Examination of subjecting today's paper currency to the prohibition against interest

Abstract

The Quran declares interest to be unlawful, but it speaks about interest in general terms without going into detail. The particulars are to be found in the traditions of the Prophet Muhammad – the Sunnah – where the Prophet says: Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, salt for salt – when these are traded, it must be like for like, hand-to-hand. If any of these items are traded for other than their own kind, then do so in any way that you see fit, as long as it is hand-to-hand [Sahih Muslim]. Scholars looking at this prophetic tradition have differed as to which forms of wealth are subject to the prohibition of interest. Essentially, there are four opinions on the matter. According to three of those opinions, today's paper currency is not subject to the prohibition against interest. Contemporary scholars have adopted the resolution of the Islamic Law Research Council which was arrived during their 1965 convention. The Council's decision was to adopt the opinion of Ibn Taymiyah that the affective cause for prohibiting interest in gold and silver is that it 'serves as an absolute monetary entity in the market'. On that basis, the resolution declared, the prohibition of interest applies to paper currency.