT PAYMENTS AND WAGES TO THE PRICE INDEXATION
SYSTEM
There are provisions in Shariah for linking wages with price indexation. However
there are no such provisions for linking debt payments with price index in
Shariah. A summarized discussion on both topics is as follows:
A) LINKING DEBT PAYMENTS WITH INDEXATION SYSTEM
The opinion of Shariah in this context is that linking debts to indexation system is
‘unfair and not totally compatible with Shariah principles’. Hence the
unanimously agreed Shariah ruling here is that the debt payments be in Misl or
equivalent in value to the principal amount. People who adjust their debt
payments according to the indexation system hold the same opinion. This makes
it pivotal to understand the definition of Misl within the context of the subject
otherwise the argument of adjustment as per the real value would seem justified.
The word Misl is defined literally and terminologically. The literal meaning of the
word is equality of price and terminologically it means that the payment must be
equal in quantity, volume, weight or length. In other words, the payment must
be equal to whatever was given as debt irrespective of its market price. When
the subject is analyzed in the light of Quran and Sunnah, it is evident that the
terminological definition of Misl needs to be considered in cases of debt
payment. This means that the quantity of the items must be equal rather than
their price. This is justified as follows:
1. A person has borrowed 1 kg wheat the value of which is Rs. 15 at the time of
borrowing. At the time of payment, he will return the 1 kg wheat to the
lender regardless of whether the value of wheat reduced to Rs. 10 per kg or
increased to Rs. 20 per kg. Jurisprudents and scholars unanimously agree on
this point and do not recommend increasing or decreasing the quantity of
this wheat according to its price at the time of return.
2. All jurisprudents agree that the condition of equality or Misl in debt payment
is to evade Riba or interest. Prophet Muhammad (SAW) has clearly stated
this requirement in a Hadith related to Riba Al-Fadl:
214
، وہو ملسو هيلع هللا ىلصکب شصم رش انغغ ػهی ػہذ سعول للا : هبل : ػ اثی عؼیذ انخذسی سمی للا رؼبنی ػہ "
ال فبػی رشا ثقبع ، وال : كوبل ملسو هيلع هللا ىلصجیغ فبػی ثقبع ، كجهؾ رنک سعول للا انخهو ي رش كکب
-"فبػی ؽطۃ ثقبع والدسہب ثذسہی
“Hazrat Sayed Khadri (RAA) has reported that at the time of Prophet
(SAW) dates of different varieties were brought to us and we used to sell
two dates of low quality with one good quality date. When Prophet
(SAW) learnt about it he said that don’t sell two inferior dates with
superior ones, don’t sell more low quality wheat against less high quality
wheat, and don’t sell one dirham for two dirhams.”1
This Hadith confirms that Hazrat Muhammad (SAW) established the proper
method to be equality of items in terms of quantity such as weight, volume and
length rather than their equality in price. Although the Prophet (SAW) was well
aware that the price of two low quality dates was equal to the price of one high
quality date, he still did not allow this transaction but insisted on equality of
quantity.
اعزؼم سعال ػهی خیجش كغبء ھى ملسو هيلع هللا ىلصا سعول للا : ػ اثی عؼیذ واثی ھشیشح سمی للا رؼبنی ػھب "
الرلؼم : اب نؤخز انقبع ثبنقبػی وانقبػی ثبنضالس ، هبل: اکم رش خیجش ھکزا ؟ هبل: ثزش عیت ، كوبل
"ذساہى عیجب، ثغ انغغ ثبنذساہى صى اثزغ ثبن
‘Hazrat Sayed Khadri and Hazrat Abu Huraira (RAA) narrate a tradition
that Hazrat Muhammad (SAW) sent a scholar to Khaibar. On his return
he presented a Janeeb or a high quality date to Prophet (SAW) on which
the Prophet (SAW) asked whether all the dates in Khaibar were similar.
The scholar replied that we exchange Saa’ (a unit of measurement) with
two Saa’ and two Saa’ with three Saa’. Upon hearing this the Prophet
(SAW) instructed to refrain from such a practice and to sell the dates of
inferior types for dirhams and then purchase Janeeb with those dirhams. 2
This Hadith clearly illustrates that the equality required in the exchange of items
which qualify for Riba refers to the quantity of the items and not their price. For
، الحلوانی مکتبۃ حلوان، ، ھج۶۶ المتوفی( محمد بن المبارک السعادات ابی الدين مجد االمام)الجزری االثير ابن ، االصول جامع 1
(۵۴۶؍) ھج۰٢ طبع----------------------------------------------------------------------------------------(۵۵؍) االصول جامع -------------------2
215
this reason the exchange of Janeeb, higher priced, high quality dates, was not
permitted by the Prophet (SAW) for a greater quantity of less inferior dates.
Rather, an equality of weight is emphasized in the exchange or return of debt
transaction. A number of other traditions testifying to this are narrated below
which further emphasize the importance of equal quantity in the exchange of
items upon which the rules of Riba are applicable:
انزہت ثبنزہت وانلنۃ ثبنلنۃ وانجش : ملسو هيلع هللا ىلصهبل سعول للا : ػ ػجبدح ث فبيذ سمی للا رؼبنی ػہ"
ثبنجش وانؾؼیش ثبنؾؼیش وانزش ثبنزش وانهؼ ثبنهؼ يضالثضم عواء ثغواء یذا ثیذ ، كبرا اخزهلذ ھز االفبف
-"ذكجیؼوا کیق ؽئزى ارا کب یذا ثی
“Hazrat Abadah Bin Samat (RAA) has narrated a tradition that Prophet
(SAW) stated: Sell gold for gold, silver for silver, wheat for wheat, barley
for barley, dates for dates and salt for salt, on the spot (in equal
quantities). If the type of item on both side is different then the quantity
can vary but the transaction should still be on the spot.”1
انزہت ثبنزہت وصب ثوص : ملسو هيلع هللا ىلصهبل سعول للا : ػ اثی ھشیشح سمی للا رؼبنی ػہ هبل"
-"يضالثضم وانلنۃ ثبنلنۃ وصب ثوص يضالثضم ك صاد او اعزضاد كھو سثب
“Hazrat Abu Huraira (RAA) has reported a tradition where Prophet
Muhammad (SAW) stated: Sell gold for gold by weight, and sell silver for
silver by weight, anyone who gives or demands any excess or increase
would be indulding in Riba or interest.”2
زہت رجشھب وػیھب ، انزہت ثبن: هبل ملسو هيلع هللا ىلصا انجی ػ ػجبدح ث انقبيذ سمی للا رؼبنی ػہ"
وانلنۃ ثبنلنۃ رجشھب وػیھب ، وانجش ثبنجش يذی ثذی وانؾؼیش ثبنؾؼیش يذی ثذی وانزش
-"ثبنزش يذی ثذی وانهؼ ثبنهؼ يذی ثذی ك صاد او اعضداد كوذ اسثی
“Hazrat Ibadah Bin Samat (RAA) has narrated a tradition that Hazrat
Muhammad (SAW) stated: Sell gold for gold whether in the form of bits,
bars or coins; and silver for silver whether in the form of bits, bars or
coins; and two Madi (48.87 kg) wheat for two Madi wheat, two Madi
barley for two Madi barley, and two Madi dates for two Madi dates and
---------------------------------------------------------------------------------------(۵۵؍)االصول جامع -------------------1 ---------------------------------------------------------------------------------------(۵۵۴؍) االصول جامع ------------------2
216
two Madi salt for two Madi salt, and any excess offered or demanded
will be Riba or interest.”1
Another Hadith in this context specifically discusses equality in the payments of
loan, debt and credit:
کذ اثیغ االثم ثبنجویغ كبثیغ ثبنذبیش وآخز انذساہى ، واثیغ : ػ ػجذللا ث ػش سمی للا رؼبنی ػھبهبل"
وھو كی ثیذ ملسو هيلع هللا ىلصسعول للا ثبنذساہى وآخز انذبیش آخز ھز ي ھز ، واػطی ھز ي ھز ، كبریذ
سویذک اعئهک ، ای اثیغ االثم ثبنجویغ كبثیغ ثبنذبیش وآخز انذساہى واثیغ !یبسعول للا : ، كوهذ ۃؽلق
الثؤط ا ربخزھب : ملسو هيلع هللا ىلصثبنذساہى وآخز انذبیش ، آخزھز ي ھز واػطی ھز ي ھز ، كوبل سعول للا
۔"ثغؼش یويھب يبنى رلزشهب وثکب ؽئی
“Hazrat Abdullah Bin Omar (RAA) stated: I used to sell camels at a place
called Baqi’. I often used to finalize the deal in dinars and take dirhams
from the seller and sometimes vice versa. In other words I used to accept
dirhams in lieu of dinars and sometime dinars instead of dirhams. Also at
the time of making payments, I often paid dirhams for dirhams or
dirhams for dinars. Once I went to the Prophet (SAW) when he was in the
house of Hafsa (RAA). I asked that I sell camels at the place of Baqi’ and
explained him how I do that (as explained above). On this Prophet (SAW)
replied that there is no harm in doing so only if you exchange as per the
rate valid on the same day and you and the buyer must not separate
unless both parties have made complete payment (no credit is incurred
by any party).”2
It is clear from this Hadith that the Prophet Muhammad (SAW) allowed Hazrat
Abdullah bin Omar (RAA) to finalize the deal in dinars but accept dirhams equal to
the value of the dinars at the time of payment and vice versa. Here the exchange
rate between the dirham and the dinar at the time of payment will be considered
rather than the exchange rate at the time of contract. For instance, Omar sells an
item to Zaid for one dinar payable after a week. At the time of contract a dinar
was equal to 10 dirhams but at the time of payment a dinar is equal to 11
dirhams. Hence, if at the time payment, Zaid decides to pay in dirhams instead of
dinars, he will be required to pay Omar 11 dirhams not 10.
-------------------------------------------------------------------------------------------------االصول جامع -------------------1 ---------------------------------------------------------------------------------------عالبيو کتاب ابوداود سنن ------------------2
217
In the light of Quran and Sunnah, all jurists agree that for the payment of loans or
credit, an accurate equality in quantity, weight, volume, or length is mandatory
and it is not permitted to use approximation or guesswork in determining the
payment amount. For instance, it is impermissible in Shariah for a person takes a
loan of one Saa’ of wheat or any other item upon which the rules of Riba are
applicable on the condition that the payment of the loan will be without proper
weighing but will be based on an estimation of quantity. For the same reason
Prophet Muhammad (SAW) has prohibited Bay’ Muzabana or the sale of
harvested dates with those which are still on the trees. This is because the
quantity of the latter is not known and it would take guesswork and estimation to
establish it. Hence the Prophet (SAW) has declared all such deals illegitimate
which are based on estimation and in which margins for errors exist. In case of
payment of loans in currency notes where value is linked with the price index,
assumptions or guesswork will naturally be employed for determining the value
of the loan since the calculation of the price index involves guesswork,
supposition, and speculations. Some examples of this are discussed below:
B) LINKING WAGES WITH PRICE INDEX Linking wages with the price index depends upon whether or not the wages are in
the form of debt such as service or labor acquired before the payment. If the
wages are in the form of debt, then the same rule of loans or credit as discussed
earlier will be applied. There is the possibility of the following two scenarios in
this case:
1st
Scenario: The wages are paid in currency notes with the condition that at the
beginning of every fiscal year, the monthly salary will be revised as per the rate of
inflation measured according to the CPI or Consumer Price Index, the most
commonly used measure of inflation. For instance the minimum wage is agreed
at Rs. 6,000 per month at the beginning of the year with the clause that it will be
revised according to the percentage change in the price index at the beginning of
the next fiscal year. In this case the employee will be bound to accept these
wages for the entire year and wait for the beginning of the next year before this
salary is revised as per the change in the price index. In case the change in the
price index at the time of salary revision is 10%, then the salary will be also be
revised to reflect an increase of 10% and be adjusted to Rs. 6,600.
218
This is the norm in various countries including Pakistan even though a lot of
companies choose not to abide by the principle. This is also permissible in
Shariah. In this scenario, the employee and employer mutually agree on a
revision of salary on a six month or annual basis and neither the employee nor
the employer can predict the change at the end of the six months or year.
However, they both consent to follow the principle of wage adjustment as
decided. Here the problem of uncertainty is resolved since both parties mutually
agree to accept the outcome as per an independent measure of change in value.
This is why there is no prohibition on this by Shariah.
2nd
Scenario: In the second scenario, the employer and the employee agree on a
salary payable in currency notes on the condition that at the termination of
employment or contract, the employee will adjust his salary on the positive side
as per the percentage increase in the price index and the adjusted amount will be
equivalent to the initially decided salary in terms of real value. For instance,
Omar hires Zaid for a month on a salary of Rs. 5,000. It is agreed at this time that
this amount would be adjusted after a month according to the percentage change
in the price index. After a month, there is a 2% change in the price index hence
the salary is increased to Rs. 5,100 where the additional Rs. 100.00 or 2% is at par
with the percentage change in the price index as initially decided. Here the
promised time of salary payment was after a month. If Omar fails to pay Zaid as
promised and delays payment to a later date, then there will not be any further
adjustments to this amount as this money has now become a debt which Omar
owes to Zaid. No further adjustments on such amounts are permitted regardless
of delays in payment. The amount will remain fixed at Rs. 5,100 even if Omar
pays Zaid after a year and the price index at this time further increases in
percentage value.
According to Mufti Taqi Usmani, this is also the Shariah point of view only if both
parties are aware of the technicalities involved in the calculation of the price
index in detail so as to eliminate any chance of confusion or conflict at the time of
wage or loan payment. Therefore if both parties knowingly agree that the actual
decided wage of Rs. 5,000 will be adjusted as per the percentage change in the
price index at the end of the month or termination of contract period, then
Shariah has no objection to it.
219
It is not allowed in Shariah for an employer to pay wages at some other agreed
time rather than the end of the term on the condition that the amount will be
adjusted as per changes in the price Index at the later date. For instance, Zaid
agrees to work for Omar for one month but Omar promises to pay him after two
months. At the time of payment if Omar promises to adjust the due salary as per
changes in the price index over the two month period, it will not be permissible
according to Shariah. This is because at the end of the term period of one month,
the due amount becomes Omar’s liability which he is now indebted to pay to
Zaid.1
As previously discussed in detail, in cases of debt repayment only the principal
amount must be returned. This would not be the case if Zaid’s salary is adjusted
over the two month period rather than for the one month of actual work. The
alternative here would be for both parties to mutually agree on the payment of
the salary adjusted as per the price index at the time of the termination of the
contract. This is the permitted stand as per Shariah rulings.
------------------------- حکم کا کرنسی اور نوٹ کاغذی ،( ٧ص) النقديۃ االوراق احکام ،(٧۴؍) مقاالت فقہی ---------------1
220
CHAPTER-8: CREDIT MONEY
The Arabic word for credit is ‘le’timan’ ( ناٮتما ) which means to trust or to place
one’s faith. The terminological meaning of the word in the Encyclopedia
Britannica is:
“Transaction between two parties in which one (the creditor or lender)
supplies money, goods, services or securities in return for a promised
future payment by the other (the debtor or borrower)”1
Credit can hence be described as ‘present right to a future payment’. In
jurisprudence the word is defined as follows:
-"م واعبعہ انضوۃیؼشف االئزب ثبہ ربصل ػ يبل ؽبمش نوبء يبل يغزوج"
“Credit is defined as a provision of being freed from present payment in
lieu of future payment (of money, goods or services) on the basis of trust
and faith among parties.”2
In يوعوػۃ انقطهؾبد االهزقبدیۃ the definition of credit appears as follows, the
meaning of which is similar to the preceding definition:
-"يؼ ؽن اعزخذاو اوايزالک انغهغ وانخذيبد دو دكغ انویۃ كوسا "3
Urdu books define credit in the following words:
‘It is the trust, faith, belief or the confidence that the creditor has in the
debtor which allows him to lend or provide goods on credit. The creditor
hence believes that at the end of an agreed period, the debtor will either
1 Britannica V:3,Page - 722 -------------------(۰۰ص) م٢٧٧المحليۃ االدارة مطبعۃ مديريۃ بغداد،(النجفی حسن)النجفی ، االقتصادی اموسالق -------------2
م٢۰-- العربيۃ دارالنھضۃ بيروت،( ہيکل فہمی عبدالعزيز الدکتور)ھيکل ، واالحصائيۃ االقتصاديۃ المصطلحات موسوعۃ 3
(۰ص)
221
return the credited goods or payment equivalent to the value of the
goods’.
CREDIT MONEY
In jurisprudence the term ‘credit money’ is defined as follows:
فکوک يکزوثۃ ثؾکم هبوی يؾذد رزن انزضايب ثذكغ يجهؾ ي انوود كی وهذ يؼی اوهبثم نهززؼی "
-"ویک وم انؾن انضبثذ ثطشین انزظہیش وانبونۃ
“They are legalized form of documented ‘Sukuk’ of limited type, which
guarantees that after a defined period a specific amount of money will
be given to the holder of these documents. And the amount which is due
should be transferable via Tazheer (endorsement) or Munawala (to
handover).”1
According to Dr. Muhammad Zaki Shafai:
وي ھب یطهن ػهیھب افطالػ انوود االئزبیۃ ال االئزب ػجبسح ػ انوػذ ثذكغ يجهؾ ي انوود وي ھب "
اینب نیغذ انوود االئزبیۃ عوی دیو رزشرت نقبنؼ ؽبيهھب كی ريۃ انذونۃ اوانجوک ورؼزذ كیب رززغ ثہ
"ي هجول ػبو كی انؼبيالد ػهی ػقش انضوۃ
‘…for this reason they are termed as ‘credit money’ since credit is a
promise to pay a specific amount of money. Hence a payment (equal to
its value) is due on the government or banks for the holder of ‘credit
money’ which is accepted on the basis of confidence which exists among
the parties.’ 2
To surmise, ‘credit is the form of debt incurred during the trade of goods and
services and the documented form of ‘promise to pay’ is termed as ‘credit
money’. Basic Characteristics
As derived from all the above definitions, credit money has four basic
characteristics:
1. The exchange of credit money is done via endorsement.
--------------------------------------------------------------------------للجعيد والتجاريۃ ديۃالنق االوراق احکام -----------------1 ---------------------(۴ص) ہفتم طبع العربيۃ دارالنھضۃ ، بيروت( زکی محمد)شافعی ، والبنوک النقود فی مقدمۃ --------------2
222
2. Credit money represents a specific amount of money.
3. Credit money acts as a guarantee for payment.
4. Credit money can only be used for the said purpose; it is limited in use
and has legal value.
Selected quotes from various references highlight the types of credit money:
According to Al-Ja’ed:
-"انؾیک ۔۔۔۔۔۔: انغذ۔۔۔۔۔۔۔۔ صبنضب: انکجیبنۃ ۔۔۔۔۔۔ صبیب: اوال :رغزوغى االوسام انزغبسیۃ انی صهضۃ اواع"
“Hundi, bonds and check are three forms of credit money”1
Dr. A. N. Agarwal states:
“… we shall now discuss the chief forms of credit instruments: promissory
notes, bank notes and currency notes, bill of exchange … check … bank
draft.”2
Hasan Najfee includes shares and different forms of certificates on the list of
items which qualify as credit money:
وادواد االئزب ھی االوسام انزغبسیۃ انضهۃ ثبنغلزغۃ وانغذ االری وانؾیک وھی اوسام هبثهۃ نهزؾویم "
-"ورغزخذو كی ػهیبد االئزب آاعبل هقیشح ، اوسام انجکود ، االوسام انبنیۃ وھی االعھى وانغذاد3
Ibrahim Saleh Omar includes currency notes on the list of credit money:
كبنوود انوسهیۃ ھی وود ائزبیۃ نکوھب ائزبب یؾہ ي یهک ھز انوود نهغھۃ انزی افذسرھب ای اھب دی "
-"وانزضاو كی ريۃ انقشف انقذسنھب4
Sheikh Mubarak Ali defines credit money as ‘check, bill of exchange, promissory
note and bank draft.”5
---------------------------------------------------------------(ص) للجعيد والتجاريۃ النقديۃ االوراق احکام ----------------1 2 Introduction to Economics principles, page - 352 -------------------(۰۰ص) م٢٧٧المحليۃ االدارة مطبعۃ مديريۃ بغداد،(النجفی حسن)النجفی ، االقتصادی القاموس -------------3 ---------------------------------، ھج۴۴ دارالعاصمۃ ، بيروت( العمر صالح بن ابراہيم)العمر االئتمانيۃ، النقود --------------4
5----------- ---- اول طبع کراچی پبلشرز ناروے،رہبر يونيورسٹی اوسلو سکالر ريسرچ ، علی مبارک شيخ ، زروبنکاری تعارف
(۶۴ص)ء٢٢
223
Though various authors categorize currency notes as credit money, whereas
currency notes itself qualifies as Saman. For this reason the legal status of
currency notes differ than that of credit money. It can hence be concluded that
the most prevalent forms of credit money are:
1. Bill of exchange
2. Bonds
3. Check
4. Promissory note
5. Draft
The present discussion will focus on the historical evolution, benefits, and the
authenticated usage of different forms of credit money. The next chapter will
discuss the subtypes of these forms in the light of Shariah and the opinions of
jurisprudents.
EVOLUTION OF CREDIT MONEY
All the modern forms of credit money such as the bill of exchange, check, etc. are
a direct outcome of the commercial banking system. Not only has credit money
evolved with the banking system but continues to expand into new avenues.
Some economists believe that the present day bill of exchange was first
introduced in Quroon-e-Wusta or the middle centuries. By popular consensus it
was introduced in the 18th
century as a tool of money transfer between countries.
The term bill of exchange was used to refer to the exchange of currencies of
different origins. It was later in the 19th
century that commercial banks started to
introduce the system of checks. Nevertheless, the roots of credit money go a
long way down in world economic history.
Jurisprudents have discussed the rulings on Suftaja and Hawala in great detail in
jurisprudence literature. This implies that various types of credit money which
later emerged in European societies were evolved forms of the modes of
exchange employed earlier by the Muslim traders. This fact is confirmed by
various historians like Joseph Schacht, Dr. Heflin and Robeson. According to
Joseph Schacht the word ‘chaqae’ is a French word which is a morphed version of
Hawala and that it is highly probable that the actual function of a check is similar
to Suk as well. Robison states that the Arabs were expert traders who gave
224
trading its formal structure by elaborating Kifalah, establishing the Bait-ul-Mal for
the poor, and popularizing Suftaja.1 The companions of the Prophet (SAW) have
also commented on the use of Sukuk indicating that the tool was present in Arab
during this time as well where it was primarily used for the trade of edible items.
However during the time of the Prophet (SAW) even though such trade was not
permitted until the edible items came into the possession of the seller, the
violation of the principle was common.
: عبء كی انوهبء ناليبو يبنک سؽہ للا رؼبنی
وؽذصی ػ يبنک اہ ثهـہ ا فکوکبخشعذ نهبط كی صيب يشوا ث انؾکى ي هؼبو انغبس، كزجبیغ "
ػهی ملسو هيلع هللا ىلصنجی انبط رهک انقکوک ثیھى هجم ا یغزوكوھب كذخم صیذ ث صبثذ وسعم ي افؾبة ا
ھز انقکوک رجبیؼھب انبط صى : اػور ثبہلل ويبرنک ؟ كوبل: ارؾم انشثبیب يشوا؟ كوبل:کى كوباليشوا ث انؾ
ثبػوھب هجم ا یغزوكوھب كجؼش يشوا ث انؾکى انؾشط یززجؼوھب یضػوھب ي ایذی انبط ویشدوھب انی
اھهھب۔
:یوول انؾیخ انکبذھهوی سؽہ للا رؼبنی رؾزہ
فکوک عغ فک وھو انوسهۃ انکزوثۃ ثذی ۔۔وانشاد ھھب انوسهۃ انزی یکزت كیھب ونی االيش ثشصم ي
"انطؼبو نغزؾویہ ثب نلال کزا وکزا ي انطؼبو وؿیش
Imam Malik (RA) has stated:
“During the era of ‘Marwan Bin Al-Hakam’ people started to use Sukuk
for edible items and the trading agreements were done before
possession of the items was acquired. Therefore Zaid Bin Sabit (RA) along
with another one of Prophet’s (SAW) companion (RA) went to Marwan
Bin Al-Hukm and asked ‘Are you allowing Riba as legitimate?’ Marwan
Bin Al-Hakam said ‘God forbid, how is that?’ they replied ‘These are
Sukuk which are traded before people acquire the possession (of the
items being traded)’. Marwan Bin Al-Hakam ordered his guards to
confiscate the Sukuk and return the subject matters to the real owners.”
In this context, Hazrat Sheikh Ul-Hadith states:
“Sukuk is the plural of ‘Suk’, which means a paper document on which
the amount of payment is mentioned. Here it qualifies as a certificate
--------------------------------------------------------------------------للجعيد والتجاريۃ النقديۃ االوراق احکام -----------------1
225
which is issued by the ruler as ‘ration card’ so that proper shares are
allocated to each individual.”1
This indicates that various forms of credit money had been in use in early times
and the modern versions of the concept are based on these earlier models.
PROS OF CREDIT MONEY
There are certain benefits of credit money which cannot be denied. These are
despite the disadvantages associated with credit money at the macroeconomic
level.
ELIMINATES THE REQUIREMENT TO CARRY CASH: The use of credit money frees the user from the worry of carrying cash. This is
particularly advantageous in business transactions which commonly require
transfers of large amounts of money and hence is also a safeguard against theft
and accidental loss. The bill of exchange and bank check serve this specific
purpose.
INSTRUMENT OF CREDIT: The use of credit money helps to foster a relationship of confidence and trust
between the trading parties where each facilitates the other over advance or
future payments. This stance has always been critical to businesses since earliest
times.
BENEFITS OF CHECKS: 1. Checks are one of the most convenient and common form of credit
money in which any large or small amount may be facilitated. Checks
are an easy to use, safe and efficient way to make payments especially in
the more developed countries where these are used instead of cash in
routine and business money transactions.
2. Checks are a secure way to make payments particularly when they are
‘crossed’ in which case the money can only be transferred into the
account of the specified person on the check. This makes it very secure
--------------(؍) اشرفيہ تاليفات ادارہ ملتان،( زکريا محمد موالنا الحديث شيخ)الکاندھلوی ، اوجزالمسالک --------------1
226
against accidental loss of theft. Checks also serve the legal purpose of
acting as an official receipt of payment.
3. Checks make it easy to process large sums of money which would
otherwise involve counting and storing substantial amounts of cash. This
helps to make business transactions faster and more efficient.
BENEFITS OF BILLS OF EXCHANGE 1. Bills of exchange are highly convenient for international transactions.
2. Bills of exchange allow trading parties from different countries to make
advance or future payment with less apprehension since the required
payment can be made until the term period indicated on the bill of
exchange expires. If the goods are supplied on credit, then the trader
can further sell the goods in the local market before the deadline and
can make the payment even as he earns a profit over the sale of the
merchandise in question.
3. Bills of exchange provide legal protection to the trading parties where
the defaulter is liable for prosecution in the court of law.
4. Payment using bills of exchange can also be made before the deadline.
However, conventional banks charge interest according to the amount
and the remaining days before the deadline (needs confirmation).
Islamic banks have their own Shariah compliant alternates for this which
will be discussed later.
CONDITIONS WHICH AUTHENTICATE CREDIT MONEY
From the legal point of view, there are certain conditions which must be fulfilled
before credit money can be used for the purpose of lawful trade. A summary of
these is as follows:
1. The ‘drawer’ and the ‘drawee’ must agree to use any form of credit
money and the drawer must put his signature on the document. The
drawee must then accept this with his free will, indicating the mutual
consent of both parties for the discussed mode of transaction.
2. A clearly stated objective must be known before the document is
prepared.
3. This mode of exchange represents money hence the term credit money
which can be redeemed for the amount it represents. Credit money
227
hence cannot represent nor can it be redeemed for any goods or
services.
4. Similar to any other legal issues, there are set age restrictions for the
drawer and the drawee. If this age does not comply with the rules as
specified by the laws of a country, then the individuals will not be
allowed to use credit money for any transaction.
"واہم انوبو یؾذدو عب يؼیۃ نالھهیۃ وھی اؽذی وػؾشی عۃ۔"
“The law makers have defined a qualifying age limit of twenty one
years”1
5. It is mandatory for the drawer to put his signature on any document
specified as credit money just as in the case of checks.
6. Certain details of the drawee must be present on the credit money
document such as the full name.
7. The name of the payee also needs to be mentioned.
8. The date and place of issue also needs to be mentioned.
9. In some cases the date and place where the payment is expected to be
made is also required.
10. The amount which needs to be delivered needs to be written clearly in
numerals and letters.
11. In case of check and Hundi, three parties are involved; drawer, drawee,
and payee.
12. In case of bonds, only the drawer and drawee are involved.
In the Arabic language, bills of exchange and checks are referred to as “ صالصیۃ
.”روهشكی“ and bonds are called ”االهشاف2
USING CREDIT MONEY
Credit money is used via endorsement which means giving another individual
or party the right to use the promissory note, check or bill of exchange etc.
All these documents are generally valid from one month to up to three
1------------ ---------------- اول طبع ، الصديق ،مکتبۃ الطائف ، السعوديۃ( ثواب بن ستر) الجعيد والتجاريۃ النقديۃ االوراق احکام
(۴٢ص)ء٢٢ 2 Ibid.
228
months for local transactions and up to six months for international
transactions. Although it is possible for the document to go into different
hands during this period, it can only be cashed or utilized by the authorized
person who is specified on it and who signs for it as a declaration of
acceptance.
LEGAL MEANS OF ENDORSEMENT
Credit money can only be authentically endorsed under the following conditions:
1. The signature of the receiver must be mentioned on the bill.
2. The endorsement should not be temporary but permanent. Also a single
document cannot be endorsed to multiple parties or individuals.
3. If the drawers are more than one then payment should be made
separately from each party, i.e. one at a time.
4. If the bill has been endorsed multiple times, then the particulars of each
endorsee must be mentioned on the bill.
5. Generally the endorsee is required to sign the bill at the back, or any
other specified location as proof of acceptance.
TYPES OF ENDORSEMENT
There are seven different types of endorsement:
1. Blank Endorsement:The blank endorsement issued by the payee or the
endorsee can be cashed by any individual who has possession of it.
2. Special Endorsement: In special endorsement, the endorsee specifies
the name of the person who can legally cash the bill. No other person
can cash the bill except this individual.
3. Conditional Endorsement: In the case of conditional endorsement the
payment of bill is being made stipulated with a condition to fulfilled, for
example, the amount of this bill should be handed over to someone on
the delivery of bill of landing. It means, the mentioned above person will
be entitled to receive the specific amount after the delivery of the bill.
4. Partial Endorsement: In a partial endorsement, only a certain
percentage of the total payment is released to the endorsee.
229
5. Restrictive Endorsement: Restrictive endorsement allows only the
specified individual to cash the bill or the funds to be transferred to the
specified bank account number.
6. Negative Endorsement: Sometimes the endorsee states ‘sans recourse
or without recourse to me’ on the bill. This means that the endorsee is
not held accountable if there are insufficient funds to cover the amount
due to the endorsee. Often banks charge both parties when checks
bounce. However on negative endorsement bill, the endorsee would not
be charged and is relieved from potential charges when check indicatez
‘sans farinas’ or ‘no charges’.
7. Facultative Endorsement: In facultative endorsement, the endorsee is
relieved from some or all of his responsibilities.
230
CHAPTER-9: FINANCIAL INSTRUMENTS
BACKGROUND OF DISCUSSION
Before moving to the actual discussion, the definitions of sale of debt and Hawala
will be revised again since Shariah rulings related to these will be thoroughly
referred to in this chapter. In a capitalistic economic system sale of debt has
become a norm and a variety of financial instruments have been developed to
support the activity including credit sale. These various instruments are also
considered tradable and their trading is often done at a lesser or greater price
than their actual face value. There are many different forms of credit sale group
under the following three categories:
Sale of debt for debt (ثیغ انذی ثبنذی)
Sale of debt to debtor (ػهیہ انذی (ثیغ انذی ي
Sale of debt to non debtor (ثیغ انذی ي ؿیش ي ػهیہ انذی)
SALE OF DEBT FOR DEBT ( ثبنذی انذی ثیغ ) Sale of debt for debt is also referred to as sale of debt against debt. Such a
transaction can be made by two parties. For instance Zaid sells one ton wheat for
Rs. 2,000 to Omar and both enter a contractual agreement that the wheat and
the money will be exchanged after a month. Now Zaid owes one ton wheat to
Omar while Omar owes Rs. 2,000 to Zaid. In another case, Omar enters a future
contract with Zaid where Omar sells one ton wheat to Zaid but promises to
deliver after a month though Zaid has already paid Rs. 2,000 for it. After a month,
Omar fails to deliver the wheat and requests Zaid to resell it for Rs. 2,000, which
Zaid agrees to pay after a month. This is because after the first contract the
ownership of the wheat was transferred to Zaid, making it a liability for Omar. If
Zaid agrees, then it means that he has purchased Omar’s ‘debt for debt’. In other
words, Omar has sold his debt for Zaid’s debt.
231
Such a sale transaction is prohibited and illegitimate according to Shariah rulings
and is evidenced from the following Hadith:
۔"ػهیہ وعهى ھی ػ ثیغ انکبنی ثبنکبنیللا ا انجی فهی ا"
“Prophet (SAW) has prohibited sale of debt for debt.”1
Though the authenticity of this Hadith is often debated among the Shariah
scholars, there is little doubt that it is genuine and implementable when
examined according to Shariah rulings. Shariah scholars qualify the Hadith as
‘Talqi-bil-Qabool’ (رهوی ثبنوجول) and Ulema accept it as a source. This means that
the Hadith is not falsified or distorted. Allama Seoti (RA) also confirms this by
stating that a Hadith which is qualified as Talqi-bil-Qabool cannot be considered
falsified.
ؾخ ارا رهوب انبط: وکزا يب اػزنذ ثزهوی انؼهبءنہ ثبنوجول هبل ثؼنھى" ثبنوجول وا نى یؾکى نهؾذیش ثبنق
نب ؽکی ػ انزشيزی ا انجخبسی فؾؼ ؽذیش : یک نہ اعبد فؾیؼ، هبل اث ػجذانجش كی االعززکبس
ھو انطھوس يبئہ، واھم انؾذیش ال یقؾؾو يضم اعبد، نک انؾذیش ػذی فؾیؼ ال انؼهبءرهوو : انجؾش
انذیبس اسثؼخ وػؾشو هیشاهب، : هیہ وعهىػللا سوی ػ عبثش ػ انجی فهی ا: ثبنوجول وهبل كی انزھیذ
-"وكی هول عبػخ انؼهبءواعبع انبط ػهی يؼب ؿی ػ االعبد كیہ: هبل2
Hence in the light of this Hadith the majority of scholars concur that the above
detailed types of transactions are illegitimate and prohibited.
SALE OF DEBT TO DEBTOR ( انذی ثیغ انذی ػهیہ ي ) In transactions entailing sale of debt to debtor, the credit is exchanged for
another item. For instance, Omar owes Rs. 1,000 to Zaid and asks Zaid to take a
piece of furniture worth Rs. 1,000 as payment of this loan. If both of them agree
on this, then the transaction will be permissible in the light of Shariah as per the
majority of Islamic scholars and jurists.
رقم ۶۵: المستدرک فی الحاکم اخرجہ فيما عنھما ہللاا رضی عمر بن ہللاعبدا عن مروی الحديث ھذا ----------------------------1
۶:۵ الکبری سننہ فی والبيھقی البيوع، کتاب من ۶٢:الحديث رقم ٧: سننہ فی والدارقطنی ھ۴ بيروت طبع ۴:يثالحد
وغيرہ۔ ۴۴۴:الحديث رقم ۰:٢ مصنفہ فی وعبدالرزاق بالدين، الدين بيع عن النھی جاءفی ما باب رة۔ ةالمدين طبع ،۵:ص للسيوطی الراوی تدريب -----------------2 -----------------------------------------------------------المنو
232
Allama Kasani (RA) states:
ػهیہ ال انبغ ھو انؼغض ػ انزغهیى وال ؽبعخ انی انزغهیى ھب وظیش( ی انذییؼ)ویغوص ثیؼہ " ثیغ : ي
-"انـقوة اہ یقؼ ي انـبفت وال یقؼ ي ؿیش ارا کب انـبفت يکشا وال ثیخ نهبنک
‘It is allowed for a person carrying the loan to sell it off. to the debtor,
because there is no problem in delivery of the subject matter to the
buyer.’ 1
In making all these transactions, all rules applicable on ordinary sales will be
applicable here as well. An example of these rules is that the subject matter
should be at least under the constructive possession of the seller otherwise it
won’t be permissible for him to sell it. According to Allama Kasani:
-"وال یغوص ثیغ انغهى كیہ ال انغهى كیہ يجیغ وال یغوص انجیغ هجم انوجل"
"Muslam Fieh' must not be sold, as Muslam Fieh' is the subject matter,
and it is not allowed to sell subject matter unless it is under the posession
(of the seller)."2
Also if the subject matter on both sides of the transaction fall on the list of items
on which the rules of Riba are applicable, then it must be ensured that none of
these rules are violated. Similarly no rebate (مغ ورؼغم) or penalty can be charged
during the transaction so that the payment remains exactly equivalent to what is
due. With deffered price which is more than actual debt, it will be considered
Riba, and it is a kind of “Taqzee am Torbi” (pay or increase in debt). Religious
scholars have conducted detailed discussions on this issue on various occasions.
For instance, one of the points these discussion have brought forth, as already
stressed repeatedly in Shariah and throughout this book, is that the debtor will
not be allowed to return the payment with any form of addition as would qualify
as Riba.
SALE OF DEBT TO NON-DEBTOR ( انذی ػهیہ ي ؿیش ي انذی ثیغ ) In this type of transaction, the debtor sells his debt to a third party. However,
there is a difference of opinion between scholars over the legitimacy of this form
---------------------------------------------------------------------------------------۔(۴۰/۵) الصنائع بدائع ------------------1 2 Ibid
233
of transaction where the Hanafi and Hanbali scholars consider such transactions
illegitimate. According to Imam Muhammad (RA):
ی یغزوكیہ ألہ ؿشس كال یذسی أیخشط أو ال یخشطال یجـی نهشعم ارا کب نہ د" -"ی أ یجیؼہ ؽز
“Unless the creditor receives his payment it is not allowed for him to sell
it. This is so because it is uncertain that he will receive his payment or
not.”1
According to Allama Kasani (RA):
وال یؼوذ ثیغ انذی ي ؿیش ي ػهیہ انذی أل انذی ايب أ یکو ػجبسح ػ يبل ؽکی كی انزيہ وايب أ "
یکو ػجبسح ػ كؼم رهیک انبل ورغهیہ وکم رنک ؿیش يوذوس انزغهیى كی ؽن انجبئغ ونو ؽشه انزغهیى
۔"انزغهیى ػهی ؿیش انجبئغ كیکو ؽشهب كبعذا كیلغذ انجیغػهی انذیو ال یقؼ أینب ألہ ؽشه
‘A sale contract to sell credit to a third party cannot be established. This
is because the subject matter is either constructive wealth as it relates to
Zimma or it means to make owner and deliver. In both cases the subject
matter cannot be delivered on the seller’s side. Also no duty to deliver
placed on the debtor is permissible since it would be a condition of
delivery for non-seller. This condition would hence be void and
consequently the sale would also be void’. 2
Qazi Abu Yaali Hanbali (RA) states in this context:
ھو ػهیہ كوم اثو هبنت انغ ووم يہ عواص رنک وال رخزهق انشوایۃ اہ ال " واخزهق كی ثیغ انذی ي
-"یغوص ثیؼہ ي ؿیش ي ھو كی ريہ انخ
“There is a difference of opinion in credit sale to third party. Abu Talib
has asked to refrain from it and has also provided a justification and
there is no contradiction in credit being illegitimate in case if it is sold to
a third party.”3
According to Allama Mardavi Hanbli (RA):
-" انزھت وػهیہ األفؾبة انخال یغوص ثیغ انذی انغزوش نـیش ي ھو كی ريزہ وھو انقؾیؼ ي"
ين أو العطايا لہ يکون الرجل باب ،ہللاا رحمہ مالک لالمام المؤطا -------------1 ------------------(۵۴:ص) فيبيعہ الرجل علی الد ---------------------------------------------------------------------------------------۔(۴۰/۵) الصنائع بدائع ------------------2 ------------------------------------------------------------------۔(۵٧/) لیيع ألبی والوجھين الروايتين کتاب ----------------3
234
“It is not legitimate to sell credit to a third party. This is the correct
viewpoint and has been adopted by Ashab (various scholars) as well.”1
It can be concluded from the above listed viewpoints that credit sale to a third
party is prohibited unless it is done through Hawala. In the latter case it is
permitted unanimously by all scholars from all schools of thought. There is a
difference between Hawala and a sale contract. For instance, in cases of Hawala
if the debtor or third party is unable to produce the required amount and the
witness is also absent, then the creditor can contact the real debtor for the
required amount. However in cases of credit sale to a third party, all rights of the
subject matter are transferred to the new debtor or third party. If the new
debtor or third party defaults then the creditor will not have the right to demand
the real debtor for the payment. For this reason credit sale to third party is not
allowed since it introduces an element of uncertainty into the transaction and
increases risk for the creditor. Neither of these elements are present when
transactions are done via Hawala. The Maliki and Shafi’i scholars have their own
stance on the issue:
MALIKI VIEWPOINT
Scholars belonging to the Maliki school of thought declare the sale of debt to
non-debtor illegitimate unless the following conditions are fulfilled:
The real debtor be present at the time of the contract and must agree
over the amount of payment.
The subject matter must consist of items whose sale is allowed without
physical possession. For instance, the sale of eatables is not allowed
until they are in the physical possession of the seller.
The nature and type of items being exchanged must differ such as the
exchange of furniture for cash.
Gold and silver must be involved in the transaction.
There must be goodwill between the creditor and third party before the
transaction can take place.
These conditions are further confirmed from the statement of Allama Zarrkani:
ا وراجع ،(/۵) للمرداوی االنصاف ---------------1 -----------------------------------------۔(۰۵/۴) مفلح البن الفروع أيضا
235
...... ويغ ثیغ انذی ػهی انـبئت ونو هشثذ ؿیجزہ أو صجذ ثجیۃ وػهى يالۂ ثخالف انؾوانۃ ػهیہ كبھب عبئضح "
ويغ ثیغ دی ػهی ؽبمش ونو ثجیۃ اال أ یوش وانذی يب یجبع هجم هجنہ وثیغ ؿیش عغہ ونیظ رھجب ثلنۃ
ي ػهیہ ػذاوح وال هقذ اػبرہ كال ثذ ي ھز انخغۃ ؽشوه نغواص ثیؼہ وال ػکغہ ونیظ ثی يؾزشیہ و
-"صیبدح ػهی هونہ یوش 1
SHAFI’I VIEWPOINT
As per the opinion of Allama Noovi (RA), credit sale to a third party is not
considered legitimate by the scholars of the Shafi’i School unless the seller
acquires possession of the subject matter during the contract. In this case
however, the debt will no longer exist which indirectly implies that such
transactions are not permitted.
اػهى ا االعزجذال ثیغ ن ػهیہ دی، كبيب ثیؼہ نـیش ک نہ ػهی اغب يبءح كبؽزشی ي آخش ػجذا ثزهک "
انبءح كال یقؼ ػهی األظھش نؼذو انوذسح ػهی انزغهیى وػهی انضبی یقؼ ثؾشه ا یوجل يؾزشی انذی ي
األظھش : جم هجل اؽذھب ثطم انؼوذ، ههذػهیہ وا یوجل ثبئغ انذی انؼوك كی انغهظ كب رلشهب ه
۔"انقؾۃ2
كبيب ثیؼہ نـیش ک نہ ػهی سعم يبءح كبؽزشی ي آخش ػجذا ثزهک انبءح كلی فؾزہ : وكی ؽشػ انھزة"
یقؼ ثؾشه ا یوجل يؾزشی انذی : ال یقؼ نؼذو انوذسح ػهی انزغهیى وانضبی: هوال يؾھوسا أفؾھب
ھو ػهیہ وا یوجل ۔"ثبئغ انذی انؼوك كی انغهظ كب رلشهب هجم هجل اؽذھب ثطم انؼوذ ي3
Allama Noovi (RA) states in Minhaj Al-Talibeen, ‘…these statements confirm that
Shafi’i prohibit the sale of credit to a third party’.
-"وثیغ انذی نـیش ي ػهیہ ثبهم كی األظھش ثؤ اؽزشی ػجذ صیذ ثبءح نہ ػهی ػشو"
In short the first form of credit sale is unanimously prohibited by scholars from all
schools of thought; the second types is permitted by all scholars; and the third
type is allowed only by the Maliki scholars but only when certain conditions are
fulfilled, which are impossible in most cases. This implies that the third type of
credit sale is directly or indirectly prohibited by Shariah. 4
----------------------------------------------------------------------(۰/) خليل مختصر علی الزرقانی شرح -----------------1 ------------------------------------------------------------------------------(۵۴/) للنووی الطالبين روضۃ ------------------2 -------------------------------------------------------------------------------(/٢) المھذب شرح المجموع -----------------3
المفتی للشيخ الثانی، المجلد‘‘ معاصرة فقھيۃ قضايا فی بحوث’’ کتاب يراجع أن فلہ باالستيعاب األنيق البحث ھذا يطالع أن أراد من 4
والسالم الصالة صاحبھا علی النبويۃ الھجرة من ۴۶ األول ربيع طبع کراتشی، دارالعلوم مکتبہ العثمانی، تقی محمد
236
HAWALA (TRANSFER OR ASSIGNMENT)
Hawala is a term which will frequently be used throughout this chapter. Hence it
is important to understand its definition, related terminologies, conditions and
Shariah rulings. In the Arabic lexicon, Hawala means ‘to relocate’ whereas the
terminological meaning in jurisprudence literature differs:
ينمنذمۃالمحيلا" -"لیذمۃالمحتالعليہ نقلالد
"The transferring of debt from the actual debtor to a third party"1
Hence in jurisprudence literature it means that the debtor transfers his debt to
another person or a third party, relieving himself of the responsibility to repay the
loan. This differs from Kafalah where the debtor is not relieved of this
responsibility.
TERMINOLOGIES Following are some important terminologies used in conjunction with Hawala:
1. Muheel—the actual debtor
2. Muhtal/Muhtal ilaih/Muhtal iLaih—the actual creditor
3. Muhtal Alaeh—the third person who takes the responsibility to pay the
debt of the actual debtor.
4. Mhutal Bihi—the debt
5. Tavaa—a situation in which the creditor doesn’t receive his payment. In
Shariah it has two forms:
a. The third party denies and swears that he hasn’t accepted to pay off
the debt and the debtor is also unable to produce any witnesses to
that account.
b. The third person defaults or at worst dies in the same state.
In both of the above cases, if the actual creditor does not consult the debtor for
the payment then the subject matter will be considered as expired. This is
referred to as Tavi.
(٢۵/) الفائق النھر فی کذا الصحيح ھو ذمۃ الی ذمۃ من الدين نقل: ہيں يہ الفاظ کے ہنديہ اور الحوالۃ، کتاب المختار، الدر ------1
237
METHOD Hawala is primarily based on the mutual agreement between the debtor and
third person. This is also confirmed by Allama Kasani (RA):
يجابمنالمحيلوالقبولمنالمحالعليہوالمحالجميعا يجابوالقبول،اال امارکنالحوالۃفھواال"
-"الخ1
CONDITIONS One of the main conditions for Hawala is that all involved parties i.e. the debtor,
the creditor and the third person must be adult and mature individuals who
should agree to the contract with freewill. The presence of a debt is also a
necessary condition with the quantity of payment should be clearly known to all
parties without any ambiguity. However Hawala of A’eyan (اعيان) or goods is not
permitted. All these conditions are also acknowledged in Maa’yeer Sharyia:
للنقل" اقابالا اصحيحا ينالمحالعليہمعلوما ينالمحالبہوالد -"يشترطأنيکونکلمنالد2
TYPES OF HAWALA Restricted Hawala or Muqyyidah: In this form of Hawala the third person is
already indebted to the actual debtor. In order to make the payment, the third
person can reduce his debt with an amount equal to the payment he delivers to
the actual creditor. In other words, the actual debtor never hands him the cash
for payment to the actual creditor.
Unrestricted Hawala or Mutlaqah: In an unrestricted Hawala, the third person is
never indebted to the actual debtor and is free to make the payment on his own
accord. The third person can later demand the actual debtor to redeem him for
the payment amount.
Hawala Halaah: Spot payment.
Hawala Moujlah: Deferred payment.3
-------------------------------------------------------------------(۵/۶) الحوالۃ کتاب للکاسانی الصنائع بدائع -----------------1 -----------------------------------------------------------------------------------(:ص) الشرعيۃ المعايير ------------------2 3 Ibid
238
RULES OF HAWALA Certain rules pertain to this mode of transaction:
1. The actual debtor is relieved from his responsibility to pay off his debt.
2. The actual creditor can demand his payment from the third party.
3. If for some reason, the actual creditor pursues or chases the third person
for his debt, then the third person also has the right to pursue the actual
debtor.
If any of the following scenarios emerge in the Hawala, then the third person will
be considered relieved of his responsibility to pay the debt.:
1. If the contract expires.
2. In cases of Tava, as discussed earlier.
3. The third person makes the payment to the actual creditor.
4. The third person is given charity equivalent to the amount owed to the
actual creditor.
5. The actual creditor dies and the third person is his relative. 1
BANK CHECK
A check is a signed document used to transfer funds from one bank account to
another. 2
According to the definition presented by Dr. Usman Shabbir:
یزن أيشا يکزوثب یطهت ثہ انغبؽت انؾیک يؤخور ي انقک وھو وصیوۃ ثبل أو ؾو وانؾیک يؾشس"
ب يؼیب ي انوود نؾخـ يؼی أو الرہ أو ( انقشف)ي انغؾوة ػهیہ ـ ا یذكغ ثغشد االهالع ػهیہ يجه
-"نؾبيهہ
‘A check is a form of Suk or a certificate representing some goods. It is a
document containing instructions for one bank to transfer specified funds
to a certain individual or the bearer of the check’. 3
1-------------- - -----------------------للفقہ العامۃ الکتب فی کذا ۃ،الحوال کتاب الکاسانی للعالمۃ الصنائع بدائع من مأخوذ ذلک کل 2 Introduction to Money and Banking, page 223. -----ھ۔۴٢ ثالث طبع النفائس، دار اردن، شبير، عثمان محمد( شبير) االسالمی الفقہ فی العصريۃ الماليۃ المعامالت ------------3
239
Dr. Ja’yed concurs with this definition where he states:
غؾوة ػهیہ ویکو ثکب ي ان( انغبؽت)ھو أيش يکزوة وكوب ألومبع ؽذدھب انؼشف یطهت ثہ اآليش "
ب يؼیب الر ؽخـ يؼی أو نؾبيهہ ـ -"ؿبنجب ا یذكغ ثوزنب وثغشد االهالع يجه
Also according to Agarwal:
“A check is an instrument containing an unconditional order, signed by
the depositor, directing his banker to pay on demand a defined sum of
money to himself or to the person named therein or the bearer of the
check.”1
There are generally three users of a check:
Drawee or the person or depositor who writes and signs the check.
Drawer or the bank that acts on the instructions of the check.
Payee or the receiver of the amount the specified on the check.
DIFFERENCE BETWEEN A CHECK AND BILL OF PAYMENT 1. The drawer for a bill of payment can be any individual whereas only
banks are the qualified drawer of checks.
2. Drawers of bill of payment are bound to accept the payment whereas
banks are not bound to accept checks.
3. Payments against bill of payment are due on specified dates whereas
checks are valid until the expiration date specified on them.
4. Bill of payment is not crossed whereas it is possible for checks to be
crossed.
5. Bill of payment may carry a discount but checks cannot do this.
6. Payment against a bill of payment may be made in installments if
required. This is not possible with checks where the entire amount has
to be made in full.
TYPES OF CHECKS Bearer Checks: Bearer checks are the simplest form of check where any person
presenting this check to the bank can receive the funds specified on it. The bank
1 Introduction to Economic Principles. Dr. A. N. Agrawal
240
is not responsible to verify or investigate whether or not the payment has been
made to the right person.
Order Check: In case of order checks, the bank is responsible for verifying
whether or not the payment is being made to the right individual. For verification
purpose, the bank can ask for proof of identification or other necessary
information from the person presenting the check.
Cross Check: Cross checks are considered the safest form of checks where the
bank does not pay cash but transfers the specified amount directly to the account
of the payee whose name is mentioned on the check. This eliminates chances of
theft or forgery.
Post Dated Checks: Post dated checks cannot be cashed before the date specified
on it. This helps traders or other individuals to ensure that sufficient funds are in
their account before the payment is released to the suppliers.
There are certain reasons due to which checks are likely to be dishonored:
1. Differences in the signature of the drawee.
2. Request for amount before the specified date or after the expiration of
date on the check.
3. Insufficient funds in the drawee’s account.
4. Death of the account holder.
5. Foreclosure of bank where the account is held.
6. Instructions from the court of law against payment.
7. Overwriting on the check.
8. Difference in the numerals and letters of the specified amount.
9. Suspicion of forgery or fake signature.
BANK CHECK IN THE LIGHT OF SHARIAH There is a difference of opinion among Islamic scholars on this issue depending
upon the type of check and the purpose for which it is used. Some scholars deem
bank checks to be Hawala while other categorize it as Wakala. An extract of the
analysis of Syed Muhammad Baqar Al-Sadr on the subject is as follows:
“Generally the one who writes the check is the debtor and the one who
receives the amount (beneficiary) is the creditor. The debtor writes the check
241
for the bank and hands it over to the creditor so that his debt is paid off.
There are times when the debtor has money in his bank account and
sometime he doesn’t, causing overdraft to occur. The rules to deals with
these two situations are as follows:
1. If the writer of the check extracts money from his own bank account
then it will be termed as “Istifa-e-Dain” (اعزیلبءدی, means ‘receiving
full payment’). If the writer is the debtor and gives this check to the
beneficiary (his creditor) then it will be termed as Hawala (from the
debtor to the creditor). This is correct as per Shariah and the debtor
will be considered relieved from his responsibility (unless the check is
bounced).
2. If the bank account of the writer of the check is empty and overdraft
occurs when the beneficiary or the creditor presents this check to the
bank for redemption, this will also be considered Hawala. However
in this case the bank is not liable to pay on behalf of the issuer of the
check. For this reason jurisprudents have termed it as “Hawala Ali Al-
Barra” which is allowed. In this case it is possible that the bank
accepts the check. If so then it means that the bank has accepted
the Hawala. This will make the issuer of the check a debtor of the
bank for the amount which was mentioned on the check.”1
AAOIFI Shariah Standards summarize the Shariah viewpoint on bank check in
following words:
“On issuance, a check against a current account is a form of Hawala if the
beneficiary is a creditor of the issuer i.e. the account holder for the amount
mentioned on the check. In this case the issuer, the bank, and the beneficiary
are the transferors, the payer and the transferee respectively. If the
beneficiary is not a creditor to the issuer of the check, then this is not a
Hawala transaction because there can be no Hawala transaction without an
existing debt. In the absence of a debt, the transaction becomes an agency
contract for the recovery of the amount of the debt on behalf of the
transferor, which is lawful in Shariah.
-ھ۔۴ ششم طبع للمطبوعات، التعارف دار لبنان، بيروت( الصدر باقر محمد السيد) الصدر سالم،1اال فی االربوی البنک -----1
242
If the beneficiary of the amount of a check is a creditor to the issuer, then
issuing a check against the account of the issuer without a balance is an
unrestricted transfer of debt if the bank accepts the overdraft. If the bank
rejects the overdraft, then this is not considered a transfer of debt, in which
case the potential beneficiary may have recourse to the issuer. The holder of
a ’traveler’s check’ , the value of which has been paid by him to the issuing
institution, is a creditor of such an institution. If the holder of the ‘travelers’
check’ endorses the check in favor of his creditor, it becomes a transfer of
debt in favor of a third party against the issuing institution that is a debtor to
the holder of the travelers’ check. This is a restricted transfer of debt and the
amount of the debt is the value of the check for which the institution received
payment.”1
Mufti Taqi Usmani in his work “Takmla Ftah Al-Malhum” (رکهہ كزؼ انهہى) has
discussed the Shariah rulings on checks in following words.
كبنقؾیؼ ا انؾیک انقشكی عذ یذل ػهی ا انزی وهغ ػهیہ هذ وکم ؽبيهہ نوجل دیہ ي انجک "
ی یوذ انجک ويوبفۃ دیہ يہ كهیظ رنک ي االصب كی ؽیء كال یؼزجش انوجل ػهیہ هج نب ػهی يجهـہ ؽز
ی یوذ انلویش وال یغوص اؽزشاء انزھت وانلنۃ ثہ نلوذا انزوبثل كی انغهظ وال یزبدی ثبداۂ انضکوح ؽز
-"ویغوص نوهؼہ ا یؼضل ؽبيهہ ػ انوکبنۃ هجم ا یجهؾ ثہ انی انجک
“It is correct that a bank check is certificate which denotes that the
person signature on it allows the holder to act as his Wakeel, to receive
his debt from the bank on his behalf. Therefore check is not Saman and
for this reason possession of check will not be taken as possession of the
real amount until encashment. Zakat is also not applicable on the
amount of the check before encashment. Gold and silver cannot be
purchased through a check as the possession of the amount is not
acquired at the time and venue of the contract. Furthermore the issuer of
the check also has the right to cancel the check before it is presented to
the bank.”2
In the light of these statements, it is the opinion of author that a bank check
qualifies as Hawala. Therefore it is incorrect to explicitly deny this fact and tag it
1 Shari'a Standards 1423 AH, 2002 - Accounting and Auditing Organization for Islamic Financial
Institutions (AAOIFI). --(۵۵/) کراتشی، دارالعلوم مکتبۃ کراتشی،( العثمانی تقی محمد) العثمانی لمسلم، الصحيح شرح الملھم فتح تکملۃ ------------2
243
as a simple certificate of debt. However, in the case of the purchase of gold and
silver, the problem occurs if the possession of these metals is not acquired at the
time and venue of the contract. But if the buyer takes spot-possession of the
gold and silver right when he pays with the check, then this would be permissible,
as per the opinion of the author. This is because in the current age, checks
represent some amount of paper currency and the credit sale with any currency
is permissible according to Shariah as it does not qualify as Bay’Surf or money
exchange.
BILL OF EXCHANGE
In his book ‘Islam and Modern Economics and Trade’, Mufti Taqi Usmani explains
the bill of exchange in the following words:
“It’s a special kind of document, which a trader issues to his buyer at the
time of sale. Sometimes the payment against this bill is due at a later
time, and the buyer (debtor) accepts the terms mentioned on it by
signing the bill, i.e. he gives his written agreement to pay a certain
amount on a specified date. This bill is known as bill of exchange (Hundi
in Urdu). Its expiration is known as maturity and the date on which it
expires is referred to as the maturity date. The amount which is
mentioned on it can be demanded only at the time of maturity. However
in case the creditor needs money at an earlier date then he can exchange
this bill with a third party against the amount (equal or less than what
the bill carries) by transferring the rights of redemption to the third
party. This he does by signing on the back of the bill which is called
endorsement. The third party can also deduct some amount which is
known as discounting of the bill of exchange. The amount of discounting
depends upon the time left before maturity, as the amount will be lesser
if maturity is close. Generally this discounting is done by the banks, which
make it a type of short term loan given by banks. These bills generally
mature after three months.”1
ھ۴۴---- جديد طبع کراچی، القرآن معارف مکتبہ کراچی،( عثمانی تقی محمد) عثمانی تجارت، و معيشت جديد اور اسالم ----1
(:ص)
244
Mufti Taqi Usmani has also defined the bill of exchange in his Arabic book
‘Bhwas’:
ح ػ انوصیوۃ انزی انوع انضبی ي األوسام انبنیۃ انزی رزذاول كی انغوم انیوو رغی کجیبنۃ وھی ػجبس"
یکزجھب انؾزشی نهجبئغ كی ثیغ يئعم ویؼزشف كیھب ثبہ وعت كی ريزہ ص انجیغ، واہ یهزضو ثؤداء كی ربسیخ
آعم، وا انجبئغ ؽبيم انکجیبنۃ سثب یشیذ اعزؼغبل انؾقول ػهی يجهـھب كال یزظش انی ربسیخ نظ
هیزھب االعیۃ ویغی ؽغى انکجیبنۃ أو خقى انکجیبنۃ ثم یجیؼھب انی هشف صبنش ثؤهم ي
"انکجیبنۃ Discounting" وانؼبدح كی عوم األوسام ا يوذاس ھزا انؾغى غجۃ يجهؾ انکجیبنۃ رؾذد ػهی
ب کبذ انذح أهم ب کبذ يذح نغھب اکضش کبذ غجۃ انؾغى اکضش وکه کبذ غجۃ اعبط يذح نغھب كکه
-"انؾغى اهم1
The bill of exchange is defined by Dr. Abdul Aziz Fehmi as follows:
The) ھی وع ي انغذاد االریۃ انزی رغزخذو كی انزغبسح انخبسعیۃ كی انذول انـشثیۃ یؼزھذ ثوعجھب ال
Drawer) وثذو ؽشوه ا یذكغ نهغؾوة نقبنؾہ"- (The Drawee) ب ي انبل كی ربسیخ يؼی ـ يجه
“This is one of those documents which are used in western countries for
international trade. The issuer of the bill guarantees that he will make a
payment unconditionally to the beneficiary on a specified date.”2
According to Agarwal:
“A bill of exchange is an order from a creditor to the debtor to pay a
certain sum of money to himself or to the bearer.”3
The bill of exchange act 1882 defines bill of exchange as follows:
“An unconditional order in writing addressed by one person to another
signed by the person giving it, requiring the person to whom it is
addressed to pay on demand or at a fixed or determinable future time a
sum certain in money or to the order of a specified person or to bearer.”4
(/) ھ۴۶ جديد طبع کراتشی، دارالعلوم مکتبہ کراتشی،( العثمانی تقی محمد) العثمانی معاصرة، فقھيۃ قضايا فی بحوث -1 (٧۵:ص)-- العربيۃ النھضۃ دار بيروت،( ھيکل فھمی عبدالعزيز الدکتور) ھيکل االحصائيۃ، االقتصاديۃ المصطلحات موسوعۃ --2
3 Introduction to Economic Principles, by Dr. A.N.Agarwal ------------------------------------------------------(۴:ص) علی مبارک شيخ بنکاری، و زر تعارف بحوالہ ----------------4
245
REQUIREMENTS OF BILL OF EXCHANGE There are certain conditions which need to be fulfilled before a bill of exchange
can be used legally:
1. The bill should be in the form of an order and not in the form of a
request or appeal.
2. The bill should be unconditional where the payment must be made
without fulfillment of any condition.
3. The bill must be in the form of a written document.
4. The bill should be issued by a person for another person or a company
or vice versa and cannot be issued by an individual for himself.
5. The bill must be signed by the issuer. If it is issued by a company, it
should be signed by a person who holds sufficient authority.
6. The payment should be made at a specified future date.
7. The bill must indicate the exact amount of payment in the absence of
which the bill will have no legal value.
8. The payment must be made to the person specified on the bill or to a
third person endorsed by him.1
COMMON TYPES OF BILL OF EXCHANGE Following are some recognized types of bill of exchange:
1. With Respect to Location:
a. Inland Bill: This type of bill is used for trading within a country
where both parties involved in the trade reside in the same country.
Consequently the transfer of funds also takes place within the
boundaries of that country.
b. Foreign Bill: This bill is used when the trading takes place across
different countries. For instance, when a trader from Pakistan
issues a bill to his supplier in Singapore, this is classified as a foreign
bill as the payment will be made in Singapore.
2. With Respect to Purpose:
a. Commercial Bill: The purpose of a commercial bill is to allow the
buyer to make payments at a future time against any goods or
1 Ibid
246
services which he might have acquired from the seller or the
provider. The acceptance of this bill by the seller or the service
provider is a required condition for the legal validation of this bill.
b. Accomodation Bill: This type of bill carries the right to discount the
bill so as to provide some financial assistance to the carrier.
3. With Respect to Time of Payment:
a. On Demand Bill: An on demand bill can be redeemed whenever
required.
b. Time Bill: This type of bill is redeemable up to a certain time from its
date of issue or after it is received by the seller or service provider.
PREPARING A BILL OF EXCHANGE There are certain rules which need to be observed in order to prepare a legally
valid bill of exchange for use in trade:
1. Pasting of Revenue Ticket: The issuer of the bill has to paste a revenue
ticket at a corner of the bill of exchange. Without this ticket the bill is not
considered legally valid.
2. Amount of Payment: The exact amount of payment needs to be clearly
mentioned on the bill in numerals and letters.
3. The Date of Issue: The date of issue of the bill needs to be clearly
mentioned on the bill. This date generally appears at the opposite
corner from where the revenue ticket is pasted.
4. The Name of the Beneficiary: The name of the recipient person or firm
needs to be mentioned clearly on the bill.
5. For Value Received: These words must be clearly stated on the bill.
6. The Signature of the Issuer: The bill has no legal value without the
signature of the issuer. In the absence of signature it is nothing but an
ordinary piece of paper.
7. The Name and Address of the Issuer: The name and address of the
issuer must be stated on the bill opposite to the signature of the issuer.
8. Validity for Acceptance: Despite the fulfillment of all these
requirements, a bill would still not be valid until the particulars of the
third party along with his acceptance are mentioned on the bill. This is
because after the issuance of the bill, the issuer transfers the
247
responsibility to a third party which is usually a bank in most cases.
Unless that bank clearly states its acceptance, the bill will not be
considered legally valid.
DISCOUNTING OF BILL OF EXCHANGE Time bills are very common today since they allow the buyer to pay at a future
date specified on the bill. If the recipient of the bill is in need of the funds before
the maturity date, then he would go to the bank to acquire a short term loan in
lieu of the bill. The bank then exchanges or purchases the bill with an amount
discounted by a percentage equal to the interest rate. The payment which the
bank now makes is hence a short term loan on which the interest charges are
taken in advance by the bank. This is termed as discounting. The loan is
automatically paid off at the time of the maturity of the bill when the bank
acquires the amount from its redemption.
ANALYSIS OF BILL OF EXCHANGE IN THE LIGHT OF SHARIAH If the issuer of the bill of exchange is the debtor of the beneficiary then the bill
will qualify as Hawala. In this case the bank will be considered as the payee or
the third party who accepts the responsibility to pay the debt. If the issuer is not
the debtor of the benefiary, then the bill will be categorized as Wakala. In case
the payee or the third party, usually the bank, is not indebted to the issuer of the
bill, then the bill will qualify as Hawala Mutaliqah.
رؼزجش انکجیبنۃ ي هجیم انؾوانۃ ارا کب انؾخـ انغزلیذ انزی عؾجذ أليش دائب : كی انؼبییش انؾشػیۃ
نهغبؽت، ویکو انغبؽت ھو انؾیم انزی یقذس أيشا نهغؾوة ػهیہ ثذكغ يجهؾ يؼی ي انوود كی ربسیخ
يؼی نهغزلیذ انؾذد۔
كھی انؾبل ػهیہ، وانغزلیذ ؽبيم انکجیبنۃ ھو ( نغؾوة ػهیہا)أيب انغھۃ انهزضيۃ ثذكغ انجهؾ انؼی
انؾبل، كب نى یک انغزلیذ دائب نهغبؽت کب افذاس انکجیبنۃ روکیال ي انغبؽت نهؾخـ كی هجل
واعزیلبء يجهؾ انکجیبنۃ۔
"نۃ انطهوۃرؼزجش انکجیبنۃ كی ؽبل ػذو وعود يذیویۃ ثی انغبؽت وانغؾوة ػهیہ ي هجیم انؾوا1
-
كبيب انجو وانکجیبنۃ وانوصبئن األخشی انزی یکزت ػهیھب يجهؾ انذی يز یوو : وكی رکهۃ كزؼ انهھى"
اعشاءھب، كب انزؼبيم ثھب ؽوانۃ فؾیؾۃ ثال سیت أل انزی أفذسھب هذ کزت ػهیھب ای يذی نکم ي یؾهھب
سعم آخش، كوذ اؽبل دیہ ػهیہ، وهذ وعذ سمب انؾیم وانؾزبل ثھزا انجهؾ انؼهوو كکهب عهھب ؽبيهھب انی
فشیؾب وسمب انؾزبل ػهیہ يؼی أل انؾزبل ػهیہ ھو انزی اعشی ھز األوسام أول يشح وهذ سمی ثؤداء
يجهـھب انی کم ي یؾهھب كشمب ػبو نکم ي یؾهھب وأيب رهلع االیغبة وانوجول كال یؾزشه كی انؾوانۃ ثم
--------------------------------ھ۔۴۴ االسالميۃ الماليۃ للمؤسسات والمراجعۃ المحاسبۃ ھیءة الشرعيۃ، المعايير --------------1
248
ؼوذ انؾوانۃ ثبنزؼبهی کب یؼوذ انجیغ ۔ انزی اعشی ھز األوسام أول يشح وهذ سمی ثؤداء يجهـھب انی کم ر
ي یؾهھب كشمب ػبو نکم ي یؾهھب وأيب رهلع االیغبة وانوجول كال یؾزشه كی انؾوانۃ ثم رؼوذ انؾوانۃ
-"ثبنزؼبهی کب یؼوذ انجیغ
“Bonds, bill of exchange and other financial instruments which carry
specific amounts are considered ‘Hawala Sahiha’ from the day they are
issued. This is so because the issuer has declared that he is the debtor of
any individual who hold this bill (legally). Therefore whenever he passes
on this bill to another person, he is issuing Hawala. The agreement of
debtor and the creditor exists by default over this document. The payee
also impliedly agrees that he will pay each person who holds this bill as
per the amount stated on it. The pronouncing of agreement is not
mandatory as far as the matter of Hawala is concerned; rather it even
occurs if Ta’tee (تعاطى) exists, just like in the case of Bay’.”1
THE RULE OF DISCOUNTING The discounting of bill of exchange qualifies as the sale of credit for credit ( ثیغ انذی
As per the opinion of majority of Islamic scholars and as .(ي ؿیش ي ػهیہ ثبهم يہ
already repeatedly discussed earlier, this is prohibited in Shariah. A certain
document called Jamika, which is similar to a bill, remains in contention among
scholars. This document is issued by the Bait-ul-Mal or the administrator of the
Waqf for a person who owns some shares of assets including cash in the Bait-ul-
Mal or the Waqf which he needs to draw in times of some financial need. It is
illegitimate for that person to sell Jamika to a third person for an amount lesser
than what is specified on the Jamika as this would constitute credit sale. Allama
Haskafi (RA) agrees with this view:
غوص ي ثیغ انذی اب ی: ثجطال ثیغ انغبيکیۃ نب كی االؽجب( أی فبؽت رویش األثقبس)وأكزی انقق "
انذیو۔
عئم ػ ثیغ انغبيکیۃ وھو أ یکو نشعم عبيکیۃ كی : ػجبسح انقق كی كزبوا: وهبل اث ػبثذی رؾزہ
ثؼی عبيکیزک انزی هذسھب کزا : ثیذ انبل ویؾزبط انی دساھى يؼغهۃ هجم أ رخشط انغبيکیۃ، كیوول نہ سعم
نجیغ انزکوس فؾیؼ أو ال؟ نکوہ ثیغ انذی ثوذ، ثؼزک۔ كھم ا: ثکزا اوـ ي ؽوہ كی انغبيکیۃ، كیوول
وثیغ انذی ال یغوص ونو : ارا ثبع انذی ي ؿیش ي ھو ػهیہ کب رکش ال یقؼ۔ هبل يوالب كی كوائذ: اعبة
-"ثبػہ انذیو أو وھجہ2
---(۵۵/) کراتشی دارالعلوم مکتبۃ کراتشی،( العثمانی تقی محمد) العثمانی لمسلم، الصحيح شرح الملھم فتح تکملۃ ------------1 -------------------------------------------------------------الجامکيۃ بيع فی مطلب المحتار، رد مع المختار الدر -----------------2
249
The literature of the Hanbali School comments on this as follows:
وال یقؼ ثیغ انؼطبء هجم هجنہ أل انؼطبء يـیت كیکو ي ثیغ انـشس وھو أ انؼطبء هغطہ كی انذیوا، "
-"وال یقؼ ثیغ سهؼۃ ثہ أی ثبنؼطبء أل انوقود ثیغ انؼطبء الھی
‘It is not permissible to sell the endowment before its possession is
acquired. This is because the subject matter is not present and there is a
degree of uncertainty as it is still in the possession of Diwan such as Bait-
ul-Mal etc. and selling its certificate is also prohibited since the purpose is
to sell the subject matter and not its certificate’. 1
This clarifies that since the sale of credit to a third party ( ثیغ انذی ي ؿیش ي ػهیہ انذی
,is prohibited and illegitimate near the Hanafi and Hanbali scholars (يطهوب
therefore the sale of the bill of exchange even without discount is also
illegitimate due to already discussed reasons. According to Maliki and Shafi’i
scholars this will be allowed only if the bill of exchange is not backed by cash. In
case it is carrying cash, the selling price of the bill needs to be equal to the
amount of cash it carries. This illustrates that discounting is not allowed by any of
the four schools of thought. If there is any disagreement it is over the conditions
which allow the sale of the bill of exchange. The following resolution in this
context was passed by Majma’ Al-Fiqh Al-Islami, Jeddah:
-"ا ؽغى األوسام انزغبسیۃ ؿیش عبئض ؽشػب ألہ یئل انی سثب انغیءح انؾشو"
“The discounting of bill of exchange is illegitimate because it leads to
Riba Al-Nasiyah which is prohibited in Islam.”2
Mufti Muhammad Taqi Usmani has a different opinion on the issue where he
doesn’t consider it as a sale of debt but Hawala. He states:
“In jurisprudence discounting is considered illegitimate as discounting of
the bill by the party, who accepts it as Hawala from the actual holder less
then his debt (ثؤوـ ي انذی), qualifies as Riba Al-Fadl. This discounting
cannot be termed legitimate because the sale of debt as Bay’ and
Hawala are different. In case of ‘sale of debt’ (ثیغ انذی), the seller
---------------------------------------------------------------------------------(۵۶/) للبھوتی القناع کشف ------------------1
المجلد‘‘ معاصرة- فقھيۃ قضايا فی بحوث’’ لہبحوا ،فقرہ ٧//۶۶ رقم قرار ،٧/ السابع العدد االسالمی، الفقہ مجمع مجلۃ 2
الثانی
250
completely transfers the responsibility of payment to the buyer of the
debt. However in case of Hawala the responsibility to pay remains with
the actual debtor or issuer i.e. if the actual creditor doesn’t receive the
payment then he holds the right to consult his actual debtor. This is
observed today in case of discounting where the discounter consults the
actual issuer or debtor if he is unable to receive the payment. For this
reason this is not sale of debt to the third party ( ثیغ انذی ي ؿیش ي ػهیہ
ؽوانۃ انذی ثبوـ ي ) ’rather it is ‘Hawala Bin-Naqs Man Al-dain ,(انذی
”.(انذی1
Mufti Taqi Usmani asserts this point further in his Arabic books:
ؾویوۃ واب ھو اهشاك وؽوانۃ، كبنزی یؾغى انکجیبنۃ وانزی یظھش نی أ ؽغى انکجیبنۃ نیظ ثیؼب كی ان"
ب صى یؾیم انؾبيم انوزشك ایب ػهی يقذس انکجیبنۃ وانذنیم ػهی رنک ا كی ـ یوشك انی ؽبيهھب يجه
هوای يؼظى انجالد ال یزؾم انؾبعى خطش ػذو انزغذیذ ثم یؾن نہ ا یشعغ ػهی ؽبيم انکجیبنۃ ارا نى یوغ
-"یذ ي يقذس انکجیبنۃ وھزا ؽب انؾوانۃ ػهی يزھت انؾلیۃانزغذ2
SHARIAH COMPLIANT ALTERNATE FOR DISCOUNTING OF BILL OF EXCHANGE
There are a number of Shariah compliant alternates for discounting of bill of
exchange. For instance, instead of selling the bill the trader or issuer can
authorize the bank to accept payment in lieu of his debt and assigns a fee to the
bank for acting as his Wakeel. After this the issuer can take a loan from the bank
equivalent to the amount carried by the bill. The bank can now collect payments
and adjust them subsequently against the loan which the issuer or trader has
taken from the bank. This can be illustrated by an example where Zaid wishes to
redeem a bill worth Rs. 100,000 by making the bank his Wakeel. He contacts the
bank for this purpose and agrees to pay Rs. 1,000 as the bank fee. The bank will
loan Zaid Rs. 99,000 and upon redemption of Rs. 100,000 from the actual issuer
or with Muqassa, it will keep Rs. 1,000 as its Wakala fee and will write off Zaid’s
loan with the remaining Rs. 99,000. However, there are certain conditions which
need to be fulfilled before this entire process can be considered legitimate.
ا یکو کم واؽذ ي انؼوذی يلقال ػ اآلخش كال رؾزشه انوکبنۃ كی انوشك وانوشك : االول
كی انوکبنۃ۔
ا ال رکو اعشح انوکبنۃ يشرجطۃ ثذح نظ انکجیبنۃ ثؾیش رکو االعشح صائذح ا کبذ : انضبی
1 Islam and Contemporary Trade and Economic, page 150.
-ھ۔۴۶ جديد طبع کراتشی، دارالعلوم مکتبہ کراتشی،( العثمانی تقی محمد) العثمانی معاصرة، فقھيۃ قضايا فی بحوث 2
251
انذح هویهۃ ورکو اهم ا کبذ هقیشح۔
انوکبنۃ ثغجت انوشك انزی اهشمہ انجک كبہ یکو ؽیئز هشمب أ ال یضاد كی اعشح: انضبنش
عش يلؼۃ
1. The loan contract and the Wakala contract must be made separately in a
manner where the first contract is not conditional for the second and
vice versa.
2. The Wakala fee must not be related to the maturity date i.e. there
should be no variation in fee even if there is a change in the maturation
date.
3. The Wakala fee must not be dependent upon the presence of the loan
whereas it will qualify as ‘a benefit over a loan’ (کم هشك عش يلؼۃ) which is
illegitimate.1
Mufti Muhammad Taqi Usmani additionally states:
‘…two points emerge in this suggestion; one is the relation of the Wakala
fee with the amount of money carried by the bill i.e. the fee would
increase as the amount increases and vice versa. The second point is an
increase in the Wakala fee with the duration of the maturity i.e. more fee
is charged if the maturation date is extended or vice versa. Here it needs
to be analyzed whether or not it is correct to relate the Wakala fee with
the amount of payment or the time of the maturation date. It seems
justified to relate the fee with the amount of payment, although there is
a difference of opinion on relating the compensation of the broker with
the amount of payment. However Allama Shami (RA) has preferred
doing so. This means that it would be legitimate for the broker to sell
something of a greater value for a larger fee or to charge less fee for
something of lesser value. The extract of the reason presented by Allama
Shami (RA) is that the amount of effort put forth by the broker to sell
something of a greater or lesser value should remain the same though
the nature and worth of the effort can differ, due to which the
compensation can vary. This brings forth the idea that there is a
provision to link the broker fee with the amount of payment. However
there is no reason to link this fee with time as it would be similar to a
-ھ۔۴۶ جديد طبع کراتشی، دارالعلوم مکبتہ کراتشی،( العثمانی تقی محمد) ثمانیالع معاصرة، فقھيۃ قضايا فی بحوث ----------1
252
situation where an interest free loan is given with a Wakala fee equal to
the interest amount incurred over the period of the loan. In other words
the interest which couldn’t be charged over a loan would now be
adjusted in the increasing Wakala fee equal to the interest rate’.
In short, the Wakala fee can be made proportional to the amount of the loan but
it would be illegitimate to link it with any shrinkage or expansion in the maturity
date of the bill.
Viewpoint of Shariah on Endorsement (Tazheer) of Bill of Exchange
There are two common forms of endorsement and the verdict of the Shariah on
each is as follows:
1. Tazheer Tamleeki: In this form of endorsement the endorser transfers
the amount carried by the bill to the beneficiary. If the endorser is the
debtor of the benefiary then it will qualify as Hawala. If this is not the
case then it will be Tawkeel bil Qabz. (Agency for Collection)
2. Tazheer Tawkeeli: In this form the client or the holder intends to
redeem the bill from the bank via endorsement. This would not qualify
as Hawala but as Wakala, which is legitimate with or without any fee
paid to the bank.
SHARIAH VIEWPOINT ON REMITTANCES OR TRANSFER OF MONEY
If the client of the bank asks to send money in the same currency from his bank
account to a specific individual then it will qualify as Hawala and any fee the bank
charges over this transaction will be legitimate as this fee will be in lieu of the
effort taken for the transmittance of the money. This subject has been discussed
in detail in previous chapters.1
PROMISSORY NOTE
A promissory note is ‘An unconditional promise in writing made by one person to
another signed by the maker engaging to pay on demand or at a fixed or
1 For details please see بالعربيۃ الشرعيۃ المعايير
253
determined future time, a sum certain of money to or to the order of a specified
person, or to the bearer’. 1
In the light of this definition, a promissory note must fulfill the following
conditions:
1. It must be unconditional.
2. It must be in written form.
3. It must specify a specific amount of money.
4. It must be made to a specific person or a third person on the order of
the actual recipient, or by its holder or owner.
5. The payment must be on demand or on a specified future date.
6. It must carry the signature of the issuer.
The ‘Glossary of Banking and Finance’ defines a promissory note as follows:
“Promissory note is a financial instrument containing an unconditional
undertaking signed by the maker to pay on demand or at a fixed or
determinable time in future, a certain sum of money to the holder or to
the bearer of the instrument, or to the order of a designated party.”2
VIEWPOINT IN SHARIAH The possession of this note is not similar to the possession of the amount which it
represents whereby its use is illegitimate in transactions in which possession is
mandatory such as in Bay’Surf, exchange of currencies and future sale.
Additionally, promissory notes may not be sold at a value greater or less than
their face value. 3
DIFFERENCE BETWEEN A PROMISSORY NOTE AND BILL OF EXCHANGE 1. In a bill of exchange, the responsibility of the issuer becomes secondary
after its acceptance by the beneficiary. In the case of a promissory note,
the issuer is the original debtor of the beneficiary and the debtor
remains in contact until the debt is paid off.
1 Introduction to Money and Credit, page 258 2 Glossary: Banking and Finance, English-English-Urdu, Shakil Faruqi Student Edition, State Bank of
Pakistan, Institute of Bankers Pakistan, Lahore School of Economics. 3 For details please see بالعربيۃ الشرعيۃ المعايير
254
2. A bill is an unconditional order to pay a specified amount whereas a
promissory note is a promise to pay a certain amount.
3. A bill requires acceptance from the beneficiary for legal validity. This is
not required in the case of a promissory note since this is simply a memo
containing the promise of the debtor to the beneficiary.
4. Foreign bills are prepared in two or three sets. This is not the case with
promissory notes.
5. Bills have a greater scope for usage as compared to promissory notes
6. Bills can be used in international transactions whereas promissory notes
can only be used at the local level.
DIFFERENCE BETWEEN A PROMISSORY NOTE AND A BANK CHECK 1. Promissory notes are just a written unconditional promise to pay where
bank checks are orders to the bank to make the specified payment.
2. Only two parties are involved in the exchange of promissory notes
whereas the bank is the third party involved in check transactions.
3. Checks expire on a given date whereas promissory notes remain valid
until the payment is made.
4. Checks have a greater scope for use as compared to notes.
PLASTIC MONEY
Credit cards are commonly referred to as plastic money and their use is
widespread in societies all over the world. Debt cards and charge or debit cards
are modified versions of credit cards. Some of these forms are briefly discussed
below:
CREDIT CARDS: A credit card holder is not required to open an account in the bank that has
issued the certain credit card but the contract between both parties is based on
an interest bearing loan. The card issuing bank provides a duration of one month
to the card holder to pay any incurred charges in full before the interest rate
clicks in. In some cases there may be an exception to this rule such as in the case
of zero interest rate credit cards which are usually valid for up to 12 months.
Even in these cards the original contract is based on the condition that any
accumulated interest will be paid by the card holder at the end of the grace
period. This is referred to as ‘rescheduling’ which allows the card holder to defer
255
his payment along with the interest rate for the grace period specified by the
card.
DEBIT CARDS: In case of debit cards, the holder or client must have a bank account with the
issuing bank. Whenever the card holder uses the debit card, the money comes
directly out of his bank account. In debit cards the card holder is not allowed to
borrow credit as with credit cards. Banks generally charge an annual fee for debit
cards from the card holder.
CHARGE CARDS: Charge cards are somewhat similar to credit cards where it is not necessary for
the client to be an account holder in the issuing banks. These banks allow the
holders to shop on credit and to make payments within a given time period to
avoid interest charge. Issuing banks charge a fee for these cards.
THE SHARIAH VERDICT ON THE USE OF DIFFERENT FORMS OF PLASTIC
MONEY For Debit Cards: Shariah has no objection to the use of these cards and their use
in monetary transaction is legitimate and correct. This is because there is no debt
incurred with the use of these cards nor any possibility of interest charge.
However the card holder may not use debit cards to buy items prohibited by
Shariah such as liquor or pornographic material etc.
For Charge Cards: Charge cards may be used if the following conditions are
fulfilled:
1. Due payments on the cards must be made before the deadline so that
no interest charge is incurred.
2. The card holder should not use the card to purchase Shariah prohibited
items such as haram food, pornographic material etc.
3. If debit cards are enough to meet the needs of the card holder, then it is
suggested that the use of charge cards be avoided.
For Credit Cards: Credit cards may be used by the card holder only if the same
conditions as specified in for charge cards are fulfilled.
256
ATM Cards: ATM cards are commonly used to acquire cash from the ATM
machines which are directly connected to the card holder’s bank account. Banks
charge some fee for each ATM transaction which is prohibited if it is linked to the
amount of cash being drawn since it will then qualify as interest. However if the
fee does not increase or decrease with the transaction amount, then it will be
allowed. Bank usually also charge an ATM card issuing fee from clients.
ثطبهۃ انؾغى انلوسی : كی انؼبییش انؾشػیۃ (Debit Card) رقذس ھز انجطبهۃ ي انئعغۃ ن نہ سفیذ
جطبهۃ نؾبيهھب انغؾت او رغذیذ اصب انغهغ وانخذيبد ثوذس سفیذ انزبػ، ویزى كی ؽغبثہ، رخول ھز ان
انؾغى يہ كوسا، وال رخونہ انؾقول ػهی ائزب، ال یزؾم انؼیم سعويب يوبثم اعزخذايہ ھز انجطبهۃ ؿبنجب
ئعغۃ انقذسح اال كی ؽبل عؾت انؼیم وذا أو ؽشاۂ ػهۃ أخشی ػ هشین يئعغۃ أخشی ؿیش ان
نهجطبهۃ، رقذس ھز انجطبهۃ ثشعى أو ثذوہ، رزوبمی ثؼل انئعغبد ي هبثم انجطبهۃ غجۃ ي اصب
انؾزشیبد أو انخذيبد۔
ھز انجطبهۃ اداح ائزب كی ؽذود عوق يؼی نلزشح يؾذدح :(Charge Card) ثطبهۃ االئزب وانؾغى اآلعم
ز انجطبهۃ كی رغذیذ اصب انغهغ وانخذيبد وكی انؾقول ػهی انوذ، ال وھی اداح وكبء أینب، رغزؼم ھ
ظبو ھز انجطبهۃ رغھیالد ائزبیۃ يزغذدح نؾبيهھب ؽیش یزؼی ػهیہ انجبدسح ثغذاد ص يؾزشیبرہ خالل یزیؼ
ذیذ يب ػهیہ ثؼذ انلزشح انؾذدح ػذ رغهہ انکؾوف انشعهۃ انیہ ي انئعغۃ، ارا رؤخش ؽبيم انجطبهۃ كی رغ
انلزشح انغوػ ثھب یزشرت ػهیہ كوائذ سثویۃ ايب انئعغبد كال رزشرت كوائذ سثویۃ، ال رزوبمی انئعغۃ
انقذسح نهجطبهۃ ایۃ غجۃ ي ؽبيم انجطبهۃ ػهی انؾزشیبد وانخذيبد ونکھب رؾقم ػهی غجۃ يؼیۃ
زی رذ ثبنجطبهۃ۔ رهزضو انئعغۃ كی ؽذود عوق االئزب ي هبثم انجطبهۃ ػهی يجیؼبرہ أو خذيبرہ ان( ػونۃ)
نهغھۃ انوبثهۃ نهجطبهۃ ثغذاد اصب انغهغ وانخذيبد وھزا االنزضاو ثزغذیذ اصب ( وثبنضیبدحح انواكن ػهیھب)
انجیؼبد وانخذيبد ؽخقی ويجبؽش ثؼیذا ػ ػالهۃ انغھۃ انوبثهۃ نهجطبهۃ ثؾبيم انجطبهۃ، نهئعغۃ
ح نهجطبهۃ ؽن ؽخقی ويجبؽش هجم ؽبيم انجطبهۃ كی اعزشداد يب دكؼزہ ػہ وؽوھب كی رنک ؽن انقذس
يغشد ويغزوم ػ انؼالهۃ انبػءح ثی ؽبيم انجطبهۃ وانغھۃ انوبثهۃ نھب ثوعت انؼوذ انجشو ثیھب۔
ذد ػهی كزشاد یؾذدھب ھز انجطبهۃ اداح ائزب كی ؽذود عوق يزغ :(Credit Card) ثطبهۃ االئزب انزغذد
يقذس انجطبهۃ وھی اداح وكبء أینب، یغزطیغ ؽبيهھب رغذیذ ائزب انغهغ وانخذيبد وانغؾت وذا كی ؽذود
عوق االئزب انوػ، كی ؽبنۃ انؾشاء نهغهغ أو انؾقول ػهی انخذيبد یؼ ؽبيهھب كزشح عبػ یغذد
عیم انغذاد خالل كزشح يؾذدح يغ رشرت كوائذ ػهیہ، ايب كی خالنھب انغزؾن ػهیہ ثذو كوائذ، کب رغؼ نہ رؤ
ھ و، ص۔/ؽبنۃ انغؾت انوذی كال یؼ ؽبيهھب كزشح عبػ، یطجن ػهی ھز انجطبهۃ يب عبء كی انجذ
یغوص نهئعغبد افذاس ثطبهۃ انؾغى انلوسی يب داو : ثطبهۃ انؾغى انلوسی: انؾکى انؾشػی ألواع انجطبهبد
یغوص : غؾت ي سفیذ وال یزشرت ػهی انزؼبيم ثھب كبئذح سثویۃ۔ ثطبهۃ االئزب وانؾغى اآلعمؽبيهھب ی
:افذاسھب ثبنؾشوه اآلریۃ
اال یؾزشه ػهی ؽبيم انجطبهۃ كوائذ سثویۃ كی ؽبل رؤخش ػ عذاد انجبنؾ انغزؾوۃ ػهیہ۔
یک نؾبيم انجطبهۃ انزقشف كیہ یغت كی ؽبنۃ انضاو انئعغۃ ؽبيم انجطبهۃ ثبیذاع يجهؾ وذی مبب ال
انـ ػهی اھب رغزضش نقبنؾہ ػهی وعہ اننبسثۃ يغ اهزغبو انشثؼ ثیہ وثی انئعغۃ ثؾغت انغجۃ
انؾذدح۔
ا ال یؾزشه انئعغۃ ػهی ؽبيم انجطبهۃ ػذو انزؼبيم ثھب كیب ؽشيزہ انؾشیؼۃ واہ یؾن نهئعغۃ عؾت
ۃ۔انجطبهۃ كی رهک انؾبن
257
ال یغوص نهئعغبد افذاس ثطبهبد االئزب راد انذی انزغذد انزی یغذد ؽبيم : ثطبهۃ االئزب انزغذد
-انجطبهۃ ػهی اهغبه آعهۃ ثلوائذ سثویۃ1
BANK DRAFT
A bank draft is ‘A bill of exchange payable on demand, usually drawn by one bank
on another or by one branch on another, a popular means of transfer of funds’. 2
Agarwal defines bank drafts in the following words:
“A bank draft is a check drawn by one bank upon another or its own
branch situated at a different place requiring it to pay a certain sum of
money to a specified person or by his order to the bearer. A bank draft
may be inland or foreign. Usually persons who have to make payment to
distant creditors go to their bank to obtain a bank draft. They have to
deposit with the banker the amount to be remitted along with a small
commission. The bank draft is then issued which is sent to the creditor
concerned who gets it encashed.”3
PAY ORDER
“It is a check like instrument issued by a bank on the request of its customers or in
payment of its own expenses or dues, drawn on itself, to pay a specified sum of
money to the order of specified person. Payment orders are usually issued by the
banks on receipt of full amounts involved, which means that it would not be
returned unpaid due to lack of funds, it is also called bankers check or cashier’s
check.”4
Use of bank drafts and pay orders are allowed from Shariah point of view and the
bank fee charged over these documents is also legitimate.
-------------------------------ھ۴۴ سالميۃ1اال الماليۃ للمؤسسات والمراجعۃ المحاسبۃ ھیءة الشرعيۃ، المعايير --------------1 2 Glossary: Banking and finance, English-English-Urdu, Shakil Faruqi Student Edition, State Bank of
Pakistan, Institute of Bankers. 3 Introduction to Economic Principles, Dr. A. N. Agarwal – page 352. 4 Glossary: Banking and finance, English-English-Urdu, Shakil Faruqi Student Edition, State Bank of
Pakistan, Institute of Bankers Pakistan, Lahore School of Economics.
258
BOND
“Bond is an interest bearing government or corporate security obligating the bond
issuer under an agreement called bond indenture to pay the bond holder a
principal amount on the date of maturity and periodic payment of interest over
the life of the bond. Bonds are long term debt instrument and are a preferred
mode of raising long term funds without selling shares. Bonds enable the bond
issuer to convert non liquid or less liquid assets into marketable instruments. The
market value, or the price of the bond in the market differs from the face value or
the par value of the bond at the maturity by discount factor based primarily on
the current interest rate and the bond rating generally, if interest rate rises bond
prices fall and vice versa.”1
كی االفطالػ انؼبفش وصیوۃ یقذسھب انذیو نوشمہ اػزشاكب يہ ثؤہ اعزوشك ي ( dnoB)انغذ
ب يؼهويب یزهضو ثؤداۂ كی وهذ يؼهوو وا ھ ـ ز انغذاد رقذسھب ػبدح نؼشمھب ػهی انغھوس ؽبيهھب يجه
ی یقیشوا يوشمی رنک انجهؾ نقذس انغذ وا ھز نیؾقهوا ػهیھب ثؤداء انجهؾ انکزوة ػهی وعھھب ؽز
انغذاد سثب رقذسھب انؾشکبد انغبھۃ انزغبسیۃ أو انقبػیۃ ؽیب رؾزبط انی اهزشاك يجبنؾ کجیشح ي
سیؼھب وال رغذ أكشادا أو يئعغبد روشمھب األيوال ثبنؾغى انطهوة، كزؼشك ھز انغذاد انبل الغبص يؾب
ػهی انغھوس وسثب رقذس ھز انغذاد ي هجم انؾکويبد انزی رشیذ ا رول ػغض يیضایزھب كزوزشك ي
ؤداء كوائذ سثویۃ انی انغھوس وا ھز انغذاد عواء افذسرھب انؾشکبد او افذسرھب انؾکويۃ اب رهزضو ث
ي یؾهھب كبنغذ انزی هیزہ االعیۃ يبءح سوثیۃ يضال رغزؾن ا یذكغ نؾبيهھب يبءح وخظ ػؾشح ثؼذ عۃ،
ویؾن نہ ا یجیغ ھزا انغذ كی انغوم واھب رجبع ورؾزشی ثض یزشامی ػهیہ انلشیوب ك ؽقم ػهی ھزا
ثبءح وخغۃ ویؾزشیہ رنک اآلخش ثھزا انض ألہ یشعو أ یؾقم ػهی يبءح انغذ ثبءح كبہ یجیؼہ انی آخش
وخظ ػؾشح سوثیۃ كی ھبیۃ انذح۔
وھبک عذاد اخشی رقذس ي هجم انؾکويۃ ورؼشك ػبدح ػهی انجوک وانئعغبد انبنیۃ االخشی،
عهہ رقذس انغذاد انؾکويیۃ ورغی عذاد انخضیۃ ويوقود ھز انغذاد لظ انوقذ انزی ي ا
االخشی، ؿیش ا ھز انغذاد رؼشك ػهی انجوک نزؾزشیھب ػهی أعبط انضایذح، كبنغذ انزی هیزہ انق
سوثیۃ يضال یزن انزضاو انؾکويۃ ثؤداء أنق سوثیۃ انی ؽبيهہ ػذ ؽهول أعهہ كزغشی كی ؽشاۂ انضایذح كیب
ھب انی انجک انشکضی كزجبع ھز انغذاد انی ي ػشمہ اکضش، ويؼی ثی انجوک ورؤری انؼشوك ي هجه
ثیغ ھز انغذاد ا يؾزشیھب اهشك يجهؾ انض انی انؾکويۃ واعزؾن ي خالل ھزا االهشاك أ یؾقم
-ػهی هیۃ انغذ االعیۃ ػذ ؽهول األعم2
Mufti Muhammad Taqi Usmani summarizes the characteristics of bonds as
follows:
1 Ibid
-ھ۴۶ جديد طبع کراتشی، دارالعلوم مکتبہ کراتشی،( انیالعثم تقی محمد) العثمانی، معاصرة، فقھيۃ قضايا فی بحوث 2
259
1. A bond is a certificate issued by the debtor as a proof that he has taken a
debt from the creditor.
2. Bonds may be sold to the general public at their face value. In other
words, the payment made by the public in lieu of the bonds is a debt to
the issuer.
3. Bonds are generally issued by private companies or a government which
is in need of funding. Governments often need to do this to cover their
budget deficits.
4. Issuers pay interest to the buyers over the face value of the bonds.
5. Bonds may be sold or traded in the market at prices greater or less than
their face value.
6. Governments often issue special types of bonds referred to as treasury
bills which are sold to banks or various financial institutions for the
above stated reasons. Treasury bills are considered a tradable item by
banks and other financial institutions.
The following books and the Glossary-State Bank of Pakistan may be referred for
more details on bonds:
ڈاکٹش يؾذ ػضب ؽجیش: انؼبيالد انبنیۃ انؼبفشح كی انلوہ االعاليی
انذکزوس فجشی ہبسو: أؽکبو األعوام انبنیۃ
BONDS COVERTIBLE TO SHARES Though bonds are usually not convertible, there are certain exceptions. The State
Bank of Pakistan defines them as follows:
“A bond that can be converted into a common stock at a conversion ratio
specified at the time of bond issue has all the factures of a regular bond
namely the par value, the coupon rate, maturity period,and the interest
payment period. Additionally, the bond issuer pays dividend and offers
the option to the investor to convert the bond into a number of common
stocks as per conversion ratio of the conversion price of the stock. As a
result the market price of the bond is affected both by the interest rate
movements as in cell stock market movements the cost of conversion
option is usually gauged by the premium paid by the bond in the
secondary market trading. Convertible bonds provide a potential gain to
the investor if the bond price goes up. At the same time they offer an
260
attractive bond yield, especially for corporate bond whose price is likely
to materially increase over the maturity period. The market value of the
option attached to convertible bond is zero or insignificant at the time
the bond starts selling initially in the secondary market, but the value of
the option increases as the bond price climbs up. It is also possible that
bond prices may fall instead of rising with disastrous consequences for
the option holder. Therefore convertible bond can also be risky in
addition to being potentially rewarding.”1
GOVERNMENT BONDS As mentioned earlier, these are bonds issued by governments to cover budget
deficits. These are quite similar to and share common characteristics with bonds
issued by private companies. However government bonds are more reliable, in
the strict financial sense, and are also considered less risky than private bonds.
Types of common governments bonds include:
1. Treasury bills
2. Treasury certificates
3. Municipal bonds
SHARIAH STANDPOINT ON BONDS Any interest which is earned over bonds or the profit which is gained through
their trade is not permissible in Shariah. All such gains are unanimously deemed
illegitimate by the greater majority of Islamic scholars. The declaration of
Majma’Al Fiqh Al-Islami Jeddah in this context states as follows:
۵ا يغهظ يغغ انلوہ االعاليی انؼوذ كی دوسح يئرش انغبدط ثغذح كی انهکۃ انؼشثیۃ انغؼودیۃ ي "
و۔۳۳( يبسط)آصاس ۔۸ھ انواكن ۸ؽؼجب انی
۸۔ثؼذ اهالػہ ػهی االثؾبس وانزوفیبد وانزبئظ انوذيۃ كی ذوح األعوام انبنیۃ انؼوذح كی انشثبه
عاليی نهجؾوس وانزذسیت و ثبنزؼبو ثی ھزا انغغ وانؼھذ اال ۳۱۳؍؍۸۔ھ، ۸انضبی سثیغ
عاليیۃ ثبنهکۃ انـشثیۃ۔عاليی نهزیۃ وثبعزنبكۃ وصاسح األوهبف وانؾئو اال ثبنجک اال
یۃ ػذ االعزؾوبم يغ عوثؼذ االهالع ػهی ا انغذ ؽھبدح یهزضو انقذس ثوعجھب ا یذكغ نؾبيهھب انویۃ اال
دكغ كبئذح يزلن ػهیھب يغوثۃ انی انویۃ االعیۃ نهغذ أو رشریت لغ يؾشوه عواء کب عوائض روصع ثبنوشػۃ
ب هشس ب يوطوػب او خق ـ ۔:أو يجه
1 Glossary: Banking and finance, English-English-Urdu, Shakil Faruqi Student Edition, State Bank of
Pakistan, Institute of Bankers Pakistan, Lahore School of Economics.
261
۔ ا انغذاد انزی رضم انزضايب ثذكغ يجهـھب يغ كبئذح يغوثۃ انیہ أو لغ يؾشوه يؾشيۃ ؽشػب ي ؽیش
الفذاس وانؾشاء وانزذاول ألھب هشوك سثویۃ عواء کبذ انغھۃ انقذسح نھب خبفۃ أو ػبيۃ رشرجو ا
ثبنذونۃ وال اصش رغیزھب ؽھبداد أو فکوکب اعزضبسیۃ أو ادخبسیۃ أو رغیۃ انلبئذح انشثویۃ انهزضو ثھب سثؾب
او سثؼب او ػونۃ او ػبئذا۔
ثبػزجبسھب هشومب اؽزشه كیھب لغ أو صیبدح ثبنغجۃ نغوع ۔ کب رؾشو اینب انغذاد راد انغوائض
-"انوشمی أو نجؼنھى ال ػهی انزؼیی كنال ػ ؽجھۃ انوبس1
رھت ؿبنجیۃ انؼهبء انؼبفشی انی ػذو عواص رؼبيم ثبنغذاد وؽھبداد االعزضبس دو رلشین ثی أواػھب "
نؼضیض انخیبه وانذکزوس ػهی انغبنوط وانذکزوس فبنؼ انشصوهی وي ھئالء انؾیخ انؾهزود، وانذکزوس ػجذا
وانذکزوس یوعق انوشمبوی، أل انغذ هشك ػهی انؾشکۃ وانئعغۃ انزی افذسرہ ألعم كبئذح ......
-"انخ...يؾشوهۃ وصبثزۃ كھو ي سثب انغیءح انزی ضل ثؾشيزہ انوشآ انکشیى
“Various scholars believe that trading of bonds or certificates is also
prohibited by Shariah and considered these illegitimate, irrespective of
their type. Sheikh Shaltoot, Dr. Muhammad Yousuf Moosa, Dr. Yousuf
Qarzavi, Dr. Abdul Azin Al-Khaiyat, Dr. Ali Al-Saloos and Dr. Saleh Al-
Marzoqi are among these scholars. According to them the value of bond
is a debt on the issuer, who offers conditional profit over it, which comes
under the definition of Riba Al-Nasiyah which has been declared
prohibited in Quran.”2
ا ھز انغذاد کهھب سثویۃ ي افهھب ؽیش ا انوشك یهزضو كیھب ثبداء يجهؾ انوشك وصیبد كال یخلی "
۔"انخ....ؽشيۃ رذاونھب ألھب رئدی انی رؼبيم سثوی ؽشاو
“All these bonds are interest bearing because the debtor promises to pay
profit over the actual amount of debt. Therefore their trading is
illegitimate for obvious reasons as this is an usurious matter.”3
CERTIFICATES
انشثویۃ ا عذاد انوشوك فکوک رضم هشومب رؾقم ػهیھب انؾشکۃ ي ػبيۃ انبط ػهی اعبط انلبئذح "
انؾذدح ورکو ھز انقکوک كی انزؼبيم انؼبفش هبثهۃ نهزذاول وؿیش هبثهۃ نهزغضءح۔
واب رنطش انؾشکبد كی ثؼل األؽیب انی افذاس ھز انغذاد ألھب هذ رؾزبط كی اصبء يضوانۃ اػبنھب
هی اغبص يؾبسیؼھب وانزوعغ انی يجبنؾ اکضش يب ؽقهذ ػهیہ ػ هشین افذاس األعھى نزضیذ ي هذسارھب ػ
كیھب او نزواعہ اصيۃ يبنیۃ هشأد ػهیھب وال رشؿت انؾشکۃ كی ػشك اکززبة ثبألعھى انغذیذح ػهی انغھوس
-----------------------۶//٧۶ رقم قرار ٧۵:ص الثانی الجزء السادس، العدد السادسۃ، الدورة االسالمی الفقہ مجمع مجلۃ 1 -------------ھ۔۴٢ ثالث طبع النفائس، دار اردن، شبير، عثمانی محمد( شبير) االسالمی، الفقہ فی المعاصرة الماليۃ المعامالت -2 -ھ۔۴۶ جديد طبع کراتشی، دارالعلوم مکتبہ کراتشی،( العثمانی تقی محمد) العثمانی معاصرة، ۃفقھي قضايا فی بحوث ----------3
262
نئال رزنبئم اقجۃ انؾشکبء كزنطش انی أ روزشك ھز انجبنؾ ي یک االهزشاك يہ۔
رھى انیويیۃ وسفذوھب نؾبعبرھى انزوهؼۃ كی وكی عبت آخش رکو ػذ انبط يجبنؾ اكشوصوھب ي ؽبعب
انغزوجم وا ھز انجبنؾ كی ثیود أفؾبثھب أو كی ؽغبثھى انغبسی كی انجوک كال یک ا رغزـم ھز
انجبنؾ نقبنؼ انوهی االثب رذكغ انزغی أو انزغبس هشمب كیغزؼهوھب كی اػبنھى االزبعیۃ أو انزغبسیۃ
۔"انخ......س عذاد كغبئذ كکشح افذا
“The debt bearing certificates are a form of Sukuk, representing an amount of
credit, which a company accepts from the public in lieu of a fixed rate of interest.
These Sukuks are tradable instruments and they are indivisible.
Sometimes it is inevitable for private firms to issue Sukuk when they are in needs
of funds for investment in their projects and the funds collected from shares are
insufficient for the purpose. Furthermore sometimes companies also face financial
downturns due to which issuance of more shares becomes unlikely, as this may
cut down the dividends distributions among shareholders. Hence Sukuks are
preferred as an alternate.
On the other side, the public have their savings stored in their current bank
accounts or in their homes which yields them no benefit. Therefore they seek
opportunities to invest with traders or industrialists which would yield them profit.
This is what has brought forward the idea of such certificates.”
This definition expounds the fact that certificates are also interest based
instruments like bonds which are used to take loans from the public at a certain
rate of interest. This allows firms to collect funds in order to fulfill their
investment needs. The public also earns interest over their savings which is
prohibited and illegitimate as per Shariah rulings.
Mufti Muhammad Taqi Usmani has presented a Shariah compliant alternative for
this whereby he states:
ونک ھزا انطشین يجی ػهی اعبط انوشك انشثوی انزی ال رجیؾہ انؾشیؼۃ االعاليیۃ كی ؽبل ي األؽوال "
وي ھب أساد ثؼل انغهی كی انجالد االعاليیۃ أ یؤروا ثجذیم نھز انغذاد كی ؽکم عذاد انوبسمۃ
-"انخ( ينبسثۃ)
“… However this is like an interest bearing loan which is prohibited by
Shariah under all circumstances. For that matter an Islamic alternative
263
has been developed by Muslims which is known as Mudarbah
Certificates.”1
The Shariah compliant alternative for interest bearing bonds and certificates is
referred to as Mudarbah certificate and Musharakah certificate where the buyers
of the certificates become business partners with the firms or governments
issuing these certificates. The transactions hence conducted will be based on the
rules of Musharakah and Mudarabah and the profit or loss will also be shared as
per the rules of Shariah. These Sukuks or certificates have been discussed
extensively in Al-Fiqh Al-Islami Al-Droorh Al-Arabia, Al-A’dad Al-Rabia, and Al-
Jaza’ Al-Slaas. A number of reputed Islamic scholars have also written papers on
the issue. Mufti Taqi Usmani presents a thorough discussion on the subject in his
book Bhavis, which has been referred to at various points in this book as well.
According to Mufti Taqi Usmani:
“These are documents issued by government to take a loan from the
public when revenue collection (in the form of taxes) is not sufficient for
expenditure; hence the government issues these certificates. For
example:
1. Prize Bonds: Each bond doesn’t yield any profit but the total profit is
distributed in the form of a lucky draw to only a few holders.
2. Defense Saving Certificates.
3. Special Deposit Certificates.
4. Foreign Exchange Bearer Certificates: Before the advent of these
certificates, the public was not allowed to hold foreign exchange
with them. A person had to face a lot of legal complications if he
needed some foreign currency. As a result, people adopted illegal
means to obtain and store foreign exchange. Secondly, individuals
returning from other countries kept foreign currency with them even
if not required by the government. Eventually to resolve the issue,
the government started to issue documents known as ‘Foreign
Exchange Bearing Certificates’ which were valued in local currency.
This allowed the government to exchange these certificates with
۔۰۵:ص عثمانی محمد المفتی الشيخ: مقالۃ الثالث، الجزء الرابع، العدد الرابعۃ، الدورة االسالمی، الفقہ مجمع مجلۃ ------------1
264
foreign exchange in a manner that if a dollar was valued at Rs. 80 on
a certain day then a person with $100 could purchase a certificate
worth Rs. 8000. In other words after the issuing or selling of the
certificate the government of Pakistan would be indebted tot that
individual by an amount of Rs. 8000. These certificates yield an
annual profit or interest of 12 percent to their buyers. The holder of
these certificates can also redeem them for dollars whenever they
wish or could sell them if they please. In the above stated case, the
transaction is done between the government and a common man.
However for the sake of ease the holder is also allowed to sell them
in the market. Trading of these certificates is generally done in
financial markets. The holder, after selling the certificate, transfers
his relationship with the government to the new holder. Once this is
done the new holder is considered as the creditor of the
government.”1
It is stated in Mosua’:
كی انؼی انؼبو ھی يغزذاد رضجذ يهکیۃ يؼیۃ أو ؽوب كی دخم يؼی رودع نذی ثک کنبۃ نهؾقول "
ػهی هشك أوسام يبنیۃ رؼطی ؽبيهھب انؾن كی دخم يؼی ویغشی كیھب انزؼبيم كی عوم األوسام انبنیۃ
انزغبسی وھی ايب عذاد راد وكی انغوم انضبویۃ واھى فلۃ نھز األوسام ھی اب هبثهۃ نهزجبدل( انجوسفۃ)
كوائذ صبثزۃ أو انغھى يزبصح رزن األوسام انبنیۃ انزی رقذسھب انؾکويۃ انشکضیۃ وانؾکويبد انؾهیۃ
-"األوسام انزی یکو ػبئذھب يزـیشا يضم األعھى انؼبدیۃ2
“Unlike most commercial securities, government securities, usually bonds
that pay a fixed amount of interest each year, offer a guaranteed safety
factor concerning their ultimate repayment. These securities are traded
in the market and their price fluctuates in value, depending on trends
and condition of the economy.”3
SHARES CERTIFICATES Shares certificates have been defined in various terms in jurisprudence literature:
-"انقک انزی یؼطی نهغبھى اصجبرب نؾوہ"
1---------------------------------------------- Islam and Contemporary Economics and Trade, page 77.
(٧۴۰:ص)- العربيۃ النھضۃ دار بيروت،( ھيکل الفھمی عبدالعزيز الدکتور) ھيکل االحصائيۃ، االقتصاديۃ المصطلحات موسوعۃ 2 3 The New Encyclopedia Britannica Vol-10, page 595
265
“It is that receipt which is given to the holder, confirming that he has a
share and stake in the company.”
انقک وانوصیوۃ انضجزۃ انزی یؼطی نهغبھى اصجبرب نؾوہ أل انغھى یؼطی نهغبھى ؽووهب رغب "
-"زضيبد ؾوھبانؾشکۃ کب یزشرت ػهیہ ان
“It is a receipt which confirms the share of the stockholder (in company
stock) because a shareholder invests and owns some stake of the
company.”1
انغھى ھو انقک انزی رقذس انؾشکۃ ویضم ؽن انغبھى كیھب ویززغ ؽبيهہ ثبنؾن كی انؾقول ػهی ػبئذ "
-"عوی زیغۃ اعزضبس سأط يبنہ2
In short, shares certificates or receipts represent the share of investment of the
stockholder in the company stock. There are various forms of shares certificates
which are beyond the scope of the current discussion on the subject. Shariah
rulings pertaining to shares are mostly related to their manner of trade and
extraction of Zakat , etc.3
BONUS SHARES
Mufti Taqi Usmani comments as follows on bonus shares:
“Dividends are distributed in two forms to stockholders;either in the form
of cash payments or sometimes in the form of additional shares issued to
the stockholders. These additional shares are equivalent in value to the
dividend payments hence the name “Bonus Shares”.
This allows the company to generate more funds in case of any financial
need. Therefore instead of paying dividends in cash form, more shares
are issued (hence dividend payments are rather reinvested in the
company). For example, a shareholder who was to get a dividend of Rs.
10,000, would get shares equal to this value. However in order to do so it
is necessary for the company to have sufficient provision and permission
(from concerned bodies). For example, if the company was allowed to
issue shares of value Rs. 80 million, but issued shares of only Rs. 60
---ھ۔۴٢ ثالث طبع النفائس، دار اردن، شبير، عثمان محمد( شبير) االسالمی، الفقہ فی المعاصرة الماليۃ المعامالت ------------1 -------------------------------۵۵:ص الثانی الجزء السادس، العدد السادسۃ، الدورة االسالمی، الفقہ مجمع مجلۃ --------------2 3 For details please browse “Islam and Contemporary Economics and Trade”
266
million in value, then the company would have the provision to issue
bonus shares of value no more than Rs. 20 million. However if the
company doesn’t have this provision then it has to take proper
permission from the concerned authorities before it can actually do so.
In order to issue bonus shares, it is necessary that the market value of the
share is no less then its face value, as otherwise the stockholder will face
a loss equal to the difference in the market value and face value. For
example, if the market value per share is Rs. 9 and the face value is Rs.
10, then the shareholder will face a loss of Rs. 1 per share.”1
WARRANTS
The definition of warrants appears in the following words in Majma’ Al-Fiqh Al-
Islami, Jeddah:
ھو انخیبس انزی رجیؼہ انؾشکخ ػهی يغزضشی عذد ویغی Warrants ؽیش یکو نھى ؽن ؽشاءيغوػخ
ي اعھى انؾشکخ ػذ عؼش يؾذد خالل يذح يؾذدح وھو هبثم نهزبول وسثب یزذ نغواد رقذس انؾشکبد
انؾشکخ ثغؼش يؾذد خالل كزشح يؾذدح عھى ¿رزن انوػذ ثجیغ ػذد ي ا (Warrants) اواػب ي انزؼھذاد
رؾون دخال ثذو ا رخبهش ثزـیش ھیکم يهکیزھب انزی هذ ¿و ؿیش يؾذدح ویغزطیغ انؾشکخ ثھز انطشیوخ ا¿ا
یزغہ ادخبل يغبھی عذد وكی لظ انوهذ یغزطیغ انغزضشو اننبسثخ ػهی يغزوجم انؾشکخ ثذو
انؾبعخ انی يجهؾ کجیش ي انبل
“Warrants are ‘options’ sold by a company to its new investors on
grounds that the new investors obtain the right to purchase the shares of
a company at a specified rate and by a certain deadline. These
instruments are tradable and remain valid for many years. Different
companies issue different kinds of warrant. A holder can purchase a
certain amount of shares at a defined rate for a specified period of time
while sometimes the duration is not mentioned i.e. no time limit is
specified.
The benefit which the company gets after issuing such warrants is that
the ownership of the investor or the stockholder is ensured for specified
period of time, as otherwise there is a threat that this ownership will be
reduced. This is so because the investors have purchased an ‘option’ to
1 Ibid, page 61.
267
obtain shares at a specified rate. Also on the other hand the investors
can make large investments even if sufficient funds are not available.”1
The Glossary of State Bank of Pakistan defines warrants as follows:
“Warrants are securities issued with preferred stocks or bonds or
certificates that give the holder the right to buy a proportionate amount
of common stock at specified price, usually higher than market price at
the time of issue of warrants, for a specific period of time, or perpetuity.
In this sense, warrants are options to the holder of the corporate stocks
or bonds.”2
Warrants hence offer their buyers rights to purchase certain amounts of company
stock at a predetermined rate. There will be a deadline before which the warrant
holder will be able to purchase the stocks. Warrants are also negotiable or
tradable instruments.
OPTIONS
“Option is a contract which gives its holder the right but not the
obligation to sell or buy an asset at an agreed price called ‘strike price’ or
‘exercise price’ over a short period in future which is of critical
importance in the contract. If the contract stipulates a fixed date for a
transaction in the future, then it is a European Style option. If the
transaction can be done repeatedly in the future through the duration of
the contract period it is referred to as a Bermuda Style option. If the time
of the transaction is chosen by the holder up to the maturity date of the
contract then it is an American Style option. In securities market, this
contract could be simply termed as Option.”3
Mufti Taqi Usmani defines options in the following words:
“The right to sell or buy a specific item at a specific price is called an
‘Option’. Assume that a person promises to another that he would
--------------------------------۵۵:ص الجزءالثانی السادس، العدد السادسة، الدورة االسالمی، الفقہ مجمع مجلة --------------1 2 Glossary- Banking and Finance, English-English-Urdu, Shakil Faruqi Student Edition, State Bank of
Pakistan, Institute of Bankers Pakistan, Lahore School of Economics. 3 Ibid
268
purchase a certain item from him at a certain price and before a specified
time i.e. before the deadline it can be sold as agreed. This is known as
Option to Sell, which is literally purchased at a price paid to its issuer. The
one who issues the option is bound to purchase the item as defined.
However the one who receives it is not bound to sell the subject matter.
Contrary to this a person may promise to sell a specific item at a specific
price before a specific date i.e. this item can be purchased at the
specified price before a particular date. This is an Option to Purchase …
options are for currencies or cereals as well. The issuer of the option gives
protection and security to its buyer from the fluctuation in prices of
currencies or cereals on chargeable basis. For example, a person
purchases Rs. 8,000 rupees for $100 but is perplexed whether he should
sell it immediately to avoid any loss in case of value decrease of the
rupee in the near future or retain it to gain profit in case the value of
rupee increases. He consults his friend who advises him to keep the
rupees safe and within three months he will purchase them at the
present day rate. However he says he will charge a fee for this promise.
Now the first person is satisfied as his cash is now secure where in case
the value of the rupee increases after a month, he can sell it to another
party or if the value decreases he can sell these to his friend (the option
seller). Option is considered tradable item and can also be sold further.
This type of trading is common in other countries and its forms are also
getting complicated with time.”1
POPULAR TYPES OF OPTIONS Listed below are some common forms of options:
1. Call Option (ػوذ خیبس انطهت): This is the right to purchase an item as
explained in the example stated above.
2. Put Option (ػوذ خیبس انذكغ): This is the opposite of a call option where the
issuer of the option has a choice. However the buyer of the option or
the person who had Rs. 8,000 in the above example is bound to sell that
item only to the issuer.
1 Islam and Contemporary Economics and Trade, page 84
269
3. Straddle Option (ػوذ انخیبس انشکت): In this type of option, both parties are
free to decide whether or not they wish to proceed with the transaction.
4. Spread Option (ػوذ انخیبس انزذ): The spread option has been described in
Majma’ Al-Fiqh Al-Islami and is similar to the straddle option. However
the rate of purchase here is greater than the rate of selling.
Majma’ Al-Fiqh Al-Islami explains these various types of options as follows:
یغ وؽن كی انؾشاءكی راد انوهذ یقذس انغزضش ھزا ویزن ھزا انخیبس ؽن كی انج: انخیبس انشکت"
انخیبس صى یزظش يبرا یؾذس كی انغوم كبرا وعذ االعذی نہ انجیغ يبسعہ وارا وعذ االعذی نہ انؾشاءيبسعہ۔
۔"ویزن خیبس ؽشاءوثیغ ای خیبسا يشکجب ونک ثغؼش نهؾشاءیضیذ ػهی عؼش انجیغ انخ: انخیبس انزذ1
SHARIAH RULINGS ON OPTIONS AND WARRANTS
The trading of options or warrants is not permitted in Shariah for the following
two reasons:
1. Their transaction involves uncertainty since the holder of options is not
always bound to purchase or sell the subject matter. In simpler words,
there are chances that the transaction may not take place at all.
2. Options are not tradable commodities from the Shariah point of view
since the validity of sale transactions necessitates that the items in
question qualify as a tradable commodity or medium of exchange. For
this reason trade of options is prohibited in Shariah.2
BAY’-AL-DAIN
Mufti Taqi Usmani defines this instrument as follows in his book ‘An Introduction
to Islamic Finance’:
“Here comes the question whether or not bai-al-dain is allowed in
Shariah or not? Dain means debt and Bay’ means sale. Bay’-Al-Dain,
therefore connotes the sale of debt. If a person has a debt receivable
السادس، العدد السادسة، الدورة جدة، االسالمی الفقہ مجمع مجلة: وتفاصيلھا الخيارات ھذہ لتفاصيل فليراجع -----------------------1
کراتشی۔ دارالعلوم جامعة مکتبة فی موجودة النسخة ھذہ الجزءالثانی،
ا ۴۰:صفحة علی باکستان، المرکزی للبنک گلوسری فی موجودة قسام¿اال ھذہ تفاصيل وايضا اول، طبع الہور کراچی، اسالميات ادارہ انی،صمد احمد اعجاز موالنا ڈاکٹر ،(Uncertainty ------غرر اور بنکاری اسالمی( 2
-ھ۴٧ الثانی ربيع
270
from a person and he wants to sell it at a discount, as normally happens
in the bill of exchange, it is termed in Shariah as Bay’ Al-Dain. The
traditional Muslim jurists are unanimous on the point that Bay’-Al-Dain
with discount is not allowed in Shariah. The overwhelming majority of
the contemporary Muslim scholars are of the same view. However some
scholars of Malaysia have allowed this kind of sale. They normally refer
to the ruling of Shafiite School wherein it is held that the sale of debt is
allowed, but they did not pay attention to the fact that the Shafiite jurists
have allowed it only in a case where a debt is sold at its par value (face
value). In fact, the prohibition of Bay’ Al-Dain is a logical consequence of
the prohibition of Riba, or interest. A debt receivable in monetary terms
corresponds to money and every transaction where money is exchanged
for the same denomination of money, the price must be at par value.
Any increase or decrease from one side is tantamount to Riba and can
never be allowed in Shariah.
Some scholars argue that the permissibility of Bay’ Al-Dain is restricted to
a case where the debt is created through the sale of a commodity and its
sale may be taken as the sale of a commodity. The argument, however, is
devoid of force, for once the commodity is sold, its ownership is passed
on to the purchaser and it is no longer owned by the seller. What the
seller owns is nothing other than money. Therefore if he sells the debt, it
is no more than the sale of money and it cannot be termed as any stretch
of imagination as the sale of the commodity.
That is why this view has not been accepted by the overwhelming
majority of the contemporary scholars. The Islamic Fiqh Academy of
Jeddah, which is the largest representative body of the Shariah scholars
and has the representative of all Muslim countries, including Malaysia,
approves the prohibition of Bay’ Al-Dain unanimously without a single
dissent.”1
1 An introduction to Islamic Finance, page 216.
271
GLOSSARY OF TERMS
Ajal: Deferment
Asman-E-Urfia: Customary price
Asman-E-Johria: Basic price
Bait-Ul-Mal: It is a Government fund in which different collected
wealth are being credited as Zakat, Jizia, etc, for the
welfare of the mass.
Bay’ Muzabana: It is a kind of sale where broken fruits from the tree
sold with fruits on the tree.
Bay’ Surf: It is a kind of sale where gold or silver exchanged with
each other .
Bay’A’ina: Buy back
Bay’-Al-Dain: Sale of debt
Bay’Moa’jjal: Credit sale
Bay’Nasia: Deferred payment base
Bay’Salam: It is sale where the full payment done in advance and
the subject matter delevered after some period
Bazanti: Name of a currency in the time of ignorance
Bazaria: Name of a currency in the time of ignorance
Daraham Mukssarah: Dirham in change form
Dirham Baghlia: Name of a currency in the time of ignorance
272
Dirham Beharja: Name of a currency in the time of ignorance
Dirham Stoqa: Dirham in crushed form
Fuloos Nafiqa: Fuloos in practice of the people
Ghala’: Dearness
Azd-ud-dolah: Name of a Muslim King
Hiba: Gift
Ijara: Lease
Ijtihad: Spending extreme struggle in the derivation of Shariah
ruling
Inkimash: Deflation
Istifa-e-Dain: Receiving debt
Jar-E-Manfea’t: To draw benefits
Kafalat: Guarantee
Kalfat-E-Qard: Guarantee of loan or debt
Ma'dodat-E-Mutaqarba: Countable items of the equel units
Mansoos: The Shariah conjunction mentioned expressly in Holy
Quran or Hadeeth.
Musarafa: This word is giving the meaning of Surf
Misl: Similar/ substitute
Mubadala: Exchange
Mudaraba: Well-known term of Fiqh
Muheel: Debtor in the Hawala arrangement
273
Muhtal Alaeh: The third person/assignee
Maqees A’lia: A part out of four parts of analogy
Musharakah: Partnership
Muslam Fieh': Subject matter in Bai’ Salam
Musta’ajir: lessee
Naikl: Name of metal
Naqd: Cash
Nasa: Differment
Qabil-e-Tajzzi: Dividable
Rakhs: Being cheap
Sadaqa: Charity
Saif-e-Mudahhab: The sword that was laminated with gold
Saif-e-Mufaddad: The sword that was laminated with silver
Salam: Well known kind of sale in Islam Law
Saman-e-Istelahi: Customary standard of value or price
Saman-e-Khilqi: Natural standard of value or price like Gold and Silver
Saman-e-Mutlaqa: Standard of value or price with out any restriction
Saman-e-Urfi: Popularly known standard of value or price
Samaniat: Standard of value or price
Samaniat-e-Ghalba: The thing which major part consists of valuable item
Samaniat-e-Johria: The thing which holds basic value
274
SDR: Special Drawing Rights
Shirkat: Partnership
Suqoot-e- Khatr-e-Taqreeq: The risk during transportation Taburru’: Donation
Tabaria: Name of a place
Tazakhum: Inflation
Tafadul Bay: A sale consists of excess
Tafreet-e-Zar: Deflation
Tagauyyur-e-Saman: Change in price
Talaqqi-Bil-Qabool: To be accepted commonly
Tasrruf: To Use
Tazheer: Endorsement
Urooz (Plural Of Arz): Commodity
Wakala: Agency
Wakeel: Agent
Waqf: Endowment Fund
Wujoob: Being mandatory
Wujubuha-wa- Wujuduha: Obligation and existence Zarr-e-Istilahi: Customary money
275
INDEX
A
AAOIFI, 241, 242
Abbasid dynasty, 37
Abdul Malik bin Marvan, 36, 37
Abd-ur-Rehman Al-Sadie, 68
Abd-ur-Rehman Bin Aswad, 154
Abu Al-Waleed Baji (RA), 191
Abu Ya’li, 154
Abu-al-Fazal, 38
Abu-Bakar Al-Jassas (RA), 48
Adam Smith, 18
Addr Al-Mukhtar, 133, 134
adultery. See fornication
Aezah Al-Masalik, 172
Afghanistan, 10, 38
Ahmad Raza Khan Baralvi, 70
Ahsan Al-Fatawee, 151, 159, 160
Ajal, 104, 115, 118, 151
Al-A’dad Al-Rabia, 263
alcoholic drinks, 54
Al-Dar Al-Mukhtar, 151
Al-Fiqh Al-Islami Al-Droorh Al-Arabia,
263
Al-Ja’ed, 222
Al-Jaza’ Al-Slaas, 263
Allama Al-Jassas, 49, 51
Allama Bahoti (RA), 186
Allama Gazi (RA), 205
Allama Halwani, 85
Allama Hanuti (RA), 120, 165
Allama Haskafi (RA), 98, 136, 248
Allama Ibn-e-Abedeen, 186, 204, 205
Allama Ibn-e-Al Arabi (RA), 42
Allama Ibn-e-Al Hamam, 42
Allama Ibn-e-Al Qasim, 43
Allama Ibn-e-Al-Qeem, 85, 93, 96, 157
Allama Ibn-e-Hajr, 203
Allama Ibn-e-Hamaam (RA), 151
Allama Ibn-e-Najeem, 99, 136
Allama Ibn-e-Qadama, 154, 156, 192,
193, 203
Allama Ibn-e-Taymiyya, 43, 85, 92, 96,
101, 136, 156
Allama Kasani, 86, 87, 88, 89, 151, 187,
232, 233, 237
Allama Mardaovi, 193
Allama Marghinani, 98, 105, 136
Allama Nasfi, 99, 100, 136
Allama Noovi (RA), 94, 235
Allama Ram Puri, 70
Allama Ramli (RA), 185
Allama Sarkhasi, 42, 85, 90, 121, 139,
140, 165
Allama Seoti (RA), 49, 185, 202, 231
Allama Shami (RA), 133, 151, 164, 165,
180, 181, 182, 183, 187, 204, 251
Allama Syed Ahmed Al-Hasaee (RA), 65,
66
Allama Zaheli, 101, 136
Allama Zarrkani, 181, 234
Alllama Kasani, 138
Al-Ma’yar, 191, 202
Al-Majmu, 191, 192
Al-Uqood Duriryia, 205
America, 28
American Style option, 267
Arz, 73, 76, 147
Asman. See Saman
Asman-e-Johria, 95
Asman-e-Urfia, 100
276
asset, 22, 23, 25, 26, 50, 51, 59, 66, 67,
70, 71, 72, 144, 175, 267
ATM Card, 256
Atta Bin Yasas (RAA), 124
Azd-ud-dolah, 37
B
Bada’ Al-Sanaa’, 151
Bait-ul-Mal, 224, 248, 249
Bank of England, 69
bank run, 30
Banknotes, 29, 30, 31, 34, 35, 65
barley, 52, 59, 107, 115, 119, 215
barter, 9, 26, 40, 128
Base Year for calclulation of Price Index,
208, 209, 210
Basra, 36
Bay’ Muzabana, 217
Bay’ Surf, 98, 140, 142, 151
Bay’A’ina, 171
Bay’-al-Dain, 269
Bay’Moa’jjal, 182
Bay’Nisa, 149
Bay’Salam, 89, 134
Bay’Surf, 62, 97, 98, 99, 100, 101, 104,
105, 107, 108, 109, 110, 111, 112,
114, 115, 117, 118, 125, 136, 137,
140, 141, 142, 143, 145, 146, 147,
150, 152, 161, 163, 164, 243, 253
Bazanti, 38
Bazaria, 120
Bermuda Style option, 267
Bill of Exchange, 222, 223, 225, 226,
227, 243, 244, 245, 246, 247, 248,
249, 250, 253, 257, 270
Types of, 245
Bimettalism, 27
Bonds, 10, 69, 196, 222, 227, 258, 259,
260, 261, 262, 263, 264, 267
brass, 37, 116
Bretonwoods Agreement, 32
Brettonwood Agreement, 161
C
Certificate of Debt, 66, 67, 69, 70, 74,
76, 78, 79, 80, 81, 82, 83, 141, 142,
143, 146, 147, 149, 243
Certificates, 261, 263, 264
Charge Card, 255
Charles de Gaulle, 32
Checks, 10, 13, 17, 24, 25, 80, 222, 223,
225, 227, 229, 238, 239, 240, 241,
242, 243, 254, 257
Type of, 225, 226, 239, 240, 254
Circulation of Money, 198
cocaine, 54
Commodity Markets, 135
Commodity Trading, 132
Constructive Ownership, 134, 175, 176,
177
Constructive Possession, 170, 232
Contract, 22, 50, 63, 71, 89, 97, 102,
105, 106, 107, 108, 109, 110, 111,
113, 114, 115, 116, 120, 121, 128,
129, 132, 133, 135, 140, 151, 155,
162, 165, 167, 169, 170, 171, 173,
174, 175, 181, 182, 183, 184, 187,
188, 189, 190, 191, 192, 194, 195,
201, 204, 205, 206, 207, 216, 218,
219, 230, 233, 234, 235, 237, 238,
241, 242, 243, 251, 254, 267
Conventional Bank, 170, 171
copper, 12, 37, 38, 77, 84, 116, 119,
120, 147
CPI (Consumer Price Index), 217
Credit, 13, 22, 24, 31, 60, 92, 93, 102,
105, 106, 109, 120, 124, 125, 126,
128, 134, 135, 139, 140, 141, 147,
277
158, 159, 161, 162, 163, 164, 165,
167, 168, 171, 178, 187, 189, 190,
192, 193, 194, 195, 196, 201, 204,
206, 212, 216, 217, 220, 221, 222,
223, 225, 226, 227, 231, 233, 234,
235, 243, 248, 249, 254, 255, 262
Credit Card, 254, 255
Credit Money, 220, 221, 223, 225, 226,
227
Credit Sale, 182, 230
Credit Sale of Currencies, 166
Creeping Inflation, 197
Currency Exchange, 148, 150, 152, 162
Currency Notes, 29, 65, 66, 67, 80, 98,
146, 148, 149, 152, 158, 206, 207,
208, 212, 217, 218, 222, 223
Currency Trade, 176
D
Damascus, 36
Dar ul Afta, Riyadh, 147
Daraham Mukssarah, 193
Dar-ul-Uloom Deoband, 142
date, 38, 41, 52, 107, 115, 119, 124,
129, 132, 135, 169, 171, 175, 177,
193, 214, 218, 219, 227, 239, 240,
243, 244, 245, 246, 247, 251, 252,
253, 254, 258, 267, 268
Debit Card, 255
Defense Saving Certificates, 263
deflation, 43, 44, 180, 199, 200, 201,
204, 206, 207
Demand Draft, 223, 257
Depression. See Kasad-e-Zar
Deuteronomy, 49
diamonds, 70, 71, 127
Dinar, 11, 12, 15, 19, 21, 22, 23, 27, 35,
38, 42, 43, 59, 60, 70, 71, 73, 79, 86,
87, 88, 89, 90, 91, 92, 98, 99, 100,
102, 103, 106, 108, 109, 110, 111,
112, 114, 117, 118, 119, 121, 123,
135, 136, 137, 138, 140, 141, 144,
165, 185, 191, 207, 216
Dirham, 11, 12, 15, 19, 20, 21, 22, 23,
35, 36, 37, 38, 42, 46, 58, 60, 70, 71,
73, 84, 87, 88, 89, 90, 91, 92, 98, 99,
100, 102, 106, 111, 112, 114, 117,
119, 120, 121, 123, 136, 139, 140,
141, 144, 164, 165, 182, 185, 201,
202, 207, 214, 216
dirham Baghlia, 36
Dirham Beharja, 37
Dirham Stoqa, 37
Discounting of Bills, 244, 247, 248, 250
Disposable Income, 208
Dollars, 26
Dr. A. N. Agarwal, 222, 239, 244, 257
Dr. A. N. Agrawal, 244
Dr. Abdul Aziz Fehmi, 244
Dr. Hamd Misri, 23
Dr. Heflin, 223
Dr. Imran Ashraf, 47
Dr. Ja’yed, 239
Dr. Khalid Adnan Turkamani, 13, 39
Dr. Muhammad Suleman al-Ashqar, 78
Dr. Muhammad Zaki Shafai, 221
Dr. Usman Shabbir, 238
Drawee, 239, 244
Drawer, 239, 244
E
Economic Recession, 77
Egypt, 37, 38
Endorsement, 221, 227, 228, 229, 243,
252
Types of, 228
England, 29, 30, 31
Europe, 28
278
European Style option, 267
Euros, 26
Exchange of Jewelry, 27, 98, 99, 102,
103, 105, 111, 114, 118, 122, 123,
124, 125, 126, 127, 128, 129, 130,
131
Exchange Rate, 27, 28, 34, 39, 88, 111,
161, 163, 166, 167, 168, 169, 170,
176, 216
Exodus, 49
Ezekiel, 49
F
Fals, 84, 86, 87, 90, 92, 94, 95, 137, 139,
141, 161, 207
Fatah Al-Taqdeer, 151
Fatavee-e-Sadia, 72
Fatawee Rasheedia, 142
Fatawee Rizvia, 144
Fatawee-e-Sadia, 144
Federal Budget, 198
Fiat Currency, 24, 77, 78, 98, 186, 206
fiduciary money, 30, 34
Fiduciary notes, 33
Fiqh Al-Shafia, 191
Fiqh Shafia, 136
Fiscal Deficit, 196, 198
Foreign Exchange Bearer Certificates,
263
Forex Trading, 132
Forfeiture. See Inqita’-e-Zar
fornication, 46
forward buying, 82, 86, 89, 90
Forward Contract, 171
France, 32
Ftah Al-Qadeer, 164
Fuloos, 11, 12, 15, 36, 38, 43, 58, 60, 63,
64, 65, 70, 71, 74, 75, 76, 77, 78, 83,
84, 85, 86, 87, 88, 89, 90, 91, 92, 93,
94, 95, 96, 98, 102, 120, 121, 122,
133, 134, 136, 137, 138, 139, 140,
141, 145, 146, 147, 148, 149, 150,
151, 152, 161, 164, 165, 181, 185,
188, 189, 190, 191, 193, 201, 202,
203, 204, 205, 206, 207
Fuloos Nafiqa, 92, 95
Future Contracts, 135
G
GDP or Gross National Product, 148
Geoffrey Crowther, 69, 81
Germany, 16, 17
Ghala’, 200
Glossary of Banking and Finance, 253
Gold, 11, 12, 13, 15, 24, 25, 27, 28, 29,
30, 31, 32, 34, 35, 36, 38, 43, 52, 57,
58, 59, 60, 62, 64, 66, 67, 68, 69, 70,
71, 73, 74, 75, 76, 77, 78, 79, 80, 81,
82, 83, 86, 88, 91, 92, 94, 95, 96, 97,
98, 99, 100, 101, 102, 103, 107, 108,
110, 111, 112, 114, 115, 116, 117,
118, 119, 120, 121, 122, 123, 124,
125, 126, 127, 128, 129, 130, 131,
132, 133, 134, 135, 136, 138, 140,
141, 143, 145, 146, 161, 163, 165,
179, 182, 185, 202, 206, 207, 215,
234, 242, 243
Gold Bullion Standard, 29, 34
Gold Exchange Standard, 31, 32, 35
Gold Specie Standard, 34
Gold Standard, 31
goldsmiths, 28, 34, 65
Government Bonds, 260
Guarantee for Payment, 222
H
Hadith of six items, 58, 61, 106
279
Hajjaj bin Yousuf Al-Saqfi, 36
Hanafi, 40, 57, 60, 85, 90, 98, 100, 102,
105, 111, 117, 136, 137, 151, 161,
162, 173, 174, 186, 194, 200, 206,
207, 233, 249
Hanbali, 85, 95, 98, 100, 102, 136, 156,
162, 182, 185, 186, 192, 194, 195,
200, 233, 249
Hasan Najfee, 222
Hashia Dasooti, 190, 201
Hashiah Takmalta Umdah Al-Raiya, 159
Hashsham bin Abdul Malik, 37
Hawala, 68, 108, 142, 143, 146, 149,
153, 223, 230, 234, 236, 237, 238,
240, 241, 242, 247, 248, 249, 252
Types of, 237
Hawashi Sharwani, 95
Hazrat Abdullah bin Marvan, 39
Hazrat Abdullah Bin Masood, 119
Hazrat Abdullah bin Omar (RAA), 216
Hazrat Abdullah bin Zubair (RAA), 36
Hazrat Abu Bakr (RAA), 123
Hazrat Abu Darda (RAA), 124
Hazrat Ali (KAW), 35, 154
Hazrat Fatima (RAA), 35
Hazrat Hasan Ibn-e-Ali (RAA), 154
Hazrat Ibn-e-Abbas (RAA), 156
Hazrat Ibn-e-Omar (RAA), 106, 108, 156
Hazrat Malkia, 85
Hazrat Mavia (RAA), 36
Hazrat Maviya Bin Abi Sufiyan (RAA),
124
Hazrat Moulana Ashraf Ali Thanvi, 66
Hazrat Moulana Rasheed Ahmed
Gangohi, 66
Hazrat Mujahid (RAA), 123
Hazrat Omar (RAA), 36, 38, 61, 107, 108,
119, 120, 122, 124
Hazrat Omar bin Abdul Aziz (RA), 37, 39
Hazrat Omar bin Abdullah Bin Omar
(RAA), 123
Hazrat Omar Bin Khattab (RAA). See
Hazrat Omar (RAA)
Hazrat Saeed Bin Masayab, 39
Hazrat Usman (RAA), 36
Hazrat Ziad (RAA), 36
Heraclius, 35
heroin, 54
Hiba, 108, 109
Hikmah, 54, 55, 56
Hundi, 152, 159, 162, 222, 227, 243
Hyper Inflation, 197
hyperinflation, 10, 16
I
Ibn Abi Shaeba, 154
Ibn Hajra Al-Haetmi (RA), 185
Ibn-e-Abbas (RAA), 154
Ibn-e-Al Qameem, 43
Ibn-e-Mamatee, 37
Ibn-e-Manzoor, 25
Ibn-e-Zubair (RAA), 154, 155
Ibra, 108, 109
Ibrahim Saleh Omar, 222
Ifrat-e-Zar, 180
Iftraq Bil-Abdan, 107
Ihsan, 155
Ijara, 22, 153, 154
Ijtihad, 174
Ilama Blazaree, 35
Ilama Ibn Najeem, 25
Ilama Ibn Tamiya, 19
Ilama Kasani, 23
Illah, 53, 54, 55, 56, 57, 58, 59, 60, 61,
73, 79, 81, 87, 91, 94, 95, 116
Imam Abu Hanifa, 85, 88, 89, 90, 93,
134, 154, 158, 181, 183, 188, 189,
190, 194, 195, 203, 204, 205, 207
280
Imam Abu Yousuf (RA), 85, 89, 90, 93,
182, 183, 184, 187, 189, 190, 192,
194, 195, 200, 203, 204, 205, 206,
207
Imam Ahmad (RA), 157, 160, 193
Imam Ahmed Ibn-e-Hanbal (RA), 57, 85,
96, 101, 154, 183
Imam Ghazali, 19, 21, 22, 49
Imam Ibn Al-Qeem (RA), 154
Imam Ibn-e-Sereen, 154
Imam Ibn-e-Tamiyya, 154
Imam Ishaq, 154
Imam Malik, 39, 59, 91, 92, 96, 140,
141, 148, 154, 155, 171, 183, 195,
224
Imam Muhammad (RA), 60, 85, 86, 87,
88, 89, 90, 93, 96, 112, 113, 134, 138,
148, 151, 182, 183, 184, 186, 187,
189, 190, 192, 194, 195, 233
Imam Qatadah, 154
Imam Sha’bi, Imam Nakh’l, 154
Imam Shafi’i (RA), 59, 94, 154, 192
Imam Suri, 154
Imam Yousuf, 86, 88, 90, 138
Imdad Al-Fatawee, 159, 160
IMF, 31, 32
Indexation, 167, 213
Inflation, 10, 14, 32, 43, 44, 180, 196,
197, 198, 199, 200, 201, 204, 206,
207, 209, 217
Inkimash, 200
Inqita’-e-Zar, 180
Interest, 9, 15, 16, 18, 20, 21, 23, 40, 45,
47, 49, 50, 51, 52, 53, 54, 56, 60, 133,
134, 157, 169, 170, 199, 206, 211,
213, 215, 216, 226, 247, 252, 254,
255, 256, 258, 259, 260, 261, 262,
263, 264, 270
International Currency Trade, 168
Iran, 35
Iraq, 37, 79
Isal, 159, 160
Islamic Banks, 170, 171, 226
Istaqraz, 149, 152, 153
Istifa-e-Dain, 241
J
Jamia’-e-Sagheer, 49
Jamika, 248
Jar-e-Manfea’t, 61, 155
Jeddah, 80, 171, 212, 249, 260, 266, 270
Joseph Schacht, 223
K
Kafalat, 160
Kalfat-e-Qard, 155
Karachi University, 47
Kasad-e-Zar, 180
Kashaf Al-Kana, 100, 136
Kawal Krishen, 13, 16
Khalid bin Abdullah Bajli, 37
Khalid Bin Waleed (RAA), 36
Kharasan. See Afghanistan
Khiyar Shart, 104
Khiyar-e-Ae’b, 112, 114
Khiyar-e-Roiyyat, 112, 113, 114
Khiyar-e-Shart, 112, 113, 114, 115, 137
Kifalah, 224
Kitab Al-Fuqaha, 89
Kufa, 36
L
Legal Tender, 29, 34
Letter of Credit, 168, 169
Leviticus, 49
Loan. See Credit
Ludwig Von Mises, 14, 16, 17
281
Lyndon Johnson, 32
M
Ma’roof Ba-Aziz, 142
Ma'dodat-e-Mutaqarba, 86
Maghni Al-Mahtaj, 101, 136
Majma’ Al-Fiqh Al-Islami, 171, 249, 266,
269
Makh Al-Jaleel, 191, 202
Maliki, 60, 90, 91, 103, 137, 140, 141,
156, 162, 182, 184, 190, 192, 194,
200, 234, 235, 249
Mansoos, 174
marijuana, 54
markup, 45, 48, 50, 52, 56, 60, 72
Marvan Bin Hukum, 36
Measurable items, 71, 73, 144, 187, 203
Mhutal Bihi, 236
Minhaj Al-Talibeen, 235
Misl, 182, 185, 186, 189, 203, 205, 206,
207, 212, 213
Money Exchange. See Bay' Surf
Money Order, 158
Moulana Abdul Hai Lakhnavi, 74, 145
Moulana Fatah Muhammad Taib (RA),
159
Mubadala, 103
Mudarabah, 82, 86, 263
Mudarabaht, 87, 90
Mufti Misr Muhammad Khatir, 22
Mufti Muhammad Shafi (RA), 47, 49, 66
Mufti Muhammad Shafi Ludhyanvi, 150
Mufti Rasheed Ahmad Ludhyanvi (RA),
148
Mufti Taqi Usmani, 13, 16, 18, 21, 23,
44, 49, 53, 54, 56, 68, 78, 90, 146,
150, 151, 152, 161, 167, 174, 218,
242, 243, 244, 249, 250, 251, 258,
262, 263, 265, 267, 269
Muhammad bin Al-Fadl, 85, 90
Muhammad Bin Al-Fadl, 96
Muhammad Ibn-e-Sereen (RA), 119
Muheel, 236
Muhtal Alaeh, 236
Munawala. See Endorsement
Municipal bonds, 260
Muqees A’lia, 79
Muratla, 103
Musarafa, 100
Musarfa, 103
Musharakah, 86, 263
Musharakat, 90
Muslam Fieh', 232
Musta’ajir, 158
Mutual Consent, 164, 166, 226
N
Naikl, 77
Naqd, 11, 101, 102, 126
Naqdain-e-Tasnia, 100
natural money. See Saman-e-Khilqi
Neoclassical, 196
Nisa, 62, 73, 87, 105, 143, 144, 149, 150,
152, 161, 162
O
Omar bin Huberah Wali, 37
Optional Condition. See Khiyar Shart
Options, 267, 269
Types of, 268
P
Pakistan, 9, 120, 136, 153, 161, 162,
218, 245, 253, 257, 259, 260, 264,
267
Paper Note. See Currency Notes
282
Paris, 38
Pay Order, 257
Payee, 239
Physical Possession, 108, 114, 115, 118,
135, 176, 177, 234
Plastic Money, 254, 255
Population, 198
Post Office, 158, 159, 160
pound sterling, 31, 191
Price Index, 208, 217
Prize Bonds, 25, 263
Professor Crowther, 13
Professor Manzoor Ali, 41
Professor Muhammad Manzoor Ali, 17
Promise, 66, 69, 127, 129, 170, 171,
173, 174, 175, 221, 252, 254, 268
Promissory Note, 223, 252, 253, 254
Prophet Muhammad (SAW), 35, 51, 61,
106, 154, 156, 158, 213, 214, 215,
216, 217, 224, 231
Proverbs, 49
Psalms, 49
Psychical Ownership, 140
Purchasing Power, 81, 179
Q
Qazi Abu Yaali Hanbali (RA), 233
R
Rakhs, 200
Ration Card, 225
Riba. See Interest, See Interest, See
Interest
Riba Al-Bay’, 48
Riba Al-Fadl, 48, 52, 57, 59, 60, 62, 72,
73, 75, 81, 105, 112, 118, 145, 213,
249
Riba Al-Hadith, 48
Riba Al-Jahiliyya, 47
Riba Al-Qard, 47
Riba An-Nasa, 62, 75
Riba An-Nasiyah, 47, 62, 72, 145, 151,
152, 161, 249, 261
Riba Bil-Quran, 47
Richard Nixon, 32
Riyadh, 76
Riyal, 72, 77, 144, 153, 162
Robeson, 223
Rozatal Talbain, 191
Running Inflation, 197
Rupees, 26, 162
S
Sadaqa, 108, 109
Sahib-e-Itar Al-Hadiya, 174
Saif-e-Mudahhab, 116
Saif-e-Mufaddad, 116
Salahuddin, 37
Salam, 89, 90, 134
salt, 26, 52, 107, 119, 215, 216
Saman, 43, 59, 63, 64, 70, 71, 74, 76, 82,
83, 85, 86, 87, 88, 90, 91, 93, 94, 95,
98, 100, 101, 102, 103, 106, 115, 117,
118, 121, 136, 138, 140, 141, 145,
165, 183, 188, 189, 206, 223, 242
Saman-e-Istelahi, 206
Saman-e-Khilqi, 63, 98, 99, 100, 102,
103, 105, 136, 142, 145, 146, 164,
165, 206
Saman-e-Mutlaqa, 63
Saman-e-Urfi, 98, 146, 164
Samaniat, 59, 63, 73, 74, 75, 76, 79, 81,
83, 86, 87, 88, 89, 90, 91, 93, 94, 95,
96, 100, 138, 145, 147, 186, 188, 189,
206
Samaniat-e-Ghalba, 94, 95
Samaniat-e-Johria, 94
283
Saudi Arabia, 77, 78, 153, 162
SDRs, 31
Second World War, 17, 32
Securities, 220, 264, 267
Shafi’i, 59, 94, 95, 98, 101, 102, 136,
154, 162, 173, 182, 183, 185, 190,
192, 200, 234, 235, 249
Shams Al-Aema Al Sarkhasi, 96
Shams Al-Amea Al-Halwani, 96
Shares, 259, 264, 265
Sheikh Abdul Razzak Afifi, 145
Sheikh Abdullah bin Bassam, 77
Sheikh Abdullah bin Salman, 76, 147
Sheikh Abd-ur-Rehman Bin Sa’dee, 70
Sheikh Ahmed al Bana, 78
Sheikh Ahmed Khateeb, 77, 147
Sheikh Mehmood Ahmed, 51
Sheikh Mubarak Ali, 13, 44, 222
Sheikh Salman Al-Hamdan, 72, 76, 144
Shirkat, 47, 87, 88, 89, 96
Shrah Al-Majla, 203
Shrah Al-Zarqani, 201
Shrah Tahavee, 120, 164
Shrah Waqiah, 159
Sick Money, 37
Silver, 11, 12, 13, 15, 24, 25, 27, 28, 29,
31, 33, 34, 35, 36, 37, 38, 43, 52, 57,
58, 59, 60, 62, 64, 66, 67, 68, 69, 70,
71, 73, 74, 75, 76, 77, 78, 79, 80, 81,
82, 83, 86, 88, 91, 92, 95, 96, 97, 98,
99, 100, 101, 102, 103, 107, 108, 110,
111, 112, 114, 115,髸116, 117, 118,
119, 120, 121, 122, 123, 124, 125,
126, 127, 128, 130, 132, 133, 134,
136, 138, 140, 141, 143, 144, 145,
146, 163, 165, 179, 182, 185, 189,
202, 206, 207, 215, 234, 242, 243
Siraj-ul-Muneer, 50
Special Deposit Certificates, 263
Spot exchange, 62, 67, 149, 150, 161,
163, 169
Stagflation, 197
State Bank of Pakistan, 148, 267
Stockholm Bank of Sweden, 29
Strike Price, 267
Suftaja, 51, 153, 154, 155, 156, 157,
158, 159, 160, 223
Sukuk, 221, 224, 262
Supreme Court of Pakistan, 18
Suqoot-e-Khatr-e-Taqreeq, 154, 156,
159, 160
Surf, 97, 98, 100, 101, 102, 103, 105,
106, 107, 109, 110, 114, 115, 136,
137, 140, 141, 142, 143, 146, 147,
150, 164
swine, 55
Syed Muhammad Baqar, 146, 240
Syria, 37
T
Tabaria, 36
Taburru’, 155
Tafreet-e-Zar, 180
Tagauyyur-e-Saman, 155
Takmla Ftah Al-Malhum, 242
Talqi-bil-Qabool, 231
Tanveer Al-Absar, 88, 151
Tasrruf. See Musarfa
Tatimma Muhtar, 183
Tatoor Al-Naqood, 102, 136, 163, 173
Tavaa, 236
Taxation, 198
Tazakhum, 200
Tazheer, 221, 252
Texal, 38
Treasury bills, 69, 259, 260
Trotting Inflation, 197
Tuhfat-ul-Fuqaha’, 89
284
Two Way Promise, 168, 170, 171, 173,
174, 175
U
Urooz (Plural of Arz), 73, 74, 76, 79, 80,
81, 82, 83, 88, 89, 94, 143, 147
Usury, 15, 36, 45, 46
V
Vietnam War, 32
W
Wages in inflation, 199, 213, 217
Wakala, 240, 247, 250, 251, 252
Wakeel, 250
Wales, 29
Waqf, 248
Warrants, 266, 267, 269
Wastage in Jewelry Making, 130
Weighable Items, 58, 59, 71, 73, 144,
187, 203
Weighted Average in Price Index
Calculation, 209
Wheat, 26, 38, 41, 52, 59, 84, 107, 110,
112, 115, 119, 132, 137, 177, 187,
203, 208, 209, 212, 213, 214, 215,
217, 230
Wodood, 165
Wujoob, 165
Y
Yazeed bin Abdul Malik, 37
Yousuf bin Omar, 37
Z
Zahir Barqooq, 84
Zakat, 35, 40, 68, 70, 73, 75, 76, 78, 80,
82, 147, 175, 242, 265
Zarr-e-Istilahi, 186