I had overseen a settlement at a semi-governmental commission in South Africa, and my client and I, after releasing, via a home-made fish & chips plate (alas! the crumbs of ultra-refined flour refused as usual to be tolerated by my digestive apparatus) the built-up tension we had managed to positively metabolize, purely by His favour, in the course of the drawn-out negotiations, proceeded towards the domestic departures section of the local city’s airport.
For the first time since the case had begun in late 2010, my client escorted me to the checking counter.
With his tactile agility, he had in fact used his i-pad to book my earlier-than-programmed return ticket to Johannesburg, in so doing resorting to his credit card facility with Nedbank.
Though he had paid for my ticket as part of my overall legal fees, pursuant to a standard ijārah contract for my letting out advocate’s services to him, and both the ticket and the flight were thus “mine”, the employee of Mango Airlines assigned to the relevant counter dutifully asked for the credit card to be produced by my client, for otherwise no check-in could be allowed.
Rules are rules, or as the ancient Latins used to say, “dura lex sed lex”.
Once and only once the magical card, manufactured with cheap printing material, was handed to the Mango’s staff member at the counter, the transaction was concluded and I was enabled to board the plane home.
Who owned the money symbolically trapped inside the mystic card?
I certainly did not, or else I would have not needed, as its owner, the enabling presence of my client beside my person.
He certainly did not either, or else he would have simply transferred to me, in a direct manner, property over that part of my legal fees.
Some other legal subject must have had ownership of it.
IS BANK MONEY SUBJECT TO ZAKĀT?
a) Synopsis of the ruling on bank money as a countervalue in sales
In our article titled “Fiat money: Is it a valid purchase price?” (www.theislamiccommunity.com), we reached the following conclusions which are equally valid, mutatis mutandis, in the present context of examining whether bank money (= most of what is deemed money nowadays) is subject to zakāt or not:
- Bank money is fictional. We only ascribe constructive existence to it because at any given time not all “borrowers” of bank currency claim delivery of a bank’s reserves of fiat money to their persons at the same time;
- Bank money is not owned by individual members of society. Apart from the fact that one cannot own a fictional existent, since ownership must be of real things, bank currency is the product of people renting “money” from the banking system and paying charges (= fees) in return for such a system’s lease of virtual currency. 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 over a corpus and no transfer of a permanent benefit. If bank money is rented by members of the public, it means that ownership thereof is retained by other than such lessees. The ownership of bank currency belongs to the banking system issuing it. That is amply borne out, among several things, by the charges it levies on people’s use of such asset it owns, and all the severe restrictions it imposes on the lessee of such (fictitious) patrimonial asset.
[We had further specified therein the under-stated point, which we stand by fully:
“Fiat money is not something one can benefit from. 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 additional 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” (…) “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% or so of bank money is not backed up even by valueless paper …, 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 problem with liquidity, hence a solvability problem affecting banks and disabling them from “guaranteeing” 90% to 98% of purely notional 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 bank currency leased by it? Will the lease arrangements favouring such financial group be scaled down and re-adjusted? Will a central bank take over in whole continents or across the globe, and impose a single virtual currency?” (reproduced here with some minor editing)].
We have provided here above the straightforward example of my client having to vouchsafe for his identity as the individualized lessee of money he had rented from Nedbank (despite the fact that money is a fungible just as much as a pear, hence not susceptible of being leased and rented) in exchange for rental and collateral fee Nedbank receives from the credit card holder.
Quite clearly, if my client was the owner of such bank money, as opposed to being its mere lessee, he did not have to ask anybody’s authorization for disposing of his property, let alone was he subject to an external entity’s binding restrictions on the use and enjoyment of such asset.
Let us assume that, as I assisted my client in the case which was running in Cape Town, I needed to be mobile without any dependence on someone else’s motor vehicle.
I would have approached a rent-a-car company at the airport or, as in my previous visit to that city, a private Muslim owner of a small fleet of low-petrol consumption leased cars.
Naturally, as the owner of any such vehicle, the company (or that physical person) was allowed to stipulate in the contract of lease a set of conditions having the effect of restricting my freedom to use and enjoy the car I rented: As I would have only acquired the usufruct (manfa`ah in Arabic) of the rented vehicle, as opposed to its corpus (raqabah in the terminology of our jurists), the owner thereof was entitled to stipulate that I should be prevented from sub-letting it to a different driver, or at least one without the same level of driving capability as my person, that I had to return it by or before a demarcated time, that I was liable in law for any damages caused to it while I was in possession of such asset pursuant to its lease, that I could not exceed a certain mileage or drive it out of the city during my use and enjoyment thereof, and so forth.
Exactly the same is done by the system owning bank money: I cannot alienate what I have merely rented from it by donation, sale, cession, sadaqah or inheritance to another person, I cannot detain it for the sake of a waqf, I cannot abuse and destroy it as I might do, being the only victim of my action, with assets I own, I have to pay fees for renting it, I am subject to interest charges if I occasion, by act or omission, the fulfilment of the conditions leading to the lessor claiming an excess over the normal rental, I have to renew the lease on expiry of the rental period subject to the lessor’s unrestricted will, which it will exercise one way or the other based on its evaluation of my performance as a lessee of a non-fungible asset, I am compelled by the “Islamic” financial intermediaries of the banking system to give out an amount in charity (?!) if I am a later payer of rental on money, etc.
These are matters which are so obvious and transparent to every child or adult dealing with money that no further elucidation is required at this point.
We will shortly return to the subject of banking and money in order to punctuate some of these self-evident truths.
Let us first address, however, the unanimous arch-rules of zakāt.
Although we will focus on the madhhab of Imām Mālik, because it is the one we are especially familiar with, it must be emphasized from the word go that the basic guiding principles are exactly the same in all the four madhāhib of Ahl as-Sunnah.
b) An arch-rule of zakāt
What are the foundational ingredients shared by all assets which the Law has caused to be subject to the compulsory wealth-tax of zakāt?
We know that zakāt means “growth in purity” and only applies to wealth which is intrinsically susceptible of growth and / or set aside for such purpose:
- The contemporary Tunisian scholar al-Habīb b. Tāhir, when synthesizing centuries of Mālikī jurisprudence, pointed out that there are six conditional requirements for zakāt becoming obligatory on an asset which the Law has extended the levying of the tax to. He listed them after specifying that “zakāt is one of the underlying pillars of Islam, and is an individual obligation (fard ‘ayn) on every person in respect of whom the under-stated conditions of obligatoriness apply (to the exclusion, therefore, of every person who does not fulfil those conditional pre-requisites): 1. Being a free person; 2. Full ownership of the minimum taxable amount (nisāb), which obviously presupposes, with even greater force, ownership of the taxable asset. “Zakāt is accordingly not obligatory on the usurper of an asset or an unjust authority who has come to possess some of people’s property, nor is it obligatory on a person with whom it has been deposited”. “These first two conditions”, he goes on to state, “are stipulated in respect to all assets which have been made taxable in terms of the zakāt”; From 3, i.e. the elapsing of one full lunar year (over ownership of such minimum taxable amount) onwards, the requirements relate to some taxable assets as opposed to others (Al-Fiqh al-Mālikī wa-Adillatuh, Vol. II, p. 6).
Not a single classical jurist bothered to detail the distinction between what is owned and what is not owned at all. Their only focus lay on differentiating between “full ownership” and “incomplete / inadequate ownership”, that is, a situation where the apparent owner did not actually qualify as one.
Had you asked them whether zakāt could be levied on a person who was renting an asset from its owner, be it a plot of land or a horse, a shop or a ship, they would have smiled and cursorily commented with a dismissive tone or gesture, ‘Of course not. He is a mere lessee, and zakāt is only charged on rich people, because they own assets which can generate surpluses for them and enrich them further. You cannot pay tax for an asset generating surplus through growth to an owner other than you.’
Had you explained what bank money was to them, they would have promptly remarked, ‘The nature of a leased asset is the same, hence the ruling, too, is identical.’
- As for Muhammad Sukhāl al-Majjājī, he has defined zakāt as follows: “It is a legal obligation on every free Muslim in respect of the wealth he owns pursuant to a right of full ownership, provided that it has reached the minimum taxable threshold as defined in the Law”, etc (Al-Muhadhdhab min al-Fiqh al-Mālikī wa-Adillatuh, Vol. I, p. 221);
- In the view of the Libyan Dr. Sādiq al-Gharyānī, there are three general conditions for the obligatoriness of zakāt in the Law, in the sense that they apply with unaltered force through the entire spectrum of taxable assets, including gold and silver, and they are peremptory in nature, i.e. no zakāt is obligatory on any asset unless such conditions are all simultaneously met: 1. Being a free person; 2. Full ownership; 3. The fact the asset reaches the nisāb. Concerning the second condition, the one which is of relevance to us here, he underlined what follows: “Full ownership, such that the property in question is under the control of the owner who is accordingly empowered to dispose of it and make it grow”. It is undoubted that bank money is the property of the banking system and those running it make it grow by leasing such fictitious “fungible” and charging usurious interest on it. The lessee cannot freely dispose of such rented property, and must imperatively bow to the will of its lessor and the restrictive conditions it lays down. “It has been reported in the soundly authentic hadīth-literature that the Prophet, Sallallāhu ‘alayhi wa-Sallam, said to Mu`ādh b. Jabal, at the time when he dispatched the latter to the Yemen: “… You must therefore teach them that Allāh enjoined upon their persons a tax relating to their proprietary assets, which tax is taken from the well-to-do among them and restored to the poor members of their community” [Sahīh al-Bukhārī]. The hadīth indicates that the compulsory tax referred to in its text is one attaching to the asset of an owner exclusively, i.e. to the exclusion of any other person. Zakāt is obligatorily charged on a woman’s dowry once she has taken physical receipt of it, so long as one lunar year has elapsed from date of her receipt thereof, inasmuch as she is now an owner of such dowry. Zakāt is likewise levied as a rule on a trustor who attends to the task of overseeing an endowment (waqf). From the liquid assets of the endowment, he distributes the zakāt which is binding on it among eligible recipients of the tax, due to the fact that ownership thereof, at least in a constructive sense, is vested in him [Cf. Ahmad ad-Dardīr’s Ash-Sharh al-Kabīr and ad-Dusūqī’s Hāshiyah on it]”. It is a patent fact that the lessee of bank money has no “constructive ownership” of it. He rents it from the banking system and pays to it rental and all collateral charges which are incidental to the contract of lease. “Zakāt is, conversely, not imposed on a usurped asset so long as it is in the possession of its usurper [since the owner of such asset has no power over it; let alone does one who is a lessee for all intents and purposes], nor is it levied upon an asset which is missing and the location of which is unknown [what should be said then of a fictional existent?], because of the inability to make it grow and dispose of it. Upon the retrieval of such missing asset, zakāt is only paid on it once, i.e. in the year of its retrieval, even though it might have been missing for years in a row. It is the same as regards an asset deposited with a trustworthy subject who safeguards it on someone else’s behalf: Zakāt is not charged on it, since the custodian of the asset is other than its owner. The zakāt is levied instead, on an annual basis, upon the owner of that asset [Another juristic view in the madhhab is that an asset deposited with another person is subject to the tax on a one-off basis only, when, in other words, the asset has been handed back to its owner. The motivational springhead for such alternative ruling is that, whilst it is deposited elsewhere, the asset is incapacitated from generating growth and thus a possible surplus. Cf. Ahmad ad-Dardīr’s Ash-Sharh al-Kabīr and ad-Dusūqī’s Hāshiyah on it]”.
Why has Dr. al-Gharyānī and other modern or present-day luminaries from the Mālikiyyah espoused the position that zakāt is levied (as an obligation) on today’s prevalent form of money?
He put forward three widely shared reasons:
- Because the new forms of “currency” have taken the place of gold and silver and metaphorically stepped into the shoes of bi-metallic money in many respects, such as purchase and sale, their utilization as a measure of value for other things (= goods and services), and the discharge of debts. This resemblance to gold and silver is “sufficient” (so he alleges) to subsume modern currencies under the same category as bi-metallic money from the viewpoint of the rules of zakāt. This argument, much trumpeted by the advocates of the said equivalence between bank money and the pair of gold and silver, does not take the issue anywhere. Since bank money is leased by the system in control of it to users who are lessees for all intents and purposes, it is totally disqualified from compliance with the primary conditions for zakāt to be chargeable. It is not owned by the taxable individual Muslims. The matter, therefore, goes far beyond what Dr. al-Gharyānī mentioned in the relevant footnote, to the effect that there is an essential difference between gold and silver, with their intrinsic planetary value, and “paper money”, the value of which is only figurative and nominal and can become voided any time that the authority issuing it has repealed its status as legal tender, whereupon it is converted back into mere worthless paper unable to satiate anybody’s hunger, apart from the inability to use it across the national borders of plentiful countries. In addition to our aforesaid critique, it should be noted that modern scholars refuse to pay regard to the undisputed fact that most of bank money these days is no longer “issued” in the form of paper, more of which later;
- The wisdom necessitating zakāt to be obligatorily levied on gold and silver, i.e. apportioning zakāt among its eligible recipients, is equally applicable to modern forms of money. If they are disbursed to a poor person they will enrich him and satisfy some of his needs, while a debtor can discharge debts he owes thereby, armed fighters are equipped with ammunition and support for waging jihād, and so on. This common argument, rooted in a purposive approach, likewise fails to take the issue anywhere. Zakāt is an ‘ibādah. If an asset does not fulfil the most essential arch-requirements of taxability in the Law, it is peremptorily excluded from the scope of its application, and no jurist ever drew an analogy between one taxable asset and another if the latter was not owned at all by a person. Private jets might exceed the value of bi-metallic monetary assets by millions, yet they are not subject to taxation in our Dīn, even if they are fully owned by their proprietors. Besides, only the banking system issuing and controlling such fictional money is rich. Everyone else, pseudo-sovereign governments included, even the governments of some of the richest and most industrialized countries in the world, are impoverished lessees of such an asset, and are thus poor and debtors to the system. Using fictional money in the hands of kāfir-dominated banking is radically antithetical to the idea of successful armed warfare which might yield success for the Muslims, something Dr. al-Gharyānī and numberless living scholars should have easily worked out for themselves. The matter is crystal-clear, and there is no point in flogging the dialectical dead horse of the false comparison between paper money (itself a tiny fraction of bank money) and fulūs or small coinage made of non-precious metal. Fulūs were real objects, while bank money is credit. Bank money can represent millions, billions, trillions, hundreds and thousands of trillions: It has nothing to do with the small-value nickel coins of yesteryear and their like;
- The ruling which excludes “paper money” from the categories of taxable assets in the Law would result, in this age, in nullifying the collection of zakāt in respect of one of the main proprietary pillars of tax collection in Islam, since few Muslims own gold and silver (Mudawwanah al-Fiqh al-Mālikī wa-Adillatuh, Vol. 2, pp. 17-18 and 24-25). Once more, this argument, too, is totally unable to take the issue anywhere. What is not owned is not taxable. Not only zakāt, but governance and the whole network of just transactions, which are as much obligatory in Islam as zakāt chargeable on some assets, have long collapsed as per the Prophetic prefiguration of human devolution uttered more than 1400 years ago. Therefore, zakāt has to be restored together with political rule and other vanished essentials of Allah’s Dīn. Bending clear rules in order to adapt an ‘ibādah to a criminal system of leasing virtual money only succeeds in entrenching the existence, legitimacy and all-pervasive power of that system in the hearts, minds and lives of Allah’s believing slaves. By contrast, recognizing that the third pillar of Islam cannot coexist with false money will urge committed Muslims to activate alternatives to it on the way to restoring such pillar. No maslahah exists in supporting fictional money (quite the opposite), and in any event no maslahah which is loosened from any textual authority can be recognized in a scenario when it directly infringes one of the non-negotiable arch-conditions of taxation established beyond doubt by the Book and the Sunnah.
- The foremost Mālikī savant from the early ‘Irāqī school of the madhhab, Judge ‘Abdu’l-Wahhāb al-Baghdādī, wrote in his celebrated work At-Talqīn: “Zakāt is one of the obligations and pillars of the Dīn. It is one of the obligations attaching to proprietary assets. It is linked to the presence of three fundamental elements: Owner, ownership and owned asset (…) The feature which qualifies ownership is that it must be complete as opposed to incomplete. What is availed by the said description is that one who is not the owner of an asset cannot wrest the owner away from the very root of his asset and his ownership thereof” (p. 148, Dār al-Fikr, 1995). The lessee of bank money is no owner, and he has to strictly comply with the stringent conditions of use laid down by the banking system owning it;
- In ‘Iqd al-Jawāhir ath-Thamīnāh, the brilliant Egyptian jurist Ibn Shās highlighted, right at the start of his treatment of the subject, that zakāt was obligatory on wealth subject to five arch-requirements, one of which being a perfected ownership that was not of a feeble character. Later on, he defined the causes of “feebleness” in relation to an asset of wealth as being i) the preclusion from disposing of it, including its temporary usurpation and the status of the asset as being a missing one. Of course, what he had in mind was an owned asset readied for disposal which was however prevented from being disposed of so as to inter alia generate growth in it. He would never have conceived the possibility of a rented asset in the notional hands of its user/lessee being subjected to Islamic taxation; b) the circumstance that other than its owner has dominant control over the asset, as in the case of a debtor whose debts cancel out any taxable asset reaching up to the nisāb [The rental to be paid on someone else’s asset is listed as a liability in any balance sheet]; c) the fact that ownership of an asset has not become entrenched (though there is an inchoate ownership, unlike the scenario of rented money). The illustration he supplies for such third cause of “feebleness” is that of war-booty prior to its distribution among the eligible recipients of shares thereof according to the stronger view in the school (Vol. 1, pp. 198-212, Dār al-Gharb al-Islāmī, Beirut, 1st edition, 2003);
- In his famous commentary on Ibn Abī Zayd al-Qayrawānī’s Ar-Risālah, which is titled Al-Fawākih ad-Dawānī, an-Nafrāwī enumerated six basic conditions for the obligatoriness of zakāt, one of them being “full ownership” of any taxable asset.
We could go on with a plethora of additional examples reiterating the same crystalline truth.
Mustafā az-Zarqā’ (hence we are quoting from the words of a leading scholar among Muslim “reformists” of the last 150 years) categorized ownership as follows in Al-Madkhal al-Fiqhī al-‘Āmm (Vol. 1, p. 241):
“Legally, in terms of the technical terminology of the Islamic jurists, ownership bears the following meaning:
“An exclusive prerogative having a restrictive effect in the Law, which is escorted by the right of disposal save in the presence of a recognized impediment”.
What is intended by the fact that it is a curbing reality is that it restrains other than the owner from enjoyment and disposal (of the owned asset) without the owner’s consent [With regard to a leased asset, the owner consents to someone else’s temporary usufruct thereof].
In terms of the impediment which is recognized in law as precluding the owner himself from disposal (of the asset he owns), it encompasses two scenarios:
- Partial lack of legal capacity, as in the case of a minor whose guardian exercises the right of disposal on his behalf;
- The existence of another party’s right (to the owned asset), which is the case where a proprietary asset is jointly owned or is pledged to someone else. In both such instances, in fact, the exercise by the co-owners and by the pledgor of the right of disposal is qualified, in spite of their ownership of the asset.
The presence of such a recognized legal impediment does not negate ownership, as it is no more than an accidental contingency”.
Let us take the example of gold coins.
I own them, and I have a right of disposal, an exclusive one restraining other people from sharing such individualized prerogative with me.
I could also have gold bars, gold dust or gold scrap, too: It is all valuable.
I hand the gold materials to a smelter who pulverizes them into particles and places them in a furnace. Just as al-Madīnah al-Munawwarah was Prophetically defined in terms of a metaphorical furnace, the “concrete” one burns off impurities found in gold and eventually refines the original substance the smelter has received from my hands, now converted into electrical components, jewellery or ingots used as a store of value.
If, instead, I alter the nature of fiat currency I am supposedly the “owner” of in terms of hegemonic propaganda, I am either left with an utterly worthless material, or I am accused of producing counterfeit money which might pave the way to a criminal charge being laid against me: In which capacity? Obviously as lessee of someone else’s property I have to restore, after my temporary use, in the same condition in which the owner leased it to me, natural wear and tear (100% virtual in respect of electronic impulses) excluded.
c) Bank money: A revealing silhouette
Fractional-reserve banking: This dominant form of banking (which is certainly not alien to so-called “Islamic” banks) entails the fact that banks maintain reserves of cash and coin or deposits at the central bank which are only a fraction of the customers’ deposits.
Right from the start, therefore, “paper” money, which modern scholars have partially equated to gold and silver, for inter alia zakāt-related purposes, is only part and parcel of the fraction (called reserve ratio) of the quantity of deposits kept by banks as reserves, since most of the funds deposited into them are lent out and thus represent straight credit.
Those reserves are forever diminishing.
Although statutory and other requirements are more stringent on paper, in a recent article on the state of Swedish banking it was revealed that banks in that country were 98% cashless (http://www.sydsvenskan.se/ekonomi/kontanter-pa-vag-bort). They refuse to accept cash or coin because of its anachronistic nature.
The old “analogy” between “paper currencies” and gold and silver is proving more and more baseless.
Since most bank deposits are treated as money in their own right, fractional reserve banking increases the money supply, and banks are said to create money. Money, therefore, is predominantly other than “cheap paper” representing some more valuable asset. It is an entry in the bank’s records.
It would indeed be far-fetched to believe that a system creating such tool of global dominion would relinquish ownership thereof.
Central banks (the engine room of the system) generally mandate reserve requirements which oblige banks to keep a minimum fraction of their demand deposits as cash reserves. This is intended to ensure that banks have enough “ready cash” to meet normal demand for withdrawals, given that, since the old days of the goldsmiths, they have worked out the average rate of customers’ daily, weekly, monthly and yearly demands on their reserves. Problems can arise, however, when depositors seek withdrawal of a large proportion of deposits at the same time; this can cause a bank run or, when problems are extreme and widespread, a systemic crisis. To mitigate this risk, the governments of most countries (usually acting through their central banks) regulate and oversee deposits.
The customers of a bank accordingly have a regulated joint right to “technically” demand the withdrawal, from the immense pool of credit created by a bank, of a share of those ever-dwindling reserves of ever more value-free and unbacked paper. That is the sum-total of what people would like us to believe is “ownership of money”, maybe even “complete ownership” thereof!
Since at any one time relatively few depositors will make cash withdrawals simultaneously, compared to the total amount on deposit (= “money” in a virtual sense), a moderate cash reserve can be maintained in ordinary circumstances as a buffer to deal with the normal cash demands from depositors seeking withdrawals.
The present circumstances are not ordinary ones, however.
The international banking system is undergoing a period of unprecedented turmoil and immense crisis.
During times of crisis, net redemption demands are said to be “unusually” large over a period of time; a bank will consequently run low on cash reserves, and it will be forced to raise additional funds so as to avoid suffering a depletion in its reserves and defaulting on its obligations to the central bank which lie at the heart of the entire system, the owner of owners, soon to become a worldwide central bank owning all money in existence.
A bank can raise funds from additional borrowings, or by selling assets, or by calling in short-term loans. If creditors are afraid that the bank is running out of cash (= the liquidity problem) or is insolvent (= the solvability problem), they have an incentive to redeem their deposits as soon as possible prior to other depositors accessing the remaining cash reserves before they do. Of course, the only “redeemable” feature is coming to possess some amounts of nominal-value paper kept as “cash” reserves. Being fiat currency, it depends on its value on societal faith in it, which is always prone to incline downwardly, let alone in our days.
In the light of the aforesaid truth that customers only have a concomitant right to press a demand they share with one another at any given point in time, the effectiveness of such a right to access a fully or even partially corresponding share of reserves is subject to the vagaries of bank’s compliance with reserve requirements, which is decreasing by the day. That is why the system is pushing humans to accept the lawfulness and viability of “money” as 100% illusory electronic signal. It can no longer appease their faith in fiat (= paper) currency.
Not only credit card funds, therefore (which are incessantly becoming more widespread as “money”), but even deposits for “withdrawal” kept in banks cannot by any stretch of the imagination qualify as individual taxpayers’ “owned assets”.
There are two types of money in a fractional-reserve banking system operating with a central bank (that is, practically every banking system nowadays):
- Central bank money: It is money created or adopted by the central bank regardless of its form – precious metals, commodity certificates, banknotes, coins, electronic money loaned to commercial banks, or anything else the central bank chooses as its form of money (We can choose nothing; the owner does).
- Commercial bank money (the one you and I rent and use): It consists in demand deposits in the commercial banking system; sometimes referred to as chequebook money.
When a deposit of central bank money is made at a commercial bank, the central bank money is removed from circulation and added to the commercial banks’ reserves. Simultaneously, an equal amount of new commercial bank money is created in the form of bank deposits. It is all therefore magical and metaphorical.
When a loan is made by the commercial bank (which keeps only a fraction of the central bank money as reserves), using the central bank money from the commercial bank’s reserves, the money supply expands by the size of the loan. This process is called deposit multiplication. The extension of credit has created “money”.
Indeed, many economists are of the view that loans lead to deposits and not vice versa.
In the past we were told the following:
“The re-lending model begins when an initial $100 deposit of central bank money is made into Bank A. Bank A takes 20 percent of it, or $20, and sets it aside as reserves, and then loans out the remaining 80 percent, or $80. At this point, the money supply actually totals $180, not $100, because the bank has loaned out $80 of the central bank money (and loan is money), kept $20 of central bank money in reserve (not part of the money supply), and substituted a newly created $100 IOU claim for the depositor that acts equivalently to and can be implicitly redeemed for central bank money (the depositor can transfer it to another account, write a check on it, demand his cash back, etc.)”. Of course, the redeemable nature is “implicit”. Nothing is ever redeemed as there is nothing to redeem such claims for, certainly not gold.
“These claims by depositors on banks are termed demand deposits or commercial bank money and are simply recorded in a bank’s accounts as a liability (specifically, an IOU to the depositor = a debt). From a depositor's perspective, commercial bank money is equivalent to central bank money – it is impossible to tell the two forms of money apart, unless a bank run occurs (at which time everyone wants central bank money). At this point in the re-lending model, Bank A now only has $20 of central bank money on its books. The loan recipient is holding $80 in central bank money, but he soon spends the $80. The receiver of that $80 then deposits it into Bank B. Bank B is now in the same situation Bank A started with, except that it has a deposit of $80 of central bank money instead of $100. Similar to Bank A, Bank B sets aside 20 percent of that $80, or $16, as reserves and lends out the remaining $64, thereby increasing money supply by $64. As the process continues, more commercial bank money is created. Although no new money was physically created in addition to the initial $100 deposit, new commercial bank money is created through loans”.
Every “money” (whether central bank money or commercial bank money) is thus an accounting record jotted down in its accounts by the system owning it and leasing it to the public on interest and subject to a myriad of multifarious charges upon its lessees. Based on the “faith system” set up by the banking industry and its vassals (government, media, entertainment industry, sell-out religious leaders etc), the man in the street accepts to rent such primary asset at the conditions prescribed by it, in the hope that somehow the fragile conceptual edifice remains intact and standing, and he can gratify some of his desires, many of them fickle, in the course of this earthly transit.
Right now, the classical re-lending model is going through a radical change, since reserves set aside by banks are rapidly shrinking.
Moreover, the use of the terminology of lending is misleading.
In secular law, a loan is a contract whereby the borrower initially receives or borrows an amount of money, called the principal, from the lender, and is obligated to pay back or repay an equal amount of money to the lender at a later time.
In a contract of loan, the borrower acquires ownership over the loaned property, which is not what happens with bank money, in respect of which one only has an undifferentiated claim over growingly thinner reserves of growingly more de-materialized “currency” or is a straightforward lessee renting portions of a virtual fungible “ensconced in plastic cards called Visa, American Express, etc”.
In the fiqh, a loan (qard) is defined as handing a patrimonial asset to another person in the mode of drawing closer to Allah, in order for such other person to derive benefit from that asset and subsequently elect to either restore the very same asset he has borrowed or the like therefore. He has such election because he has attained ownership over the asset, which the conclusion of the loan has transferred to his person.
There is no applicability of such reality to bank money. It is not transferred to a customer’s ownership; it has nothing whatsoever do with beneficently assisting a fellow human being; and there is obviously no possibility of handing back the same property … Some torn paper from meagre cash reserves? The selfsame original electronic impulse by which I paid for my trip to Zanzibar or for the furnishing of my 3-storey mansion?
The truth is that bank money is leased, though it is incapable of being rented just as much as a fig or an apricot.
d) Juristic capitulation
In this age of unmatched decadence, “economists” have mushroomed in former “Islamic” lands, currently ravaged by compounded usury, and sought to dupe the Muslims into believing that scholarly opinion was tilted in favour of the sharī`ah embracing the licit nature of bank money, while only a few “hardcore traditionalists” insisted, as pitiful sentinels of an evaporating past, that gold and silver was the dual currency sanctioned by Islam.
An example of such counterfeit scholarship can be found in a paper titled “Must Money be Limited to Only Gold and Silver? A Survey of Fiqhi Opinions and Some Implications”, jointly authored by Muhammad Aslam Haneef (Associate Professor, Department of Economics, International Islamic University, Malaysia) and Emad Rafiq Barakat (Department of Islamic Economics and Banking, Yarmouk University, Jordan).
It would be rather absurd to expect advocates of modern economics and banking dissuading people from using bank money or discarding economic theories.
Inevitably, therefore, in the section devoted to the evidence for the views of those who limit money to gold and silver (the vast majority of classical jurists) and those who do not limit it to them, the co-authors never tackle the specific nature of bank money, and disingenuously make it appear as if genuine savants such as al-Hattāb and al-Wansharīsī, who lived and wrote centuries ago, could ever have drawn analogy between “anything of value that is acceptable to society as money” and “valueless bank money, a fictional existent foisted on an increasingly unwilling polity of human beings”.
At the end of such astonishingly rash and unscholarly excursus, the usual few-line platitudes about the principles of neutral permissibility and the ubiquitous public interest (maslahah) were bandied around in support of a preconceived stance which refused to define and appraise the nature of bank money.
Unfortunately, not too much of an improvement can be harvested by us from the words of a good faith scholar like Muhammad Tawfīq Ramadān al-Būtī:
“In actual fact, the value of paper money is represented, first and foremost, by the underlying reserves of metallic currency which banking establishments and their funds set aside as back-up [which is of course comprehensively untrue], and, secondly, by rare coinage which, usually, represents metallic currency stored in the vaults of the institution issuing money, alternatively, by financial certificates of the values of things … which are in turn represented [as debt instruments] by rare coinage or metallic currency”.
It is regrettably hard to come across a more naïve understanding of how the banking system operates. “Paper money, the value of which is trusted by people on the strength of the metallic currency and the like thereof which are owned by the issuer of money [2%?], as well as by the respect earned by such issuer of money as a result of the firm connection between the paper that is caused to circulate among people and the value thereof which has been stored by it [which one?], can legitimately be deemed to be a yardstick for measuring the value [of things], to be a respected means of exchange, and to be a storage of wealth [what, the wishful claim by all depositors at once to a small percentage of a zero-value paper in its death throes?]” (Al-Buyū` ash-Shā’i`ah wa-Athar Dawābit al-Mabī` ‘alā Shar`iyyatihā, p. 332).
The rest of his analysis of the subject follows similarly convoluted, delusional and vague conceptual trajectories.
From an ostensible perspective, we are confronted by something different in At-Tankīl al-Mushaddad ‘alā Abātīl al-Qawl al-Musaddad (Dār Ibn Hazm, Beirut, 1st edition, 2006).
Not only we are involved here with a genuine Mālikī master, the Mauritanian Shaykh Muhammad b. Mahfūz al-Mukhtār Fāl ash-Shinqītī, but the readers of the said text (a refutation of the bases for alleging that the judgments of zakāt on gold and silver cannot be validly extended to paper currencies) are regaled with an impromptu tour through the galaxy of juristic thinking, deep understanding of the root-principles of the Law, and sound methodologies in linking them to specific derivative rulings. It is a crash course on that for a throwaway price!
Ultimately, however, in spite of its astonishing display of technical mastery, it misses the mark in applying the fiqh to the subject at hand, as the author simply does not understand (and in truth makes no real effort to understand) the reality of bank money.
After 114 pages of technically stellar analysis (from page 7 to page 120 of the work), the said great scholar does not add anything new to the three grounds set out by Dr. al-Gharyānīas justification for equating “paper” money to bi-metallic currency of intrinsic value = gold and silver for the purpose of inter alia zakāt.
He fails to deal with ownership of bank money, its genesis, nature and legal implications, and the fact that it is no more than a fantasy mental construction, just as he totally refrains from observing that “fiat” money = paper money is but a tiny fraction, incessantly diminishing in its ratio, of bank money, and is in fact on the way to inescapable extinction like many other casualties of advancing nihilism.
The staple arguments are put forward: Price-ness and “an intrinsic capacity for growth” are common to “paper” money and the pair of gold and silver; zakāt has been prescribed for the sake of social assistance and must accordingly extend to assets of wealth which have significant value (though of course bank money has none, and the social argument cannot turn every high-value proprietary asset which has been exempted from taxation in Islam into a property covered by the rules of zakāt; moreover, the loosely interpreted purposive approach is destructive, as it induces Muslims worldwide to abandon gold and silver and empower kāfir dominance through the ownership and lease of “virtual” money).
From a general point of view, the author is spot-on when he contends, for instance, that analogical reasoning (qiyās) can apply to the root-judgments of ‘ibādāt or acts of worship, zakāt included. The problem, however, is that bank money cannot be dealt with analogically with gold and silver or even trading stock. It is a non-existent (at best a valueless unredeemable paper which is insufficiently stored in banks’ reserves) that is owned by the system and rented by us for an exorbitant fee + massive ribā.
No jurist ever suggested, or could have ever suggested, that what fails to essentially qualify as taxable asset can be subsumed by analogy under the rules governing a taxable asset.
No jurist ever suggested, or could have ever suggested, that “for the sake of a growth in social cooperation, fairer distribution of wealth, consolidation of the public interest, encouragement of a broader humanistic afflatus and so on”, kuffār living in Muslim lands might lawfully be taxed by qiyās in terms of the zakāt. They do not fulfil one of the immutable arch-conditions for zakāt to be levied, period.
The same is true of slaves. They were excluded from its compass, at source, till the end of the world and the transition away from this Abode of actions which are governed by a sharī`ah separating the lawful from the prohibited.
Original case: Asl (literally root or source or fundament) – Gold and silver; The new case: Far` (literally branch) – Paper (= fiat) money and bank money generally; The proposed ruling or hukm: The branch is taxable in terms of zakāt; The effective cause or `illah for analogically extending the ruling of the original case to the new case allegedly ramifying as a branch from the same root? There has to be a proper relationship to the law of the text (= the hukm), a relationship, in other words, of mutual affinity and concordance (munāsabah).
There is none here, and thus the effective cause of the suggested analogy cannot be applicable to the new case of a rented fictional “fungible” in the same way as it is applicable to the owned real-value material called gold and silver.
True, as our Mauritanian writer pointed out, Shaykh ‘Ulaysh from Egypt, when assimilating paper money to fulūs, was speaking during an epoch where fiat currency was backed up by gold and silver and thus fully redeemable in some countries, whereas it was (blissfully) non-existent in other countries, hence his assimilation is no longer applicable, inasmuch as bank money “stands on its own” and is “universally used”.
Again, that should at best have led the writer to shake his head in dismay and sorrowfully contemplate how far “money” had travelled from a fitrah-imbued genuine / non-virtual reality, to such an extent that even good old fulūs could be mourned as a fossil of a better age where money had substance and palpable existence, never mind how small-scale.
Let us return one moment to the “purposive” argument (since the “analogical” argument is a non-starter when comparing an owned asset to one which is not owned at all).
We have said it was loosely interpreted and indeed destructive, since it only promotes the interest of the leaders of kufr in realizing their dreams of a planetary imperium ruled with an iron fist.
[Maslahah, after all, lexically denotes a locus or tool of wholesomeness or soundness, i.e. the precise antithesis of rented bank money and its legitimizing endorsement by Muslims].
We shall again scoop beneficial points from Mustafā az-Zarqā’’s Al-Madkhal al-Fiqhī al-‘Āmm (Vol. 1, pp. 121-123), so that no one can possibly rebuke us for ignoring modernist writers or theses.
We saw the likes of Muhammad b. Mahfūz al-Mukhtār Fāl ash-Shinqītī and Dr. al-Gharyānī (parvum in multo: there are literally hundreds and thousands of like-minded thinkers) placing the accent on the public interest (maslahah) requiring the levying of zakāt on “paper” money and the distribution, as compulsory zakāt, of the amounts thereof thus collected.
In the said 3-page passage of his work, Mustafā az-Zarqā’ surveys the panorama of juristic views as to when can a maslahah “let loose (from textual authority)” be legitimately paid regard to if it contradicts textual authorities of the sharīah.
He classifies the textual authorities of the sharīah under two groups:
- Specific textual authorities which have been transmitted from the Law-Giver (ash-Shāri`), i.e. Allah or His Messenger, Sallallāhu ‘alayhi wa-Sallam, in respect of demarcated things and individually identified states, by either commanding or prohibiting them specifically (such as a Muslim’s marriage proposal over the formal proposal of his brother which the would-be bride has clearly leaned towards);
- General textual authorities encompassing a comprehensive circle, within the gathering ruling of which several matters and states, i.e. plenteous individual things bearing mutual resemblance to one another, are located (such as the Prophetic prohibition of any sale vitiated by a material want of knowledge regarding one or both of the countervalues or bay` al-gharar).
It is a readily discernible truth that the arch-rule of zakāt requiring complete ownership of an asset, as an immutable essential of any taxable asset, is based on a string of general textual authorities reinforcing one another and converging to the same umbrella judgment applicable to a cornucopia of distinct but interrelated matters.
A textual authority of the sharīah, Mustafā az-Zarqā’ goes on to state, is further classed under a) one which, in pointing to its intended meaning, conveys a definitive (qat`ī), hence unequivocal and clear, ruling or b) one which conveys a speculative (zannī) ruling open to different interpretations.
There is no difference among our jurists of Ahl as-Sunnah as to the fact that complete ownership being one of the foundational conditions for the obligatoriness of zakāt is a (general) textual authority of the sharīah of the first (= definitive and unequivocal) type.
It is also the view of all our jurists that when a textual authority of the sharīah is definitive in both its indication of a ruling and its firm entrenchment in the Law, which is undoubtedly the case of the said arch-rule of zakāt, it is impossible to conceive of any maslahah that necessitates the opposite of such ruling, inasmuch as the yardstick by which every maslahah is gauged is precisely the way the Law itself looks at it.
Accordingly, as Mustafā az-Zarqā’ concludes, any ostensible maslahah which conflicts with a definitive textual authority is in actual fact a corrupting evil (mafsadah) in the eyes of the Law, based on other considerations carrying a more preponderant weight.
Which is exactly what prevails here: Bank money is a corrupting evil, conferring legitimacy on it is a corrupting evil, and, far from fostering the protection and advancement of public interest, subjecting the timeless judgments of zakāt to the encompassment by it of such corrupting evil is itself a major corrupting evil, even though a few outweighed considerations of public interest might be ensconced in it, just as they are ensconced in the evils of gambling and consumption of intoxicating substances as well.
e) Some fine details
My family country, Italy, has €2 trillion debt, and its Treasury has to sell more than €35bn of bonds and bills a month (which is more than the joint annual output of Cyprus, Estonia and Malta!).
The idea that governments, let alone individuals, genuinely own monetary assets is thus insanely infantile.
Economists openly assert that the higher the capital requirements imposed on commercial banks by the central banks (destined to converge into a single world bank) are, the more “faith” there will be in the solvability of banks, which will reduce the chances of depositors withdrawing funds from a bank and the latter consequently experiencing a liquidity deficit.
The solvability as such is long gone. It is a non-existent. The only issue left is whether faith in such fictional or constructive existent can be sustained among people.
What is their plan? It is to make households more indebted.
In my country of residence, South Africa, 63.3% of total bank deposits are by companies (= illegal entities in Islam) and financial institutions (idem) – This funding base is termed “wholesale deposits”; while only 23,3% thereof concerns households (Those are the so-called “retail deposits”). A bank is therefore exposed to the concrete risk of a serious liquidity crisis should a few big clients (= fictitious juristic personas) withdraw their deposits simultaneously. The risk must be spread in a more diffuse way.
For the faith-driven system to survive, therefore, it is important to dramatically expand the ratio of retail deposits and tie households to banks more and more, least the illusion evanesce altogether and falsehood crumble into the void it is.
As interim measures, banks will come up with such tricks as the South African Reserve Bank making available a new “liquidity facility” to commercial banks, the so-termed committed credit facility.
Before you jump to hasty assumptions that now “money” is really involved, such that one might equate it to gold and silver to save the façade of zakāt as an extant pillar of Islam, you should know that all such facility means is that participating banks will be able to gain guaranteed access to Reserve Bank (= the central bank) financing to offset any deficit in their required liquid assets to a maximum of 40 percent of the cash outflow the bank is experiencing. Banks will pay a fee of up to 40 basis points (0.4 percent) of the agreed facility (to whom? to the real owner of it all, the central bank), whether it is used or not, to encourage them to structure their balance sheets in such a way as to limit their dependence on the new credit facility to a minimum. The asset banks offer as collateral (= to the central bank, which extends credit to commercial banks exactly as they do to the sub-lessees, i.e. physical and juristic personas making up the users of money in the world of “real economy”) when they want to use the facility must … meet strict criteria” (Cape Times, Tuesday, 12 June 2012, p. 14).
In other words, mere palliatives to delay the implosion of money as a sheer mental construct.
f) Quo vadis?
We have therefore proved, in an incontrovertible fashion, that bank money does not qualify as a taxable asset in terms of the Islamic rules of zakāt.
It must be clearly recognized that distribution in gold and silver of what has been collected in bank money is a cosmetic (political) move devoid of validity in the fiqh. If the asset is non-taxable at source, the supervening involvement of bi-metallic currency at a later stage is forbidden. It is a case of too little too late.
It would be the same as keeping one full month of compulsory fasting in other than Ramadān, with the intention of discharging the same obligation, and “purifying it” by extensive engagement in the blessed act of sending prayers on the best of creation, Sallallāhu ‘alayhi wa-Sallam, at the end of any day of fasting such “alternative” month.
There can accordingly be no “taking” of bank money (itself an act disallowed in respect of gold and silver, as elucidated by us in “Does the Mālikī madhhab instruct an Islamic leadership to forcibly take pecuniary zakātable assets from their owners?”; cf. www.theislamiccommunity.com), and then distributing it in gold and silver.
A noticeable consequence of what is set out in this text is that no Muslim who rents fictional money from the banking system can be castigated or fought against for “withholding” what is other than a taxable asset. He is no criminal sinner.
It is indeed no wonder, nay, patently intelligible, that zakāt-collection and distribution as presently structured only satisfy charitable urges of individuals and thoroughly fail to address the pressing need to uplift Muslims socially and financially.
If you say, ‘Well, I want to at least donate those amounts to zakāt-beneficiaries’ (so to purge your conscience), that, too, is disallowed.
In our fiqh, in fact, one of the two unanimously required pillars of a contract of donation is that the donated asset must be owned by the donor and such as to extend a lawful benefit to the donee, and we have already seen that bank money falls short of meeting either condition. It is trite law in Islam that a usurper cannot validly transfer property over an asset he has usurped by donation thereof to another party, since he is not an owner of such asset, and the same holds true of an officious agent, i.e. one who claims the right to dispose by agency of an asset belonging to a principal who has not constituted him as his agent and has therefore not initiated or consented to the transaction involving his asset.
One expected reaction can be summarized as follows:‘Why should we do less as Muslims in an age where an increasingly larger base of good actions is being eroded?’.
First of all, what is not sanctioned by the Law has not been sanctioned. It is not for us to redefine Allah’s sharī`ah, since that would in itself consist in an act of disobedient rebellion against Him.
Secondly, Allah is not in need of our ‘ibādāt. We are in need of enacting ‘ibādāt and mu`āmalāt, provided our enactment thereof agrees with what the Dīn has stipulated.
«Their flesh and blood does not reach Allah, but your taqwā does reach Him» (Sūrah al-Hajj: 37).
Thirdly, we certainly will not enter the Garden by virtue of our correct actions (let alone incorrect ones), but only as a result of Allah admitting us to His Mercy.
“The salāt of none of you is accepted if he has occasioned the loss of ritual purity, until and unless he performs ablution” (Cf. Sahīh al-Bukhārī, Book of Ablution, Chapter on salāt not being accepted without ritual purity, hadīth no. 135 + Book of Ruses in the same collection; as well as Sahīh Muslim, Book of Ritual Purity, Chapter on ritual purity being an obligatory requirement for salāt, hadīth no. 225).
Al-‘Alā’ b. Ziyād, the great model of worshippers and relinquishers of worldly redundancies from al-Basrah, who belonged to the generation of the Followers, said: ‘We are indeed a people who have placed ourselves in the Fire. If Allah wills to remove us from it, we shall be caused to exit it.’
We cannot therefore love our selves, our actions and our quest for salvation, more than Allah or more than His Messenger, Sallallāhu ‘alayhi wa-Sallam.
Fourthly, why should we selectively insist on doing something when we show no concern for the collapse of other non-negotiable duties which go hand-in-hand with true implementation of zakāt, such as the restoration of governance, judging matters among ourselves by what Allah has sent down, and revitalizing the ethos and integrated network of lawful man-to-man transactions, particularly in the fields of money, commerce, business, industry, social assistance etc?
It is indeed tellingly paradoxical that Muslims are so nonchalant about campaigning for zakāt to be strictly imposed on mineral wealth, which is real wealth and fully taxable in our Dīn (“To whom does our mineral wealth belong?”; cf. www. theislamiccommunity.com), while almost begging to be legitimized in taking it out of a rented usurious fiction.
Sinful criminality must be ascribed to Muslim authorities who ignore the duty to discharge zakāt on their taxable mineral resources.
Fifthly, and that is absolutely crucial, a vast blessing is embedded in giving up our pretence that we can still conserve the five pillars of Islam even though the rest of the house has caved in. Recognizing the truth (aching as that might be) is the catalyst for completing the second half of the journey: Working out alternatives which shore up the tottering structure of Islam, by inter alia resurrecting zakāt and its shining beauty. It is the key to truly turning the problem into its solution, which is the opposite latently existing in it forever.
It has to be necessarily accepted that the prescient Prophetic anticipation of his ummah following the lizard of judeo-christianity step by step into its very hole could never have been confined only to New Year’s celebrations or styles of dressing and omitted such basics of human existence as politics, money, trade, matrimony or law.
Another likely objection raised to this article would be, ‘How come other scholars, greater than you, have not discerned or espoused what you have set out herein?’.
I cannot comment on other people.
I can say something about how the veil was removed from my person, but that would cause this condensed writing to stray into tedious and extraneous terrain.
Suffice it to say that its dedicatee, Sidi ‘Abdus-Salām from Sweden, is owed by me a colossal debt of gratitude for this, may Allah reward with beneficence all those who journey to Him and in the process stumble upon pearls beckoning out of oysters, the shells of which have been thrown open by Destiny’s ceaseless work.