Author: Dr. Muhammad Ziya-ur-Rahman Azmi رحمه الله
◈ Ruling on Exchanging Currencies on Credit with an Increase in Amount ◈
In the modern era, it is common to conduct transactions using paper currency due to its light weight, ease of transfer, and convenience in counting.
Scholars differ on how to classify paper currency:
According to the preferred view:
✔ Paper currency is considered equivalent to gold and silver, i.e., a form of independent legal tender (نقد مستقل).
✔ However, different national currencies are treated as different types, just like gold and silver differ.
Example:
Therefore, it is permissible to exchange currencies of different countries at different rates.
However, one strict condition applies:
The exchange must be hand to hand in the Majlis al-ʿAqd (session of the contract).
i.e., Both parties must take possession before parting ways.
If the exchange rate of a currency is 1,100 and it is sold in the market or bank for 1,200, 1,400, or even 3,000 —
there is no issue with this increase, because:
✔ Paper currency is not like a fixed metal standard (e.g., gold or silver).
✔ It is governed by supply and demand.
✔ Riba al-Faḍl (increase in same-kind barter) does not apply here.
The only forbidden transaction with paper currency is:
✖ Exchanging currencies on a delayed basis (credit) without immediate mutual possession.
Any delay in exchange between two currencies, even of different countries, falls under riba al-nasī’ah, which is ḥarām.
Ibn ʿUthaymīn – Nūr ʿala al-Darb 28/245
◈ Ruling on Exchanging Currencies on Credit with an Increase in Amount ◈
In the modern era, it is common to conduct transactions using paper currency due to its light weight, ease of transfer, and convenience in counting.
❖ Scholarly Disagreement:
Scholars differ on how to classify paper currency:
- Should it be linked with gold?
- Or with silver?
- Or considered like trade goods?
❖ Rājiḥ (Strongest) Opinion:
According to the preferred view:
✔ Paper currency is considered equivalent to gold and silver, i.e., a form of independent legal tender (نقد مستقل).
✔ However, different national currencies are treated as different types, just like gold and silver differ.
❖ Practical Implication:
Example:
- French currency is not the same as Moroccan, Algerian, or Tunisian currency.
- Thus, exchanging one currency for another is like exchanging gold for silver.
Therefore, it is permissible to exchange currencies of different countries at different rates.However, one strict condition applies:
The exchange must be hand to hand in the Majlis al-ʿAqd (session of the contract).
i.e., Both parties must take possession before parting ways.
❖ Permissible Increase (No Riba al-Faḍl):
If the exchange rate of a currency is 1,100 and it is sold in the market or bank for 1,200, 1,400, or even 3,000 —
there is no issue with this increase, because:
✔ Paper currency is not like a fixed metal standard (e.g., gold or silver).
✔ It is governed by supply and demand.
✔ Riba al-Faḍl (increase in same-kind barter) does not apply here.
❖ Prohibited Form – Riba al-Nasī’ah (Delayed Exchange):
The only forbidden transaction with paper currency is:
✖ Exchanging currencies on a delayed basis (credit) without immediate mutual possession.
Any delay in exchange between two currencies, even of different countries, falls under riba al-nasī’ah, which is ḥarām.
Ibn ʿUthaymīn – Nūr ʿala al-Darb 28/245