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  • Gold, Silver, Wheat, Barley, Dates, Salt - Islamic Finance

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    Abdulaziz Khattak
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    This document discusses the Islamic rules regarding bay al-sarf, which is the exchange of money for money. Bay al-sarf is strictly regulated under Shariah to prevent interest-bearing loans, which are prohibited. The key rules established by hadiths are that exchanges must be equal in quantity and quality, made on the spot with no delay, and involve the same type of currency (e.g. gold for gold). However, there are minority views that these rules only apply to gold and silver, not other currencies. Most scholars agree that any item widely used as currency in a society should follow the same rules. The arguments around modern foreign exchange stem from the use of paper currencies not backed by gold,

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    Gold, Silver, Wheat, Barley, Dates, Salt - Islamic Finance

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    This document discusses the Islamic rules regarding bay al-sarf, which is the exchange of money for money. Bay al-sarf is strictly regulated under Shariah to prevent interest-bearing loans, which are prohibited. The key rules established by hadiths are that exchanges must be equal in quantity and quality, made on the spot with no delay, and involve the same type of currency (e.g. gold for gold). However, there are minority views that these rules only apply to gold and silver, not other currencies. Most scholars agree that any item widely used as currency in a society should follow the same rules. The arguments around modern foreign exchange stem from the use of paper currencies not backed by gold,

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    319 views1 page

    Gold, Silver, Wheat, Barley, Dates, Salt - Islamic Finance

    Uploaded by

    Abdulaziz Khattak
    This document discusses the Islamic rules regarding bay al-sarf, which is the exchange of money for money. Bay al-sarf is strictly regulated under Shariah to prevent interest-bearing loans, which are prohibited. The key rules established by hadiths are that exchanges must be equal in quantity and quality, made on the spot with no delay, and involve the same type of currency (e.g. gold for gold). However, there are minority views that these rules only apply to gold and silver, not other currencies. Most scholars agree that any item widely used as currency in a society should follow the same rules. The arguments around modern foreign exchange stem from the use of paper currencies not backed by gold,

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    Bay alSarf is a contract of exchange of money for money. This contract is tightly regulated under
    Shari`ah because it can be easily manipulated for the purpose of producing an interestbearing loan,
    whichisprohibitedinIslam.
    IbnRushdexaminesthethreeformsofsalethatcanariseinamarketwheregoodsandmoneyarein
    existence:
    "when two commodities are exchanged, one may serve as a currency and the other as a priced
    commodity,orbothmaybecurrencies.Whenacurrencyisexchangedforacurrencythesaleiscalled
    'sarf',andwhenacurrencyisexchangedforapricedcommodity,thetransactionissaleproper('bay').
    Similaristhesaleofapricedcommodityforanotherpricedcommodity(barter)"
    ibnRushd:BidayatalMujtahid(p.154,Garnet,1996)
    Therulesofbayalsarfderivelargelyfromthewellknownhadith:
    "Goldistobepaidforbygold,silverbysilver,wheatbywheat,barleybybarley,datesbydates,andsalt
    bysaltlikeforlike,equalforequal,paymentbeingmadeonthespot.Ifthespeciesdiffer,sellasyou
    wishprovidedthatpaymentismadeonthespot".
    Hadith:Muslim
    Gold and silver were the currency of use at the time of the Prophet, peace be upon him, and he
    approvedtheirusebytheactofusingthemhimself.Itcannotthereforebesaidthatitiswrongtouse
    goldandsilverasmoney.
    Many jurists have used analogy to argue that the hadith on gold and silver represent all forms of
    monetarymedium,andthatthereforeallformsofcurrencyshouldobeytherulesestablishedforgold
    andsilverexchanges.Thispositionisnothoweverunanimous,andtherearethosewhoarguethatthe
    rulesdonotapplytootheritems,copperforexamplesincecopperisnotoneofthesixitemsmentioned
    inthehadith(thesocalledribawiitems).Undersuchaninterpretation,anexchangeof10coppercoins
    todayfor12coppercoinstomorrowwouldnotbearibatransaction.Similarly,therearesomejurists
    who argue that because money is to be regarded as gold and silver only, then paper money is not a
    properformofmoneyandaloanof10paperdollarsmadetodayinreturnfor12paperdollarstobe
    receivedtomorrowisnotaformofriba.Thesehoweverareminorityviewsanditshouldbenotedthat
    most jurists do agree that where an item is being used as money by custom (urf) among a local
    population,itshouldobeytherulesthatarestatedinthehadithregardinggoldandsilver.
    Based upon the above hadith, it is established that if gold is to be exchanged for gold, the exchange
    must be made on the spot, with the amounts being of equal quality and quantity. Because both
    countervaluesmustbesettledimmediately,aforwardtransaction(inwhichoneofthecountervaluesis
    deliveredatafuturedate)isnotallowed.Giventhatexchangesmustbeequalforequal,atendollar
    not cannot be exchanged for nine one dollar notes. Proceeding from here, commissions on currency
    exchange will be questioned by some scholars because of the contravention of the 'equal for equal'
    ruling.
    Otherscholarsarguethatifthemonetarysystemwerecorrectlydesigned,thenmoneywouldcomprise
    gold and silver throughout the world (i.e. American money would be made of gold, Malaysian money
    wouldbemadeofgold,etc.)andhencetherewouldbenoneedforforeignexchangeinthefirstplace.
    Here,theargumentsovertheShari`ahpositiononmodernforeignexchangeandcurrencytradingare
    seentoarisebecausethesemarketsareofthemselvesbuiltuponunIslamicfoundations.

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