All perfect praise be to Allah, The Lord of The Wolrds.
Islam has definitively forbidden Riba (Usury) for Allah's Messenger (PBUH) said, "The selling of gold for gold is Riba (usury) except if the exchange is from hand to hand and equal in amount, and similarly, the selling of wheat for wheat is Riba (usury) unless it is from hand to hand and equal in amount, and the selling of barley for barley is usury unless it is from hand to hand and equal in amount, and dates for dates, is usury unless it is from hand to hand and equal in amount" {Related by Bukhari}.
Al-Imam An-Nawawi (May Allah have mercy on him) said: "There is consensus amongst Muslim scholars thatRiba is generally forbidden, although they have disagreed about its criterion and sub-rulings."{Shareh An-Nawawi Ala Muslim, 11/9}. Many Hadiths have stated that gold and silver are amongst the currencies in which Riba is likely to happen. Shafie jurists are of the view that the criterion of Riba in gold and silver is that both are mostly prices. Al-Imam Ash-Shirbini (May Allah have mercy on him) said, " The Illah (Cause) of Riba in gold and silver is that both are mostly prices, according to his (Shirbini`s) most correct opinion in the book "Al-Majmou`"." Also,the Illah of Riba is mostly referred to as the basis of the prices." {Moghni Al-Mohtajj, 2/369}. The Shafie scholars have limited theIllahfor forbidding Ribaof prices in gold and silver, which scholars of the principles of jurisprudence called "Illah Qasirah" {Limited to gold and silver}. Therefore, these scholars haven`t considered coins, which aren`t made from gold or silver, as substitute currency and haven`t been circulated mostly as prices. The view of the Shafie school of thought and other schools about "IllahQasirah" doesn`t absolutely prohibit resorting to Qiyas{Analogical reasoning}. What they meant is that, in their lifetime, they haven`t found another metal-in which the Illah of gold and silver existed-to apply the rulings of gold and silver on. At that time, coins made of metals other than gold and silver were auxiliary currency used to buy cheap commodities, and so they lacked the concept of price. As a result, Shafie jurists have called gold and silver the highest of prices and the relationship between this Illah and its ruling is nowadays reflected in paper currency, and it is clearer than that in gold and silver. Historically, paper currency have passed through several stages. At the beginning, it was difficult for people to keep gold and silver coins, so they started depositing them at money exchangers` and received a deed in return. With the passage of time, people became more trustful of these deeds and started exchanging them instead of the precious metals since the latter were hard to carry and involved a great deal of risk. Later on, they were put into circulation at a larger scale. From a juristic viewpoint, they were bonds of debt. After these deeds were extensively circulated in the market, they developed into what`s called "banknotes". Banks issued thesewith a full coverage of gold and pledged to pay their value in gold as well. Later, countries started issuing them through their own central banks and obliged every creditor to accept them in return for debts. As wars and economic crises were on the rise and countries were in need for printing more paper currency, the gold coverage started decreasing gradually until the separation between the two was announced in 1971, and paper currency became an independent currency with a binding purchase power. Today, jurists-including Fiqh assemblies and Fatwa bodies- consider paper currency an independent currency on which the rulings of metal currency, in terms of the obligation of Zakah and the occurrence of Riba, apply. This is because people consider paper currency as real currency. Therefore, Ibn Abdeen, a Hanafie scholar, said about dirhams made of impure gold or silver, "Dirhams of impure gold or silver became prices because they were commonly circulated amongst people. Once people cease using them, they become of no value." {Hashiyat Ibn Abdeen, 4/534}.
The view of the late Shafie jurists, such as At-Tirmisi, Dahalan and Al-Sharwani reflects what they have experienced in their own lifetime as regards the beginnings of the paper currency, which were, to them, debt bonds. Therefore, the eminent scholar Al-Shatiri-a modern Shafie scholar- said, "Paper currency which people use today takes the rulings of gold and silver." {Shareh Al-Yaqoot An-Nafees, 362}. "Every circulated currency that has a price and has the same value of gold and silver, such as currencies common nowadays, is considered likely to involve usury. {Al-Fiqh Al-ManhajiAla Math-hab Al-Imam Al-Shafie, 3/107}. Undoubtedly, issuing a Fatwa that paper currency is unlikely to involve usury corrupts our society and subjects it to many an evil. Nowadays, economic crises that we are experiencing stem mainly from dealing in usury and commoditizing currency. As a result, the value of currency went up and down, prices went sky high, inflation and unemployment multiplied, poverty and bankruptcy increased and state economies entereda state of confusion. Therefore, ruling that paper currency is unlikely to involve usury leads to corruption, and hadthe four Imams been alive, they would have ruled that it is likely to. This is why the Hanafie scholars inTransoxonia ruled that exchanging impure gold and silver currency of unequal weights is prohibited-although the reliable opinion of the Hanafie school says it isn`t-because, according to them, "It is the most common currency in our country, and if exchanging impure gold and silver currency of unequal weights becomes permissible, that will open the door for usury." {Al-Hidayah Fi Shareh Bidayat Al-Mubtadi, 3/84}.
In conclusion, we (Iftaa` Department) are of the view that paper currency takes the rulings of gold and silver in terms of the possibility of the occurrence of Riba and the obligation of paying Zakah, in addition to other rulings. And Allah knows best.
