Author: Dr. Muhammad Zia-ur-Rahman Azmi (Rahimahullah)
— [Ibn Baz, Majmoo’ al-Fatawa wa al-Maqalat: 59/19]
Buying and selling currencies for profit, provided it is done lawfully and without exploitation, is allowed in Islam.
❀ Prohibition of Deferred Payment:
Deferred payment in currency exchange transactions is not permissible to prevent uncertainty (gharar) or interest (riba).
❀ Similarity with Gold and Silver Transactions:
Currency is treated like gold and silver in Islamic finance. Hence, transactions must be completed immediately.
Ruling on Currency Transactions
Engaging in currency exchange is permissible under the following conditions:- No Prohibition on Buying and Holding Currency:
There is no harm if a person buys dollars or any other currency, keeps it in their possession, and later sells it when its value increases. - Transactions Must Be in Cash (Immediate Payment):
Currency exchange should be conducted on a cash-for-cash basis and not on credit. For example:
- Exchanging Saudi Riyals for US Dollars.
- Exchanging Saudi Riyals for Iraqi Dinars.
- Immediate Exchange Requirement:
The transaction must occur hand-to-hand, similar to the rules for exchanging gold for silver.
Islamic Guideline
Currency exchange should follow the principle of "نقد بہ نقد" (cash-for-cash) to avoid any form of delay or uncertainty, which is prohibited in financial dealings in Islam.— [Ibn Baz, Majmoo’ al-Fatawa wa al-Maqalat: 59/19]
Key Points
❀ Permissibility of Currency Trading:Buying and selling currencies for profit, provided it is done lawfully and without exploitation, is allowed in Islam.
❀ Prohibition of Deferred Payment:
Deferred payment in currency exchange transactions is not permissible to prevent uncertainty (gharar) or interest (riba).
❀ Similarity with Gold and Silver Transactions:
Currency is treated like gold and silver in Islamic finance. Hence, transactions must be completed immediately.