Category: Financial Transactions
Fatwa#: 7936
Asked Country: South Africa

Answered Date: Feb 06,2003

Title: Please review the PROOF behind the idea that paper money is haraam.

Question

I saw that u do not regard paper money as being haraam, but please respond to the following, in detail: Moulana Imran Hosein (who studied under Moulana Fazlur Rahman Ansari) says the following: 1. Modern paper money is a branch of riba. He gives the following reasons: A. Modern paper money is ?fiat? money i.e. it is not redeemable for any precious metal (gold/silver) or other commodity. Therefore, the value assigned to it, e.g. R100, is not convertible into actual value ? it can only be used to buy some other good or stored as useless paper. B. The international system of exchange rates allows certain individuals/companies/countries to devalue a currency within minutes i.e. speculatory attack on a currency. Also, exchange rates are set arbitrarily. This means that the value assigned to a paper note is constantly changing, and wealth can be created or destroyed merely by virtue of exchange rates. This facilitates the transfer of wealth from poor to rich, without any effort on the part of the rich, and paper money is a mechanism of riba. C. Paper money has no intrinsic value ? value is arbitrarily assigned (unlike gold, which has historical, universal value).

Answer

Firstly%2C+you+use+the+word+%3Fproof%3F+in+your+question%2C+yet+there+was+no+proof+ever+mentioned+by+the+claimant+that+paper+money+is+Haraam.+By+proof+we+mean+Shar%3Fee+proofs%2C+not+simply+disadvantages.+To+make+something+Haraam+one+has+to+have+Dalaa-il+%28sound+shar%3Fee+proofs%29.%0D%0A%0D%0AWe+accept+that+paper+money+is+not+the+Islamically+ideal+means+of+exchange.+It+definitely+has+its+elements+of+deception%2C+and+has+been+easily+manipulated+by+western+powers+to+subjugate+economically+weaker+nations.+The+ideal+would+be+to+deal+in+gold+and+silver%2C+which+have+real+and+intrinsic+value.+Therefore+it+would+be+the+duty+of+a+true+Islamic+State+to+revert+to+gold+and+silver+as+the+standard+means+of+exchange%2C+which+could+then+be+represented+by+paper+money.+%0D%0A%0D%0AHowever%2C+it+does+not+follow+that+under+the+present+circumstances+it+is+Haraam+to+use+paper+money.+Islam+is+a+practical+way+of+life%2C+and+the+Fuqahaa+%28jurists%29+of+Islam+have+laid+down+guidelines+by+means+of+which+we+can+practice+on+this+Deen+in+every+age.+They+have+explained+that+if+any+commodity+becomes+the+means+of+exchange+in+any+society%2C+and+this+is+the+norm%2C+then+value+will+be+attributed+to+that+commodity+based+on+the+norm+of+that+society.+A+simple+example+would+be+that+in+some+societies+in+the+past+shells+were+used+as+the+standard+means+of+exchange.+Although+shells+in+themselves+do+not+hold+intrinsic+value%2C+since+the+society+attributed+value+to+it%2C+such+items+may+be+used+as+a+means+of+exchange.+%0D%0A%0D%0AThe+fact+that+paper+money+has+been+manipulated+by+certain+powers%2C+and+they+have+designed+their+system+of+Riba+around+it%2C+does+not+render+paper+money+Haraam.+It+is+the+transaction+of+Riba+and+the+act+of+manipulation+that+are+Haraam%2C+and+not+the+currency+itself.+If+tomorrow+they+design+their+schemes+around+metals%2C+are+we+then+going+to+say+that+dealing+in+metals+is+Haraam.+Certainly+not%21+In+fact%2C+one+who+is+aware+of+the+detail+rules+of+Riba+would+be+aware+that+gold+and+silver+are+more+susceptible+to+the+contract+of+Riba+than+currencies+are.+%0D%0A%0D%0AOn+a+practical+level%2C+one+can+understand+that+it+would+be+virtually+impossible+to+do+without+paper+money.+Now+that+this+so+called+Maulana+considers+paper+money+as+Haraam%2C+one+wonders+what+he+would+do+if%2C+for+example%2C+he+had+to+go+for+Hajj.+Does+he+take+trunks+full+of+coins+along+because+paper+money+is+Haraam.+One+has+to+be+realistic.%0D%0A%0D%0AFor+details+on+the+development+of+paper+money%2C+and+the+Shar%3Fee+rulings+of+its+usage%2C+refer+to+%3FAl+Qadhaayah+al+fiqhiyyah+al+muaasirah%3F+by+Mufti+Taqi+Uthmaani+Saheb.+This+is+an+excellent+work+on+the+subject.+%0D%0A%0D%0Aand+Allah+Ta%27ala+Knows+Best%0D%0A%0D%0AMoulana+Imraan+Vawda%0D%0AFATWA+DEPT.

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