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Fiat money in sales

May 5, 2012


In the growing impetus of finding a “reformist” solution to the present-day abyss between classical jurisprudence and dominant transactional modes, renowned institutions which acted as torch-bearers of traditional Mālikī knowledge over the centuries, such as al-Qarawiyyīn, have thrown their weight behind such monetary platitudes as “fiat currency is the same as gold and silver for all intents and purposes”.
While the intention, i.e. asseverating Islam’s flexibility, might be vaguely laudable, this article suggests that not everything is what purports to be in this thorny field, and that scarcely anything which glitters is gold



As Allah taught Ādam all the names, realities might be evidenced or distorted by one’s choice of nomenclature.
The Dīn of fitrah is endowed with an entrenched lexical body which guides the steps of every researcher to its truths.

Fiqh is not the equivalent of the term “jurisprudence” utilized by secular legal systems.
Fiqh means deep understanding, and that is what is required, beyond legalism, to unravel the characteristics of novel phenomena which increasingly confront an increasingly bewildered Muhammadan ummah.
Imām Mālik defined istihsān as comprising nine-tenths of fiqh, while technical tools represented the remaining tenth. Right from the outset, therefore, the certified technical prowess of a scholar or group of scholars is not to be confused with deep understanding of the best itineraries to pursue in a particular age.
It is an indisputable fact that Imām Mālik lived in a time which predated the codification of the sources of Islamic Law as defined by the experts in the science of its root principles or usūl.
It clearly ensues from it, therefore, that Imām Mālik could never have had in mind the “technical” categorization of istihsān in the science of usūl al-fiqh, and no Islamic jurist has indeed hypothesized that such specific subsidiary source of the Law amounts to nine-tenths thereof.
What the noble Imām had in mind was thus the more generic import of the expression, that is, the ability to deem something good or preferable in the light of all the pointers to its legal status as gleaned by masters blessed with “deep understanding” of the Law and its sphere of application at any given time and place.


Every devotee of legal investigation, regardless of his level of proficiency, is aware of the fact that the contract of bay` in our fiqh (variously rendered as “contract of purchase and sale” or “contract of sale”) is the head of all commutative contracts or ‘uqūd mu`āwadah (from ‘iwad = consideration or quid pro quo for something else).
A commutative contract is one whereby a party transfers to the other party a benefit which is exactly identical to the one he receives in return from the latter.
Clearly, in a donation what x gives as a gift to y does not amount to a benefit which is identical in its extent to what y transfers to him in return for it: The donee transfers no legally recognized benefit, since gratitude or a show of it is not capable of being assigned any transactional value.
By contrast, if I sell a tie to Mr. Bean and Mr. Bean hands me the purchase price we have agreed to value the tie at, Mr. Bean and I have transferred mutually identical benefits to one another. It does not matter that an employee at Buckingham Palace would be prepared to offer a price which is higher or lower than what Mr. Bean paid, and that I would consent to selling the tie for such revised purchase price to such separate individual.
It is easy to realize from the foregoing that, while an ordinary sale truly is a commutative contract, a usurious transaction is not, due to the benefit received by the usurer being an exogenous excess over the one transferred by the weaker party.

While the identity of bay` as a commutative contract is clear to all and sundry, in this epoch of rampant monetization of commerce people are losing touch of the essential fact that, in the bilateral contract of bay`, the object (the tie in our example) is sold for the price just as much as the price is sold for the object.
Bay` is indeed one of the words described in Arabic as encompassing opposite meanings (asmā’ al-addād). It can thus indicate either the act of selling or the act of purchasing, depending on the context.
As correctly underlined (matter-of-factly) by al-Bunānī, a well-known late Mālikī scholar, in his expatiation on Khalīl’s abridgment of classical Mālikī fiqh, there is a reciprocal sale of (and thus transfer of ownership into) both countervalues in a bay`. The tie is a patrimonial asset or māl, and so is the money Mr. Bean pays me for it. I sell one countervalue to Mr. Bean, and he sells the other one to me.
Of course, “money” has an intrinsic predisposition for representing “price-ness” (thamaniyyah), which is why we refer to it as a price, and why we differentiate it by calling it ‘ayn as opposed to ‘arad or ordinary merchandise.

I sell to

and sells me for it.

But can sell me as purchase price for my ?


The answer to the aforesaid question depends on the rules governing the object of a bay`, the sale article or mabī` in Islam.
We have already stressed that, while for the sake of practical convenience we refer to sale article (mabī`) and price (thaman), the latter being where money intrinsically feels more at home, each countervalue is a proprietary asset or māl which is sold to the other party.
It is trite law in Islam that the mabī` must be a patrimonial asset to which a value can legitimately be assigned (= māl mutaqawwam, from the word qīmah meaning value), from the perspective of the meaning attached to such a phrase in our fiqh.
No value can be legitimately assigned to some plot of land on the Moon, an eagle flying above the clouds or a plate of pork chops.
A patrimonial asset which can be validly sold in a bay` must be one to which a value is assigned by people’s custom (‘urfan) and by the Law (shar`an).
Different schools and different scholars have defined the concept differently, within a unifying context of broad agreement on the essential features of what is meant by māl mutaqawwam:
“What inborn nature inclines to, which is susceptible of being expended or withheld”;
“What human ambitions naturally stretch towards, which is suited by custom and by law to extend a benefit” (Judge Abū Bakr b. al-‘Arabī from Sevilla);
“What native human temperament leans towards, which can be stored for a subsequent time of need” (Al-Bahr ar-Rā’iq – Sharh Kanz ad-Daqā’iq, a famous Hanafī text penned by Ibn Nujaym al-Misrī).
The only differentiator is that the Hanafiyyah, unlike the more correct and accurate definitional approach adopted by the bulk of Islamic jurists, drop reference to the key aspect that the securing by the sale article of a benefit which is legitimate in the Sharī`ah  is a prerequisite for its eligibility to be a valid patrimonial asset exchanged for its relevant countervalue.
No doubt the truth lies with the bulk of the jurists, as primary consideration must be accorded to the Law’s view on a particular asset, since it is untrue that everything which connatural human dispositions lean towards is deemed by the Law to be a patrimonial asset that might be soundly exchanged for a quid pro quo in the Law.
The carcass of an animal might be innately desirable to human beings (and it is indeed consumed by people worldwide), yet it is assigned no value by the Law, and its sale as an edible product is thus vetoed in Islam: It is excluded in toto from the compass of patrimonial assets. The same is true of an intoxicating beverage purported to be sold as such.

Valuation of an object is either the product of custom or the product of the intervention of the Law. In the latter respect, the benefit to be extracted from it must have been sanctioned as permissible by the Law.


The standard present-day position, expediently espoused by Qarawiyyīn and other renowned institutions of Mālikī jurisprudence, is that fiat money (paper notes, mere entries in accounting records or electronic signals), never mind how much incorporeal and virtual, should be equated analogically to gold and silver and subsumed under them on the dual basis that:
a)    Such money is de facto a prevalent medium of exchange;
b)    It is used as a measure of value of things, regardless of the drastic fluctuations thereof caused by inter alia its use.

First of all, it should be observed that the “custom” of resorting to fiat currency in transactions originated fully with kuffār. They introduced it, and they imposed its use on Muslim peoples.
It is not therefore a “custom” of the Muslims.
On that basis alone, the whole first argument erected as a justification of the transactional legitimacy of fiat currency is entirely debunked.
As the great Makkan adherent to the Mālikī methodology, the magisterial usūlī Hasan b. Muhammad al-Mashshāt, explicitly asserted in his celebrious work Al-Jawāhir ath-Thamīnah fī Bayān Adillah ‘Ālim al-Madīnah (edited by Dr. ‘Abdu’l-Wahhāb Ibrāhīm Abū Sulaymān, Dār al-Gharb al-Islāmī, Beirut, 1990, 1st edition, p. 271), “know that customs are validly acted upon in the Law subject to the proviso that they should not run counter to any legal proof, since in that event it would be obligatory to discard them and follow the legal proof instead. What is meant by acting upon them is to qualify or particularize thereby some derivative legal judgments, as mentioned previously, not in the sense that they are acted upon in all derivative legal rulings. The import of “acting upon them”, therefore, is that they are given effect to only in those derivative judgments in respect of which the Law has remitted the matter to custom.
In the book titled Nayl as-Sūl [‘alā Murtaqā al-Wusūl, a work on usūl al-fiqh based on the Mālikī approach by the great polymath from the desert Muhammad Yahyā al-Wallātī – Edited by his descendant Abū Muhammad ‘Abdullāh Muhammad Yahyā al-Wallātī, it has been published in 1992]”, we read the following: “Illustrations of such qualifying or particularizing customs are represented by the instances of acquainting oneself with additional attributes which occasion the determination of legal judgments, such as defining what is meant by unqualified or qualified water, the recognized length or brevity of the interval that elapses between the omission or addition of things in the prayer and the prostration of forgetfulness to rectify it, the quantification of the monetary amounts and clothing allowances which spouses or relatives are entitled to claim, the identification of furniture which is exclusively earmarked for the benefit of either males or females, and the wording used by people in their oaths, contracts or rescissions of agreements. Prevailing customs are elevated to the status of legal discriminators in such matters, which they accordingly particularize and qualify. Whenever the governing custom in their respect undergoes a change, the judgment thus governed by them is correspondingly altered””.


Let us pause one moment.
There is a claim for maintenance in respect of customary allowances for clothing and medication.
When it comes to the derivative ruling on the average quantum to allocate to such a claimant, the general or unqualified judgment is particularized or qualified by the custom in that connection which prevails in a social scenario at a specific time and place.
The same is true of what exactly amounts to a binding oath in Swedish as per the linguistic usage which is predominant in Stockholm among middle-class Muslims in the year 2015 AD.
This type of matters is regulated by preponderant usages, inasmuch as such usages naturally apply to them.
The same should be said if a community, unable to mine or get hold of gold, for instance, were to designate a particular quality of grains as acceptable money inter se.

This is a far cry from the phenomenon of fiat currency, where no “widely accepted way of behaving” which emerged from the members of the Muslim polity could be attributed to it.
There is no custom.
No societal nexus of humans, indeed, would opt for a customary way of behaving whereby entries in banking registers or electronic impulses generating massive inflation and depleting the purchasing powers of individuals and families were used as money in exchange for sale articles.

Secondly, assuming there was something describable as a “custom”, it cannot contradict a legal proof, for the latter would then have to be empowered to the exclusion of the former.
After all, in our context the patrimonial asset capable of being assigned a legitimate value in a sale must accord, in the benefit it purports to extend, with both custom and Law, apart from being something dispositions of men innately incline to (and such inbred temperaments do not favourably lean towards invisible money which is produced out of nothing by a closed number of authorized issuers thereof).   

Here are some arch-reasons why fiat money is opposed to the governing legal proof:
a)    Fiat money is not voluntarily consented to. It is accepted because it is legislatively imposed. No one agrees to sell his shirt or orchard for invisible money. Contracts are shaped by the pillar of offer and acceptance which is grounded on genuine and genuinely free mutual consent;
b)    Fiat money does not exist. It is trite law that, in our fiqh, one of the essential requirements of the sale article or the price is that it must be capable of being delivered. The constructive capacity to deliver money which, in 90% of the cases, does not exist even in paper form, is a pure fiction propagandized by the banking system and the vassal fiscal states it controls. The deliverable nature of fiat currency is thus identical to the one associated with the textbook examples of selling or purchasing a bird in the air or a fish floating at the bottom of oceans: Zero. We only ascribe constructive existence to it because at any given time not all “borrowers” of fiat currency claim delivery of it to their persons at the same time;
c)    Fiat money is indeterminate. It is trite law that, in our fiqh, one of the essential requirements of the sale object or the price is that it must be determinate as opposed to indeterminate or unknown. The electronic impulse calculated in terms of, say, the currency called Euro, fully depends for its existence on political deliberations. If Greece is taken out of the Euro zone, the sum in Euros I have agreed to pay in exchange for a handmade Persian carpet is totally unknown. It might be zero or anything close to zero. The said indeterminateness is further evidenced by the effect of what we mentioned earlier: Given that 90% of fiat money is not backed up even by valueless paper (itself disqualified from membership of the category of legitimate countervalues in sales), the capacity to produce paper and thus deliver it in exchange for the object of a particular sale is prey to the vagaries of political propaganda and its successful deployment or otherwise: Will the magic of pure symbols continue to hold sway over the population? Will there be a run on the banks because the confidence in that magic has been dented or has evaporated? Will there be a “liquidity” problem affecting banks disabling them from “guaranteeing” 90% of purely fictional money? If so, will there be money to bail out such system, and to what extent? Will there be political will, on the part of the nation states, to bail out trans-national finance as usual, or will they mount a challenge to it and subtract legal force from fiat currency leased by it to participants in sales? Will the lease arrangements favouring such financial group be scaled down and re-adjusted? There is therefore exorbitant gharar or material want of knowledge as to the existence, extent and essential characteristics of one of the two countervalues which are simultaneously purchased and sold in a bay`;
d)    Fiat money cannot be legitimately owned. It is trite law that, in our fiqh, one of the essential requirements of the sale article or the price is that it must be capable of legitimate ownership. One cannot own a fictional existent. Ownership must be of real things. Fiat currency is the product of people renting out “money” from the banking system and paying charges (= fees) in return for such a system’s lease of money. Money cannot be confined to a special privileged class. Money is a fungible like food, and fungibles cannot be rented. They can be sold, owned, consumed, alienated by donation and its like, bequeathed in inheritance, but not leased or rented. By definition, the lease of something is the temporary transfer of the usufruct of a thing in exchange for a fee. It presupposes no transfer of ownership and no transfer of a permanent benefit. If fiat money is rented by members of the public, it means that ownership thereof is retained by other than such lessees. The ownership of fiat currency belongs to the banking system issuing it. That is amply borne out by the charges it levies on people’s use of such asset it owns. Accordingly, Mr. Bean cannot transfer ownership of such rented property to my person. If I extend to him the benefit of owning the tie, he must grant me an identical benefit. As he cannot make me the owner of what he himself does not own, the contract is no longer a sale. It is not a commutative transaction. It is vitiated at source. It contravenes the Sharī`ah. 
e)    Fiat money is not something one can benefit from. It is trite law that, in our fiqh, one of the essential requirements of the sale object or the price is that it must be such that a benefit can be derived from it by the relevant contracting party. Cheap paper benefits no party to a purported sale. Impulses existing in a void benefit no person. No legitimate benefit can be yielded by a usurious asset. I rent fictional money from the banking system. I consume it, as I would do with a banana or any fungible, yet I cannot own it and I keep on paying its owner / lessor additionally charges which escalate exponentially. Therefore, the whole transaction by which I rent money is a gigantic usury generating colossal excess benefits for one dominant party. Mr. Bean cannot then validly transfer ownership of such usurious asset to me in a purported sale of my tie for an amount of that illegitimate proprietary asset.

Fiat money is not a recognized māl mutaqawwam in our fiqh.
Each and every bay` by which it is purported to be exchanged for a true māl mutaqawwam is invalidated, nay, voided by the Sharī`ah.


It is incumbent on the Muslims to show allegiance to Allah and His Messenger, Sallallāhu ‘alayhi wa-Sallam, beyond any sectarian affiliation.
It is an additional imperative for them to search for profound understanding (fiqh) of their Dīn in the light of the circumstances which prevail in their lives.
One of the fruits harvested as a result of such penetrating examination of the Law is that fiat money is not recognized in the Sharī`ah as being a patrimonial asset that can be validly sold in return for an article in the contract of bay`, and Allah knows best.



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