Professional Documents
Culture Documents
Abstract
Money is a commodity or token that everyone will accept in exchange for the
things they have to sell. Different societies have different monies. The purpose of
money is to facilitate the transfer of value over space and time. In other words, we
use it to exchange wealth geographically, and to provide for future payment. Without
money, which is in effect an intermediate good used for trading, it would become
very difficult to have a division of labor, such as specialization, and everyone’s
standard of living would suffer. In this paper we will try to re-evaluate the arguments
on the types and functions of money according to the previous and modern literatures
wrote by the Muslim scholars. Then the paper continues analyzing various fiqhi
opinions about type of money according to Islamic scholars and compares it with the
existing monetary framework. Lastly, the paper discusses on the idea of just price
according to history Islamic economic thought.
1
Degree in Bachelor of Economics (Honours) from International University Malaysia. Currently pursuing Charted
Islamic Finance Profesional (CIFP) program at the International Centre for Education in Islamic Finance (INCEIF).
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1.0 Introduction
The real nature of money is obscured by the vocabulary of finance, which is doublespeak.
We use the term "investors" for speculators, whose gambling destabilizes global financial markets.
We use the terms "money," "capital," "assets," and "wealth" interchangeably-leaving no simple
means to differentiate money from real wealth. Money is a number. Real wealth is in food, fertile
land, buildings, or other things that sustain us. Lacking language to see this difference, we accept
The classical legal scholars do not develop a concise theory of money, thus many question
rises about the role of money and its functions in pricing matter especially in Islamic law of
transactions. The classical texts highlight three questions: is there a difference between raw metal as
a good and struck coins as a medium of exchange? What is the exchange rate between gold and
silver? And what is the basis for using conventional (or fiat) money, which has an exchange value
To answer all above questions modern Muslim scholars of law have draw heavily on the
classic opinions discussed in the previous question. However, contemporary Muslim scholars
explicitly draw on sources from various schools of law, about the legal status of role of money and
it functions in pricing. We will discuss further some of the question rises and analyze it according to
some literatures and try to comprehend both the classical and modern Muslim scholars regarding
this issue.
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Primitive peoples used shells, beads, elephant tusks, furs, skins, and livestock and during
ancient time they used gold, silver, copper, iron and bronze as a medium of exchange. However, the
chronology changes as the time passed by. The Muslims have used the dinar and dirham since the
era of Prophet Muhammad (pbuh) and the Khulafa’Ar-Rasyidin. The dinar is specified having
weight of 22-carat gold equivalent to 4.25 grams with a parameter of 23 millimetres. The other
currency that inherited from the Islamic tradition is the silver Dirham which is specific in weight of
We have noticed that the history have shown us the world are changing its medium of
exchange and units of account from the barter system until it become monetary system. Throughout
the history we could not denied the fascinating facts when the civilization from time to time using
There are several factors that the civilizations are using gold and silver as their money,
mainly as medium of exchange, it is because several factors that will be explains below.
(i) High density and value-Gold is a mineral that is hard to obtain and desired by all
races all over the world. This make gold is high in value. Because of its high density,
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(ii) Stable and to last in a long term-From the chemistry view, gold is a metal that
seldom react with another element. It is inactive and because of that it is mine as gold
itself from the soil (not as oxide iron). Gold is also not corroded. It is also
the valuation of gold from small to large according to its weight. If the gold is cut to
two, it has the same contains. One part is not better than the other part. This
characteristic makes the division is able to delicate parts. Gold from this part of the
world is same as gold that mined from the other part of the world.
(iv) Keep able-Gold is an ideal value keeper. It can be kept for future use even though it
(v) Portable -Gold is portable so it can be a currency at all places. Even it is deem to be
practical in terms of bullion or coins. Some misconception that gold is heavy and not
portable is wrong since the gold and silver has been use for centuries as medium of
(vi) Cannot easily been created and indestructible -Fiat money derive a lot of socio-
economic problems because of it’s easy to create and easy to destroy. Inflation will
arise if it’s created and problem like economic slump, unemployment, will arise if
it’s destroyed. But gold can’t be created and can’t be destroyed. It makes gold is
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Therefore it is obviously that the gold is the most stable currency the world has ever seen.
Being rare, beautiful and unique, gold is treasured as a store of value for thousands of years, and it
is considered as an important and secure asset. Paper currencies may come and go, but gold
endures. Despite fluctuating in price, gold is still preferred to currency because it of its real value or
what is known as intrinsic value. Last but not least, gold have had value in all civilizations, have
survived all financial crises, and can be expected to do the same in the future.
Fiat money is money declared by a government to be legal tender. Fiat money achieves
value because a government demands it in payment of taxes and says it should be used within the
country as a "tender" (offering) to pay all debts. Where fiat money is used as currency, the term fiat
currency is used. Fiat money according to Nik Norzrul et. al.(2003) has major differences between
(ii) Issues and managed by governments by means of the political and economic
process. Thus it can be expanded and contracted at will, and as such as it can be
(iii)The fiat money only recognised within the boundary of the issuing government. It
may lose its value totally upon collapse of the government or crisis in the
economy.
(iv)All forms of paper assets: bonds, shares and even bank deposits, are promise to
repay, money borrowed. Their value is dependent upon the investor’s belief that
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the promise that the promises to repay money borrowed. Their value is dependent
upon the investor’s belief that the promise will be fulfilled (p.243).
Umar Vandillo (2004), one of the renowned dinarist explains paper money has evolved in
nature through history. What we know today as paper money is not what it used to be. This
agreement.
(iii) A piece of paper not backed by any specie, whose legal value is determined by the
Therefore, in other words, the fiat and even credit forms of money are generally made
acceptable through a government decree that all creditors must take the money in settlement of
It is been accepted all this while from western perspective that money has three main
function which are medium of exchange, unit of account and store of value. These are the three
functions of money. Medium of exchange is defined when money is used as an intermediary for
trade, in order to avoid the inefficiencies of a barter system. Such usage is termed a medium of
exchange. While unit of account is a standard numerical unit of measurement of the market value of
goods, services, and other transactions. Also known as a "measure" or "standard" of relative worth
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and deferred payment, a unit of account is a necessary prerequisite for the formulation of
commercial agreements that involve debt. Lastly store of value is known as an act as a store of
value like must be able to be reliably saved, stored, and retrieved — and be predictably useful when
it is so retrieved.
All these three functions of money have been discussed thoroughly by economists as well as
Muslim scholars. Some of them agreed how Western economists viewed it, while some others
disagree that the money is used as mean of store of value for their specific arguments. Some may
disagree especially on functions of money as store of value since the use of fiat currency like paper
or electronic currency no longer backed by gold in most countries, hence it is not considered by
Taqi Usmani (2001) discussed on the nature of money on his judgement against riba by
quoting Imam Al-Ghazzali (d.505 A.H.) the renowned jurist and philosopher of the Islamic history
that already has discussed the nature of money in an early period when the Western theories of
“The creation of dirhams and dinars (money) is one of the blessings of Allah…. They
are 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 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
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commodity is a just price for another. Therefore, all these commodities need a
mediator to judge their exact value…. Allah Almighty has, therefore, created dirhams
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.
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,
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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 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
This brief, yet comprehensive, analysis of the nature of money, undertaken by Imam Al-
Ghazzali about nine hundred years ago, is admitted to be true by the economists who came
centuries after him. That money is only a medium of exchange and a measure of value is
universally accepted by almost all the economists of the world. Before Al-Ghazali, Ibn Taimiyyah,
a prominent scholar touches on these as well, the two important functions of money -measurement
of value and medium of exchange -are especially mentioned by Ibn Taimiyyah in his discussion of
"Athman (singular of thaman, that is, price or that which is paid as price, money,
which the quantities of objects of value (maqadir al-amwal) are known,..and they are
By this statement he clearly means that the essential function of money is to measure the
value of goods and to be paid in exchange for different quantities of goods. His disciple, Ibn al-
2
Ibn Taimiyyah, (1963). Majmu al-Fatawa. Riyad: Matabiál-Riyad Vol.29, p.472.
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"Money and coins are not meant for themselves but they are meant to be used for
Since Ibn Taimiyyah considers the main function of money to be a medium of exchange, he is
against trade in money because it diverts money from doing what it is meant to do. If money must
be changed for money, the exchange must be completed simultaneously (taqabud) and without any
delay (hulul). In this way a man will be able to use money as a means for obtaining his
requirements. If two persons exchanged money for money, with one of them paying cash while the
other promises to pay later, then the first person will not be able to use the promised money for
transaction till he is actually paid. This means a loss of opportunity. In Ibn Taimiyyah's opinion this
is the reason why the Prophet forbade such transactions that clearly stated in the hadith that
narrated in numerous sources. Muslim narrated on the authority of ’Abu Sa‘id Al-Khudriy; The
“Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates,
and salt for salt; like for like, hand to hand, in equal amounts; and any increase is Riba.”
Taqi Usmani (2001) and Iraj (2009) both agreed that money is only a medium of exchange
and a measure of value is universally accepted by almost all the economists of the world, but
unfortunately a large number of these economists failed to recognize the logical outcome of this
concept.
Iraj (2009) quoted Keynes in his discussion of equivalence between functions of and
demand for money saying that “Only in the event of money being used solely for transactions and
3
Ibn Qayyim, (1955), I’lamul Muwaqiin (trans.). Darul Fajr. Vol. 2. p.137.
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never as a store of value, would a different theory come appropriate”(p.65). He furthers the
discussion by showing a simple diagram in explaining the courses of store of value. The triangular
Liquidity
Preference
The diagram above shows how the store of value makes a triangular trap whose equal sides
are hoarding, liquidity preference, and speculative demand for money. The string that ties these
concepts in a systematic manner is nothing but the rate of interest. Iraj (2009) quoted Professor D.
Fisher statement whereby he said “ money is clearly a stock. Money, however, is also an economic
good”(p.69). Thus controlling money as store of value is same as hoarding and lead speculation to
occur. He then defines speculation as an act of buying and selling stock or a commodity with the
hope that the buying price is the lowest and selling price the highest expected. The Arabic word for
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Islam prohibits the act of hoarding because the Prophet (pbuh) says: “No one hoards but the
traitors (i.e. the sinners)”4.The store of value has nothing to do with savings. Interesting statement
made by Auckley included by Iraj (2009) to remove any doubt of his arguments in store of value
stating that “..there is no necessary connection between saving and hoarding; I can save without
hoarding, hoarding without saving, or even save and dishoard, hoard and dissave” (p.78).
By allowing interest to prevail in the economy, speculators are given the opportunity to hunt
the most profitable chances. However, the gains are enjoyed by a few but the losses are borne by the
rest of society. The clear intention of speculators in both buying and selling “commodities” is not to
hold and consume them but to make profit through the exchange of money for money. This is
summarize then that the interest will lead to the occurrence of speculation, then lead to
The discussion on whether should money should be in gold and silver is grouped into several
Those scholars of the idea to return back the existing money to gold and silver according to
shari’ah.
Those who implicitly accepted the existing monetary system based on fiat money provided
it is backed by gold.
Referring to the first views of some modern scholars such as Umar Ibrahim Vadillo, Imran
4
Hadith Narrated in Sunan Abu Da’ud, hadith no. 2990.
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Hussain, Nik Mahani, and Ahamed Kameel Mydin Meera and so forth, they propose to create a
gold dinar which can have specific value in the currencies of different Islamic countries. All the
Islamic countries must have a share in the international Islamic dinar as a trade currency and as
national reserves. The dinar must be in gold and not paper. How practical this will have to be dealt
with later when the volume of trade becomes big (Umar, 2004; Nuradli Ridzwan et al.
Effectively the use of the Islamic dinar will create an Islamic trading bloc. Such a trading
bloc will be a powerful voice in International trading regimes and the shaping of the new financial
architecture. In the beginning the Muslims used gold and silver by weight and the dinar and dirhams
that they used were made by the Persians. As what Allah says in the Holy Quran:-
Alluring unto man is the enjoyment of worldly desires through women, and
children, and heaped-up treasures of gold and silver, and horses of high mark, and cattle,
and lands. All this may be enjoyed in the life of this world - but the most beauteous of all
The economic culture in Islam is based on Dinar and Dirham.The usage of word Dinar and
And amongst the People of the Book there are those who, if you were to entrust
them with a treasure (qintar), he would return it to you. And amongst them is he who, if
you were to entrust him with a dinar would not return it to you, unless you kept standing
over him.6
And they sold him for a paltry price - mere few silver coins: thus low did they
5
Surah Ali-imran 3:14
6
Surah Ali-Imran 3:75
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value him.7
These two verses from the Holy Quran tell us that the usage of Dinar and Dirham is already
occurred since thousand years ago, before the era of the Prophet Muhammad (PBUH).Besides the
verses from then Holy Quran, there are also plenty of hadith from the Prophet (PBUH) regarding
“Dinar that you spend for the sake of Allah,dinar that you spend to free the slave,dinar
that you give to the poor people,and dinar that you spend for your family.the biggest
reward (in the sight of Allah) is dinar that you spend for (fulfill the needs and increase
The evidence from the Holy Quran and the Hadith above clearly stated that the monetary
system that being used throughout the human civilization, since the previous Prophet until the time
Moreover, this system was being practiced throughout the rule of Khulafa' ar-Rasyidin until
the end of the Khilafah Uthmaniyyah which is on 1924 Masihi. The first dated coins that can be
assigned to the Muslims are copies of silver dirhams of the Sassanian Yezdigird III, struck during
the Khalifate of Uthman, radiy'allahu anhu. These coins differ from the original ones in that an
Arabic inscription is found in the obverse margins, normally reading "in the Name of Allah".
Since then the writing in Arabic of the Name of Allah and parts of Qur'an on the coins
became a custom in all mintings made by Muslims. In the year 75 (695 CE) the Khalifah
7
Surah Yusuf 12:20
8
Hadith Narrated by Imam Muslim in Sahih Muslim,volume 5,page 160.
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Abdalmalik ordered Al-Hajjaj to mint the first dirhams, thus he established officially the standard of
Umar Ibn al-Khattab. In the next year he ordered the dirhams to be minted in all the regions of the
Dar al-Islam. He ordered that the coins be stamped with the sentence: "Allah is Unique, Allah is
Eternal". He ordered the removal of human figures and animals from the coins and that they be
As what stated in Muqaddimah of Ibn Khaldun by Ibn Khaldun when explaining about the
them, for example zakat, marriage, and hudud, etc., therefore within the Revelation they
have to have a reality and specific measure for assessment of zakat, etc. upon which its
Know that there is consensus [ijma] since the beginning of Islam and the
age of the Companions and the Followers that the dirham of the shari'ah is that of which
ten weigh seven mithqals weight of the dinar of gold... The weight of a mithqal of gold
is seventy-two grains of barley, so that the dirham which is seven-tenths of it is fifty and
The urge of using gold dinar is not only among the Muslim but also from the Non-Muslim.
In addition there are many Non-Muslim economists that wanted the medium of exchange is made
from the gold or silver because of their understanding of the stability and so forth. Some of them
argue that the major reason why they are some people did not want to use gold and silver as
9
Muqaddimah of Ibn Khaldun or the Prolegomena in Latin, records an early Muslim view of universal history.
Many modern thinkers view it as one of the first works of sociology. The Arab historian Ibn Khaldun wrote the work
in 1377 as the preface or first book of his planned world history.
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medium of exchange; it is not because lack of technical expertise but it is because the gold and
Therefore we should support the effort and attempt of the Muslim economist to bring back
the usage of gold and silver as the medium of exchange and units of account so that the economic
could be more just. The Malaysia consul at the Organization of the Islamic Conference (OIC) to
bring back the usage of the gold and silver is not to raise popularity but it is the matter a fact of
responsibilities of bringing back the understanding and realization regarding the usage of dinar and
Umar Vadillo (2004) argues that Imam Malik said money is “any merchandise commonly
A) Money has to be merchandise. Therefore it could be paper. But fiat money is only for the value
of the paper itself, not for what is written on it. Money must be something tangible (‘ayn). Money
B) Money must be commonly accepted. Therefore it cannot be imposed. No-one can say it is
obligatory on you. No-one can even make the Gold Dinar obligatory on the people. The Gold Dinar
and the Silver Dirham become a currency out of free choice, not as the result of decree. Paper
money is imposed on people. This obligation is not accepted in Islam for two further reasons:
1. The fraudulent nature of the offer: they oblige you to accept something above its value (its real
value is zero).
2. The obligation of the offer: you are obliged to accept it whether you like it or not.
The dinarist concluded in many of their writings a simple statement whereby paper money is
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not valid money in Islamic Law, whether in its present form or in any of the forms in which it has
existed in the past. The Shari‘ah money is the Gold Dinar and the Silver Dirham. Any merchandise
If we look back in the early opinions of the Islamic jurist, among those who believes that
limited the money to be in dinar and dirham are Abu Hanifah, Abu Yusuf, Ibn Nafi’, al-Nadwi,
Syaikh ‘Alish or some scholars from Syafiíyyah school of thought like Al-Nawawi,Al-Suyuti and
Al-Maqrizi, and Hanbali’s scholars like Mujahid and Nakha‘i. Despite these scholars writing in the
early part of Muslim history were exposed to gold and silver as the main forms of money, although
some limited amounts of copper based money were in circulation. Some of these scholars did not
state directly that only gold and silver can be used as money. Later scholars, who support either
view, base their position on their interpretation of certain writings of earlier scholars. Some
contemporary scholars hold the same views are Syaikh Ahmad al-Khatib, ,Syaikh Abd Rahman Al-
However, another group of Islamic scholars those hold the views otherwise (Views that do
not limit money to only gold and silver) are Imam Shaybani, Al-Hattab, Al-Wansharisi, Ibn
Taimiyyah, Ibn Qayyim, Laith Ibn Sa’ad and many more. Some contemporary scholars hold the
same views are Syaikh Yusof Qardhawi, Syaikh Muhammad Taqi’ Usmani, dan Abd Allah
These group counter arguments basically can be summarized as what stated by Muhammad
“The second group (Views that do not limit money to only gold and silver) does not
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reject gold and silver as money. However, they do not interpret the evidences as limiting
money to only gold and silver. Also, based on general principles of legal maxims (qawa‘id
fiqhiyyah) such as ‘the lifting of hardship’ and ‘the principle of ibahah’, they are of the
opinion that it would not be beneficial to see money limited to only gold and silver.
Therefore, gold and silver as money is acceptable but not obligatory. It is possible to accept
The fiqhi opinions on the issue of money in Islam, especially the use of gold and silver lead
to broad discussion that need to be analyze thoroughly in terms of its practicality from the legal
framework and sustainability towards the current monetary system. The fact that Islamic
scholarship has divergent views on money and the monetary system must be seen as strength, not a
weakness. What it indicates is that Islamic scholarship is dynamic and able to address different
situations and circumstances, provided the issue is not something that is fixed or determined
Malaysia Currency (Ringgit) Act 1975 ("MCRA") the currency used a medium of exchange
in Malaysia is known as ringgit and sen. Section 2 of the MCRA amended the Central Bank of
1. The unit currency in the Federation shall be in the ringgit, which should be divided into
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2. Upon coming into force of this action, every contrct, sale payment, bill, note, instrument,
ad security for money and every transaction, dealing, matter and thing whatsoever realating
to money or involving the payment of, or the liability to pay, any money whcihbut for this
subsection would have been deemed to be made, executed, entered into, done aand had for,
in and realation to Malaysia dollars shall be deemed instead to be made, executed, entered
The CMBA clearly reflects that the Central Bank of Malaysia (Bank Negara Malaysia) is
empowered to issue notes and coins in ringgit and sen denominations as been stated in the section
23 of CBMA. It follows by section 24 stated that such notes and coinsto be legal tenders in
Malaysia at face value for payment of any amount.(CMBA, 1958). The ringgit is being used
worldwide, not only in Malaysia but international, but it is depends on the power of supply and
The government is responsible for controlling currency expansion and for checking erosion
of the value of money, both major causes of economics instability. The state is responsible for
controlling currency expansion and for checking erosion of the value of money, both major causes
of economics instability. The authority given by the government (in this case the CBM) must, so far
as possible, avoid deficit financing and unrestricted monetary expansion, because doing so results in
inflation and creates distrust in the currency. The authority (the CBM) should issue coins of just
value, and never issue them as a form of business. That is the reason why it is importance for
government to understand that money must be regards as a measure of value and a medium of
exchange; any measure that upsets these functions of money is hazardous to the economy.
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The idea of just price was widely discussed by a renowned scholars namely Taqi Al-Din
Ahmad Bin Abdul Halim, or known as Ibn Taimiyyah. Just price in simple terms can be explain as
price of good ‘x’, which is paid for similar objects in a given time and place. This is being discussed
most in his literatures and book called al-Hisbah. Though the notion of a just or fair price was
present in Islamic jurisprudence since the earliest times, Ibn Taimiyyah seems to be the first Islamic
According to Abulhasan and Aidit (1992), jurists who codified Islamic rules about business
transactions, applied to concept in case a defective object is sold, in case of usurpation, forcing a
hoarder to sell his goods, overcharging, disposal of the property of a trust, etcetera. Generally, they
thought that the just price of something is that price which is paid for similar objects in a given time
and place. Therefore, they preferred to call it the price of the equivalent (thaman al-mithl). Price is
serious matters and being discuss thoroughly by scholars in these four aspects:
2) Price involves market prices is determined by the forces of Demand and Supply.
3) Price is variable and is subject to fluctuations due to changes in Demand and Supply.
But interesting to note that two terms occurring very frequently in Ibn Taimiyyah's
discussion on the issues related to prices: "compensation of the equivalent" (iwad al-mithl) and
"price of the equivalent" (thaman al-mithl). Ibn Taimiyyah says: "The price of the equivalent is that
rate (si'r) at which people sell their goods and which is commonly accepted as equivalent for it and
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Other passages of al-Hisbah reveal that by the price of the equivalent he means, more
precisely, that price which is established by the free play of market forces -of supply and demand.
"If people are dealing their goods in the normal ways (al-wajh al-ma'ruf) without
injustice on their part and the price rises either due to shortage of the goods (that is,
decrease in supply) or due to increase in population (that is, increase in demand), then it
is from Allah (SWT). In such cases, to force the sellers to sell their goods at a particular
Ibn Taimiyyah in his writing distinguishes between two kinds of prices; unjust and prohibited
prices and just and desired ones, and he then considers the price of the equivalent as the just price.
Thus, the two words, “just” and “equivalent”, are used interchangeably.
Thus price of goods sold (thaman al‐mabi’) according to Islamic law of transactions is discuss
deeper will not just include the topic of pricing matter, but as well as the profit gained from the
pricing value is taken into consideration. Just price is the core concept that needs to be realized by
those who have the authority (it is also referring to the role of al-Hisbah institution).
It is reasonable that the price is determine by the demand and the supply of the market, but
Islam allowed for the regulator to control the price whenever it is needed to avoid speculation,
hoarding, monopoly and so forth. This shows how the Islam realize the imperfection of the market.
Ibn Taimiyyah had a clear grasp of how, in a free market, prices are determined by the forces of
10
Ibn Taimiyyah, (1343H). Tafsir Surah An-Nur, Cairo:Idarah al-Taba’ah al-Muniriyah, p.103.
11
Ibn Taimiyyah, (1976). al-Hisbah, Cairo:Dar al-Sha’b, p.34.
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"Rise and fall in prices are not always due to an injustice (zulm) by certain
of the goods in demand. Thus if desire for it decreases, the price rises. On the other
hand, if availability of the good increases and the desire for it decreases, the price comes
down. This scarcity or abundance may not be caused by the action of any individuals, it
may be due to a cause not involving any injustice, or sometimes, it may have a cause
that does involve injustice. It is Almighty God who creates desires in the hearts of
people"12.
The issue of fixing the price in the market has been discussed widely by the Muslim
scholars. Price control may seem contradicting with the Western idea of laissez-faire, however in
Islam consultation for price-fixing in all cases do not favour an authoritarian fixing of prices. The
Muslim scholars only allow it after negotiation, discussion and consultation with the people
concerned to avoid any self-interest in the decision made. This reflects that the price is not solely
based on the Demand and Supply because the fluctuation of prices in the market may lead to
speculation, hoarding, monopoly and so forth without proper intervention from the authorities.
Therefore the decision made must be appropriate and based on the current market situation.
This is due to disadvantages and dangers of arbitrarily fixed prices which do not enjoy popular
support -for example, black markets or grey markets, or surreptitious down-grading of the quality of
the goods sold at the fixed price. The same dangers are discussed by modern Muslim economists
and scholars. There is no doubt that these dangers can be reduced, even removed, if prices are fixed
12
Ibn Taimiyyah, (1963). Majmu al-Fatawa. Riyad: Matabiál-Riyad Vol.30, p.43.
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Ezry Fahmy Bin Eddy Yusof
by mutual consultation and by creating a sense of moral obligation and dedication to the public
interest.
Ibn Taimiyyah also have discussed on price control towards factors of production where he
"If people are in need of the services of artisans and cultivators and they refuse to
offer them or create some sort of imperfection in the market, the state should fix their
prices. And the purpose of this price control is to protect the employers and employees
Hence, the main objective of the just price and other related ideas brought forward by Ibn
Taimiyyah and other scholars was mainly to maintain justice in commutative dealings and other
relations among the members of the society. They were also meant to provide guidelines for the
authorities to enable them to protect the people from exploitation. And in fulfilling these aims, they
would make it easier for the people to meet their moral and financial obligations.
7.0 Conclusion
It is come to the conclusion that the author think that money should be restricted to the role
of a medium of exchange rather than a store of value. Some modern scholars suggest preventing
banks from creating credit at all since it impedes controlling the amount of money.
As for paper money, it should be assumes the prominent role in economic transactions, a
new legal concept has to be developed, which incorporates this new form of money. Even in the
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Ezry Fahmy Bin Eddy Yusof
nineteenth century paper money could still be regarded as a credit for gold reserves with the central
bank. However, in the twentieth century this approach is less convincing since it does not reflect
reality any more. The full coverage of currency in gold was given up in Britain in 1931 and in the
US in 1971.
We should understand that the foundations for money have changed considerably whereby
currently, paper money is issued without a real counter value and the social background for trade
has changed. New aspects of using money, especially continuous inflation, call for new directions in
Islamic legal thought. Islamic legal thinkers come to different conclusions in their attempt to embed
Moreover, to discriminate among the legally acceptable alternatives for interpreting the role
of paper money in an Islamic economy, legal scholars have combined historical developments with
practical economic aspects. Since this problem will remain a constant topic among Islamic legal
scholars for some time. It is advisable that Islamic legal thinkers and scholars could hand in hand
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Ezry Fahmy Bin Eddy Yusof
References
Abulhasan M. Sadeq and Aidit Ghazali (1992). Readings in Islamic Economic Thought.
Meera, A.K.M. (2004), The Theft of Nations. Pelanduk Publications, Subang Jaya, Malaysia.
Muhammad Aslam & Emad Rafiq Barakat. (2006). Must Money Be Limited to Only Gold and
Silver?:A Survey of Fiqhi Opinions and Some Implications. JKAU: Islamic Economics. 19
(1). p, 21-34.
Nik Norzzrul et. al. (2003). Law and Practice of Islamic Banking and Finance. Malaysia:Sweet &
Maxwell Asia.
Nik Mahani. (2009). Between Islamic Bank and the Gold Dinar-a Compilation of Paper & Articles.
Nuradli Ridzwan et al. (2004). The Mechanism of Gold Dinar. Malaysia:A.S Noordeen.
Iraj. Toutochian. (2009). Islamic Money & Banking; Integrating Money in Capital Theory.
Islamicmint.com (2006) History dinar and dirham. Retrieved September 13, 2009 at
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Taqi Usmani. (2001). The Supream Court of Paksitan:The Text of the Historic Judgement on Riba
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Vadillo, U.I. (2002) “The Architecture of the Gold Dinar Economy: An Academic Perspective,” in
Proceedings of 2002 International Conference on Stable and Just Global Monetary System,
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