1. History of the Dinar & Dirham
In the beginning the Muslims used gold and silver by weight and the dinar and dirhams that they used were made by the Persians.
The first dated coins that can be assigned to the Muslims are copies of silver dirhams of the Sassanian Yezdigird III, struck during the Khalifate of Uthman, radiy'allahu anhu. These coins differ from the original ones in that an Arabic inscription is found in the obverse margins, normally reading "in the Name of Allah". Since then the writing in Arabic of the Name of Allah and parts of Qur'an on the coins became a custom in all mintings made by Muslims.
Under what was known as the coin standard of the Khalif Umar Ibn al-Khattab, the weight of 10 dirhams was equivalent to 7 dinars (mithqals).
In the year 75 (695 CE) the Khalifah Abdalmalik ordered Al-Hajjaj to mint the first dirhams, thus he established officially the standard of Umar Ibn al-Khattab. In the next year he ordered the dirhams to be minted in all the regions of the Dar al-Islam. He ordered that the coins be stamped with the sentence: "Allah is Unique, Allah is Eternal". He ordered the removal of human figures and animals from the coins and that they be replaced with letters.
This command was then carried on throughout all the history of Islam. The dinar and the dirham were both round, and the writing was stamped in concentric circles. Typically on one side it was written the "tahlil" and the "tahmid", that is, "la ilaha ill'Allah / لا إله إلا الله" and "alhamdulillah / الحمد لله"; and on the other side was written the name of the Amir and the date. Later on it became common to introduce the blessings on the Prophet, salla'llahu alayhi wa sallam, and sometimes, ayats of the Qur'an.
Gold and silver coins remained official currency until the fall of the Khalifate. Since then, dozens of different paper currencies were made in each of the new postcolonial national states created from the dismemberment of Dar al-Islam.
Allah says in the Qur'an:
And amongst the People of the Book there are those who, if you were to entrust them with a treasure (qintar), he would return it to you. And amongst them is he who, if you were to entrust him with a dinar would not return it to you, unless you kept standing over him. Qur'an (3,75)
Qadi Abu Bakr Ibn al-Arabi, the greatest authority on Qur'anic Law wrote in his famous "Ahkam al-Qur'an" about this ayat:
"The benefit that can be taken from this is the prohibition of entrusting the People of the Book with goods".
Qadi Abu Bakr said: "The question concerning entrusting property is legislated by the text of Qur'an." This means that the ayat is a legal judgement of absolute validity and of the greatest importance to the deen.
Entrusting wealth to non-Muslims is not allowed, but furthermore, taking a non-Muslim as a partner outside Dar al-Islam (where we stand over them) is extremely restricted, because they might cheat or might use our wealth in forbidden transactions.
Since paper-money is a promise of payment, can it be permitted to trust the issuers while they hold the payment (our property) outside our jurisdiction? History has also demonstrated repeatedly that paper money has been a permanent instrument of default and cheating the Muslims. In addition, Islamic Law does not permit the use of a promise of payment as a medium of exchange.
2. What are the Dinar & Dirham
According to Islamic Law...
The Islamic Dinar is a specific weight of 22k gold (917.) equivalent to 4.25 grams.
The Islamic Dirham is a specific weight of pure silver equivalent to 3.0 grams.
Umar Ibn al-Khattab established the known standard relationship between them based on their weights: "7 dinars must be equivalent to 10 dirhams."
"The Revelation undertook to mention them and attached many judgements to them, for example zakat, marriage, and hudud, etc., therefore within the Revelation they have to have a reality and specific measure for assessment [of zakat, etc.] upon which its judgements may be based rather than on the non-shari'i [other coins].
Know that there is consensus [ijma] since the beginning of Islam and the age of the Companions and the Followers that the dirham of the shari'ah is that of which ten weigh seven mithqals [weight of the dinar] of gold. . . The weight of a mithqal of gold is seventy-two grains of barley, so that the dirham which is seven-tenths of it is fifty and two-fifths grains. All these measurements are firmly established by consensus." Ibn Khaldun, Al-Muqaddimah
How are the Islamic dinar used?
- The Islamic Dinar can be used to save because they are wealth in themselves.
- They are used to pay zakat and dowry as they are requisite within Islamic Law.
- They are used to buy and sell since they are a legitimate medium of exchange.
3. Using the Dinar & Dirham
Gold and silver are the most stable currency the world has ever seen.
From the beginning of Islam until today, the value of the Islamic bimetallic currency has remained surprisingly stable in relation to basic consumable goods:
A chicken at the time of the Prophet, salla'llahu alaihi wa sallam, cost one dirham; today, 1,400 years later, a chicken costs approximately one dirham.
In 1,400 years inflation is zero.
Could we say the same about the dollar or any other paper currency in the last 25 years?
In the long term the bimetallic currency has proved to be the most stable currency the world has ever seen. It has survived, despite all the attempts by governments to transform it into a symbolic currency by imposing a nominal value different from its weight.
Gold cannot be inflated by printing more of it; it cannot be devalued by government decree, and unlike paper currency it is an asset which does not depend upon anybody's promise to pay.
Portability and anonymity of gold are both important, but the most significant fact is that gold is an asset that is no-one else´s liability.
All forms of paper assets: bonds, shares, and even bank deposits, are promises to repay money borrowed. Their value is dependent upon the investor's belief that the promise will be fulfilled. As junk bonds and the Mexican peso have illustrated, a questionable promise soon loses value.
Gold is not like this. A piece of gold is independent of the financial system, and its worth is underwritten by 5,000 years of human experience.
4. The Importance of Paying Zakat with Dinar & Dirham
"Islam is based on five: testifying that there is no god but Allah and that Muhammad is the Messenger of Allah, establishing the prayer, paying the Zakat, the Hajj and the fast of Ramadan."
Zakat cannot be paid with a promise of payment
Zakat can only be paid with tangible merchandise, called in Arabic 'ain. It cannot be paid with a promise to pay or a debt, called in Arabic dayn.
From the beginning the zakat was paid with dinars and dirhams. Most significant is that the payment of zakat was never allowed in paper money during all the ottoman period right until the fall of the Khalifate.
Shaykh Muhammad Alish (1802-1881), the great Maliki Qadi, said that if you were to pay zakat with paper-money only its value as merchandise ('ayn), that is, its value as paper can be accepted. Therefore, its nominal value is irrelevant as payment of zakat.
"If the Zakat was obligatory by considering its substance as a merchandise, then the nisab would not be stipulated according to its value but according to its substance and its quantity, as is the case with silver, gold, grain or fruits. Since its substance [paper] is irrelevant [in value] in respect to the Zakat, then it should be treated as the copper, iron or other similar substances."
Fatwa of Shaykh Alish
Payment of Zakat is perfectly explained and regulated in the Islamic jurisprudence. For centuries when Islamic Law was enforced by a Caliph or an Amir, the Zakat was collected in gold and silver. When paper-money was being first introduced, during the last century by the colonial powers the traditional ulema rejected it as being opposed to Islamic Law. According to them paper money was to be treated as fulus or lower category of currency with limited used, basically just as small change. It is, for example, not allowed to make a qirad with fulus. Among those ulema, stands out the famous scholar of magrebi ascendance, Shaykh Muhammad Alish (1802-1881) who was the Shaykh of the Shaykhs of Maliki fiqh in the University of Al-Azhar in Egypt. He wrote in his Fatwa.
"What is your judgement in respect to the paper with the stamp of the Sultan that circulates like the dinars and the dirhams? Is it obligatory to pay Zakat as if it was a coin of gold or silver, or merchandise, or not?"
I responded exactly in the following way:
"Praise belongs to Allah and blessing and peace upon our Master Muhammad, the Messenger of Allah."
"Zakat is not to be paid for it, because Zakat is restricted to the flocks, certain type of grains and fruits, gold and silver, the value of rotational merchandise and the price of the goods withheld. What is referred previously does not belong to any of these categories."
You will find an explanation by comparison with the copper coin or fulus with the stamp of the Sultan which is in circulation and for which no Zakat is paid since it does not belong to any of the categories mentioned. It says in the "Mudawwana": "Those who posses fulus for over a year for a value of 200 dirhams does not need to pay Zakat unless is used as a rotational merchandise. Then, it should be treated as if it was a merchandise."
In the "At-Tiraz", after mentioning that Abu Hanifa and Ash-Shafi'i obliged to pay Zakat for the fulus, [is stated that] since both affirm that the payment of Zakat is from value, and considering that Shafi'i has two contradictory opinions about the subject, the opinion of the school is that there is no obligation to pay Zakat for the fulus since there is no discrepancies about the fact that what counts with respect to the fulus is not its weight or its quantity but only its given value. If the Zakat was obligatory by considering its substance as a merchandise, then the nisab would not be stipulated according to its value but according to its substance and its quantity, as is the case with silver, gold, grain or fruits. Since its substance [paper] is irrelevant [in value] in respect to the Zakat, then it should be treated as the copper, iron or other similar substances.
And Allah, ta'ala, is the Wisest. And may Allah bless and give peace to our Master Muhammad and his family.
(Translated from the "Al-Fath Al-'Ali Al-Maliki" pp. 164-165).
This Fatwa considers paper-money to be fulus, because it only represents money and does not have value as merchandise. It follows that since Zakat cannot be paid in fulus, which has no value as merchandise, it cannot be paid in paper-money, which value as weight of paper is null. On this basis, it becomes clear the urgent need to restore the use of the Dinar and the Dirham as payment of Zakat. If the millions of Muslims who now make their payment of Zakat in paper money would do it in newly minted Dinars and Dirhams, they will put in circulation millions of gold and silver coins into the mainstream of daily commercial activities of our communities. That single act will became the most important political act of the century, opening the path towards the establishment our own halal free currency breaking away from the usurious financial system.
The return to the payment of zakat in gold and silver is an essential part of the reestablishment of Islam.