Is it permissible to exchange paper currency for metal currency with a difference in value?

The questioner : Is it permissible to exchange paper currency for metal currency with a difference in value, such as giving you ten paper riyals and receiving nine metal riyals?

The Shaykh : No; because first, we do not currently know of any metal currency. Do you have any metal currency?

The questioner : Yes, like what you have.

The Shaykh : I mean, it is not silver, is it?

The questioner : It is not silver, but metal.

Another questioner : Like our ten qirsh and the shilling; they have a half-riyal, like five qirsh and ten qirsh, like the riyal which is made of metal and paper.

The Shaykh : Metal, meaning like our metal, not paper, I mean, not silver.

The questioner : Paper, paper.

The Shaykh : I know the paper currency, like the Saudi paper currency, the Jordanian, and others, but I am asking about the change, as you call it?

The questioner : The change is not silver; I do not think it is silver.

The Shaykh : Yes, it is not silver; that is what I am verifying. So, we need to look at the paper currency. In its essence, it has no intrinsic value, as we always say; rather, its value is nominal, based on the gold that is supposed to be stored for it. Now, we know from the Shari'ah that if the types differ, it is permissible to exchange them with a difference in value. So, if the metal currency, as I mentioned earlier, is of metal, I see no prohibition in the scenario you asked about.

The questioner : Does it not carry the basis upon which these currencies are established based on their origin?

The Shaykh : Their origin is gold, we said. Now, if we wanted to, why did I ask if it is silver, for example? Let us assume this metal currency is silver and the paper currency is gold. Is it not permissible to exchange them with a difference in value?

The questioner : Yes, it is permissible.

The Shaykh : Now, since this currency is non-silver metal, it is permissible a fortiori. So why the valuation now? Because if you resort to valuation here, it is not permissible to exchange the valued item, which is the paper currency, with the silver currency. I am not saying metal now, because I have moved from absolute metal to specific metal, which is silver, to remind you of what came in the Sunnah: if the types differ, sell however you wish. Is the answer clear, I think?

The questioner: Yes.
Abu Layla : Our Shaykh, what is the reason, I mean, in currency exchange, exchanging ten riyals for nine riyals, what is the reason for this and why?

The Shaykh : The difference in currency. I gave the example of silver now, and I say that one of the reasons people fall into usurious transactions today is the rise of the gold currency in kind and the rise of the silver currency in kind. Because if these two metals were circulated among people, exchanging them with a difference in value is permissible by the Shari'ah. So your question, what is the reason? Because the Shari'ah distinguished between this and that. So you are not allowed to buy gold with gold with a difference in value, but it is permissible to buy gold with silver with a difference in value. It is not permissible, for example, to buy a sa' of good dates with two sa' of poor dates; this is dates and this is dates, this is better than that, so it is not permissible to buy with a difference as long as the type is what? Unified, one. But the method, as came in the hadith of Bilal from the Messenger (peace and blessings be upon him), he said to him: Likewise, if a person has the goal of buying a specific metal from a specific metal, there is no obstacle to what? Buying gold with silver, even with a difference in value, or the reverse, buying silver with gold, even with a difference in value. In other words, the professor here asked: if we return to the value, if we assume the Ottoman or Saudi gold lira today equals, for example, one hundred Saudi riyals, the Saudi paper riyal, for example, let us assume each riyal equals a silver riyal. We witnessed a Syrian silver lira in Syria and the Ottoman Turkish majidi, and its divisions called Abu al-Ma'ah and Barghut small, all silver. So let us assume the Saudi gold lira is worth one hundred silver riyals. These one hundred silver riyals correspond today to, for example, one hundred paper riyals. Now, we leave the paper aside. We assumed the Saudi gold dinar is worth one hundred silver riyals. It is permissible for you to buy it for one hundred and one, or for ninety-nine. Why? The type differed. Is it clear here?
Abu Layla : Yes, Shaykh.

The Shaykh : Now, if there is a silver currency, you can buy as much gold as you wish with it, with a difference in value. The problem we always discuss with you is that the paper currency is a gold currency in its origin, valued for it. So you are buying gold with gold now. Here the problem arises. But when the question is buying with metal qirsh, it is like silver.
Abu Layla : My professor, perhaps I did not get the answer from the side that if I pose the question, perhaps our Shaykh, for example, I sell these ten paper riyals and he takes them for nine riyals, perhaps for the purpose of using the telephone, because telephones in Saudi Arabia are on the metal.

The Shaykh : The telephone?
Abu Layla: Yes.

The Shaykh : What does the telephone have to do with the matter?
Abu Layla : Ah, our Shaykh, from the monetary side, now when I buy ten riyals for nine, what is the intention behind this?

The Shaykh : Why did you put the telephone in the matter?
Abu Layla : Because the existence of the metal currency can be used for the telephone.

The Shaykh : Is it used for anything else?
Abu Layla : Yes, it is used.

The Shaykh : Now, let me leave the examples, my brother, let us stay on the subject.
Abu Layla : Our Shaykh, for example, this man has now a Saudi riyal and he wants to buy something from this shop with a cash riyal, which is metal or paper, he buys. But by telephone, he cannot connect except with the metal from the boxes in the streets. Is it possible that he buys the nine riyals for ten paper?

The Shaykh : Now, what did we say? Are you returning to your first question? You are asking me the same question we answered, perhaps? Yes, it is possible.
Abu Layla : Yes, I am asking about this. I, our Shaykh, from your question that it is permissible, and I say why, because for example, the riyal is the riyal?
Al-Halabi : Our Shaykh, he repeated the question, perhaps he did not understand, for example.

Another questioner : There is, Shaykh, Shaykh, the thing that came in onAbu Layla : Came in on me. A while ago, our brother Abdullah the Saudi asked the same question, soThe Shaykh : He said it is not permissible except for dire necessity, and the dire necessity is measured by its amount.

The Shaykh : No, but it is not permissible to exchange paper currency with paper currency.

Another questioner : With metal currency.
Al-Halabi : No, no, he did not mention metal at all.

The Shaykh : No, absolutely, no, no.

Another questioner : He mentioned it when he brought in the telephone. Now, whyAbu Layla : Did he bring in the telephone?

The Shaykh : No, no, excuse me, why did he bring it in? But when we issue a fatwa, the problem is that buying paper currency with paper currency with a difference in value, every paper currency has a valued percentage of gold, and we have said repeatedly that it goes down and up.

Another questioner : No, my Shaykh, this question was at that time with another paper currency with metal.

The Shaykh : No, this is the first question that comes with this clarity.

The Shaykh : onAl-Halabi : I remember, Abu Abdullah.
Abu Abdullah: Now, let us get the tape.
Abu Layla : Our Shaykh, what I understood from you from the research you explained.

The Shaykh : My brother, let it be so, we seek from Allah...

Another questioner : Is it permissible to understand now.

The Shaykh : If it is within these limits.

Another questioner : Ah, meaning ten paper riyals for nine metal?

The Shaykh : Yes.
Abu Layla : For the values valued for them, our Shaykh, from gold and silver.

The Shaykh : We are saying now, we brought you an example with gold and silver. We have a gold currency in kind and we have a silver currency in kind. Is the difference in value permissible or not?

The questioner: It is possible.

The Shaykh : Now, is it permissible? Is there any doubt about this among you?

The questioner: No.

The Shaykh : Now, let us come to this. Instead of the silver currency, we have a metal currency, they call it, for example, copper, iron, and so on. Now, since the type differs, we have a paper currency which is a gold currency valued for it, right or not?

The questioner : Correct.

The Shaykh : Now, the gold currency, what are we buying it with? With silver. Is the difference in value permissible or not?

The questioner : It was permissible.

The Shaykh : Well, we don't have silver, we have copper, we have iron; is it permissible to exchange them with a difference in amount or not? It is permissible. I said earlier that the professor here is even more so; because the two types are different, do you see? But paper currency for paper currency, which is the point we keep repeating, is that this is not permissible except out of dire necessity. And as long as we say, excuse me, brother, it is not possible except out of dire necessity, because the Saudi man comes with Saudi currency and wants to buy goods here, he wants to buy onions and parsley, and he cannot do so if he wants to exchange it. But if he sits as the merchants do today, when the Lebanese currency dropped, they rushed to buy it, and when the situation improved a little in Lebanon, they offered it in the market; and so it was with Iraq and Syria, paper currency for paper currency. This is what we have always been singing about, that trading in it is not permissible except for exchange out of dire necessity. As for Allah, I do not recall that a question with this specific detail was ever put to me at all, except this time. Yes, others.
Al-Halabi : I am with my Shaykh.