Understanding the Gold Dinar and Silver Dirham


August 17, 2010

The Malaysian Government and Bank Negara Malaysia should study the statement from Shariah Counselor of World Islamic Mint and Former Imam of the Great Mosque of Granada, Spain. It is clear from the Imam’s statement that the right of Bank Negara Malaysia as the sole note issuing authority for the ringgit which is legal tender in Malaysia is and should not be an issue.

The Gold Dinar and Silver Dirham  cannot be compared or considered an alternative to “paper currencies”.

The Imam  states clearly that:

The Gold Dinar and Silver Dirham known as Shariah currency or Shariah coins in the Fiqh are not legal tender. The Shariah currency has no relation to present fiat currencies on many accounts and should not be legally or practically be compared or treated as the same. The Gold Dinar and Silver Dirham relates to religious matters, most important of which is the matter of payment of Zakat, rather than constitutional matters”.–Din Merican


STATEMENT FROM IMAM HAJJ ABDALHASIB CASTINEIRA

Shariah Counselor of World Islamic Mint and Former Imam of the Great Mosque of Granada

Kuala Lumpur, August 16,  2010

Bismillah irrahman irrahim,

Regarding the matter of the Gold Dinar and Silver Dirham and Legal Tender in Malaysia

The Gold Dinar and Silver Dirham known as Shariah currency or Shariah coins in the Fiqh are not legal tender. The Shariah currency has no relation to present fiat currencies on many accounts and should not be legally or practically be compared or treated as the same. The Gold Dinar and Silver Dirham relates to religious matters, most important of which is the matter of payment of Zakat, rather than constitutional matters.

Its introduction can only occured on voluntary basis since freedom is a command from Allah in all commercial transactions including the acceptance of money. Its usage has been throughout history open to Muslim and non-Muslims alike.

All Praise is due to Allah, the most Compassionate, the most Merciful, the Lord of all the worlds, the King of the Day of Judgment, Who has gathered all knowledge in His Essence and Who is the Creator of all knowledge for eternity. All peace and blessings be upon His beloved Prophet, Muhammad, who was not taught by man but by Him, He was the last and most honored Prophet, the last in the chain of prophethood that was brought to this world and has guided us to the right path. May abundant peace and blessing be upon his Family and his Companions, who were chosen among the good and benevolent.

In relation to the present concern of the people regarding the Launching of the Shariah currency in the State of Kelantan on the last 2nd of Ramadhan 1431, as a witness of the momentous ceremony of the Launching in the city of Kota Bharu and as Shariah Counselor of World Islamic Mint, I would like to state in a manner of clarification and support to this initiative the following:

1.- The Gold Dinar and Silver Dirham are not legal tender. Legal tender or forced tender is an offered payment that, by law, cannot be refused in settlement of a debt, and have the debt remain in force. Personal cheques, credit cards, debit cards and similar non-cash methods of payment are not legal tender only the notes and coins of Malaysia are Legal Tender. The issuing of Legal Tender is the exclusive prerogative of the Federal Government and the Government of Kelantan never had nor has the intention to issue Legal Tender as that is legally impossible.

2.- The Dinar and the Dirham are known in the fiqh (see [a] Muqaddimah of ibn Khaldun) as the “Shariah currency”or “Shariah coins”. The term “Shariah coins” is specific to the Dinar and Dirham and is not applicable to any other coin made in gold, silver or any other material. Any other coin is known as “non-shari’i” (ibn Khaldun).

3.-Properly speaking the term “alternative currency” is not applicable to the Shariah coins or currency because the term “Shariah coins” is specific to the Dinar and Dirham and therefore is not alternative to any other coins or currency (non shari’i). It stands on its own without alternative. The use of the expression “alternative currency” can only be used if proper explanation is given in regards to the fundamental differences that exist in relation to the legal tender currencies such as the Malaysian Ringgit.

The Malaysian Ringgit is an entirely different legal concept and has different functions. The Malaysian Ringgit is not based on a commodity (in Arabic ‘ayn, meaning tangible merchandise) like the Dinar and Dirham, the Malaysian Ringgit a promissory note (in Arabic dayn, meaning debt or liability) with no intrinsic value (its value as ‘ayn/tangible merchandise is the value of the paper close to zero) but with a fiat value which established by the compulsion law of the Federal Government through the Law of Legal Tender and it can change from time to time.

On the other hand, the value of the Dinar and Dirham depends entirely on the market value of the commodity (gold and silver) on which it is manufactured, just like a kilo of rice depends on the value of rice. This difference in important in religious terms, for example, zakat which is a legal obligation of the Shariah has to be paid in ‘ayn but cannot be paid in dayn. (see [b] Al-Kasani). Muslims should, if having the choice(if no choice is given or no ‘ayn is available then darurah, that is exceptionality, is temporarily applicable), pay with ‘ayn rather than dayn.

5.- In linguistic sense, the Dinar and Dirham are not face values, but names that indicate specific weights. The Dinar is a specific weight of 4.25 grams and it is also known as mithqal in Arabic. The Dirham is a specific weight of 2.975 grams or 7/10 of the mithqal. In a way they  are legally the same as saying “1kg of rice”.  Therefore they are specific weights of commodity (gold and silver) which are mentioned in Qur’an and in many aspects of the Shariah regarding zakat and legal judgments; and thus they cannot be altered in their weight.

6.- In history, the Shariah coins has never been legal tender. In the practice of the early Muslim community the Shariah coins were not only currency used as means of payment. Barley, dates or salt were also used as means of payment and therefore no exclusive right was given to the Shariah coins. The reason for this “freedom to choose the medium of exchange” is that money is considered a part of trading it is regulated under the same Qur’anic injunction that regulates trade: “tijaratun ‘aan taradim minkum”, the meaning of which is “trade according to mutual consent”. “Mutual consent” excludes the idea of compulsion or monopoly in regards to trading. (see [c] Tafsir al-Jalalayn).

This is another reason why the Dinar and Dirham are not legal tender and have never been legal tender. Freedom to choose the medium of exchange is a fundamental right granted by Allah to Muslims and non-Muslims alike. The use of the Shariah currency is therefore inclusive of non-Muslims.

7.-The term “currency” is commonly understood as legal tender or as fiat money that carries a face value. Since the “Shariah coins” are not legal tender and do not have a face value the” Shariah coins” should be better understood as a commodity rather than as “currency” in the common use of the term.

Regarding current common practices, the use of the “Shariah coins” belongs to the category of barter, that is, the mutual exchange of products and services. It is arguable that in the past, before the introduction of legal tender laws, transactions made with gold and silver were consider normal transactions and the term barter was applicable to all other transactions. Therefore the use of the term “Shariah currency” should be understood with the limitations explained above and in consideration to the historical practice of the Muslims as it is relevant in the Islamic Jurisprudence.

8.- Until very recently in history “paper currencies” were defined as promissory notes in terms of gold and silver. In that sense they represented an ‘amanah’ (trusting wealth to someone who will keep it for you until you demand it) that is an obligation to pay on demand a certain amount of gold and silver. We know from history that this obligation was often not fulfilled and eventually the governments of the world decided gradually to eliminate the obligation to pay in specie altogether.

The closest case of the default is the US dollar and its unilateral decision to break their “Bretton Woods Agreement”. This concept of ‘broken amanah’ is known in the Qur’an and carries legal implications as to the prohibition to accept amanah from non-Muslims unless they live under Muslim rule so that they can be obliged to pay their contractual obligations (see [d] Qadi Abu Bakr ibn al-Arabi). This legal injunction, which in theory implies the prohibition to accept British pounds, US dollars, etc. ( or any other currency backed by them), has been abrogated long ago since the colonial days by new laws that consider that this legal injunction is no longer applicable.

Under the inspiration of the colonial legal systems, the constitutional Law of all Muslim countries including Malaysia grants the right to accept foreign promissory notes from non-Muslim countries (such as USD) to their own Central Bank (Bank Negara) as a reserve value for their own fiat currency. Because of this many Muslims (and non-Muslims) still mistakenly belief that their own fiat currency is backed by gold and silver when in fact no legal tender in the world is fully backed by specie anymore.

The gold dinar and silver dirham are commodities and therefore they are not an ‘amanah: they are a tangible commodity (‘ayn), that is, when you pay with them, you hand over a certain amount of gold and silver and therefore they do not require to be backed by any other asset or authority other than itself. This is another reason why the Shariah currency cannot be compared or considered an alternative to “paper currencies”.

9.- Legal Tender is often a misunderstood concept. Coins and banknotes do not need to be ‘legal tender’ in order to be used as money to buy and perform other transactions for which money is intended. Legal tender must be accepted to settle a money debt. For example, US federal law does not restrict private businesses, persons or organisations in what methods of payment they choose to accept or refuse. Businesses are therefore free to insist on payment by credit card, for example, or to refuse larger denomination banknotes. In Canada for example, only Canadian dollar banknotes issued by the Bank of Canada are legal tender; however, commercial transactions may legally be settled in any manner agreed by the parties involved.  A significant amount of business in Canada is transacted in United States dollars, despite United States currency not being legal tender. Legal tender can be refused unless or until a person is in debt, therefore vending machines and transport staff do not have to accept the largest denomination of banknote for a single bus fare or bar of chocolate, and even shopkeepers can reject large banknotes.  However, restaurants that do not collect money until after a meal is served (a debt has been created) would have to accept any legal tender. The right of a trader to refuse to do business with any person means a purchaser cannot demand to make a purchase, and so declaring a legal tender other than for debts would be redundant.

10.- The minting of the Dinar and Dirham is a known practice of the Muslims from the early days of Islam. The first dated coins that can be assigned to the Muslims are copies of silver dirhams of the Sasanian Yezdigird III, struck during the Khalifate of Uthman, radiallahu 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 minting made by Muslims. In the year 75 (695) the Khalif Abdalmalik ordered Al-Haddjadj to mint the first dirhams, officially establishing the standard of Umar ibn al-Khattab, radiallahu anhu: 7/10 of the mithqal. The next year he ordered the dirhams to be minted in all the regions of the Dar al-Islam. He ordered the coins to be stamped with the sentence: “Allahu Ahad, Allahu Samad”. The minting of the coins is considered an obligation of the Sultan that needs to be followed (see [e] al-Qurtubi).

And Victory belongs to Allah. In Him we trust and praise belong to the Lord of the worlds and peace and blessings on His Messenger.

The slave of Allah, Hajj Abdalhasib Castineira, in Kuala Lumpur, on the 5th of Ramadhan, 1431.

NOTES

A] Imam Abu Zayd Ibn Khaldun (d. 1406)

“The Revelation undertook to mention them and attached many judgments to them, for example zakat, marriage, and hudud. Therefore within the Revelation they have to have a reality and specific measure for assessment (of zakat, etc.) upon which its judgments may be based rather than on the non-shari’i (other coins).

Know that there is a 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 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.”

“Al-Muqaddimah”
B] Imam Abu Bakr al-Kasani ( d.1191)

If the property on which zakat fell due is dayn, as distinguished from ‘ayn, its zakat may be settled in terms of ‘ayn wealth. Thus a person having a claim of two hundred dirhams on which zakat is due, may give, in settlement of the same, five dirhams in cash, because dayn as compared with ‘ayn is defective (naqis) and the ‘ayn is complete (kamil), and a settlement of the defective in terms of the complete is valid. On the contrary, the settlement of the complete ‘ayn in terms of the defective (dayn) is not valid, and therefore, the zakat debt is not discharged if a person wants to pay the zakat of two hundred dirhams which he possesses (i.e. ‘ayn) in terms of the five dirhams which a poor person owes him (i.e. dayn); namely, by absolving him from the debt intending it for his own zakat debt on the two hundred dirhams.”

“Bada’i` al-Sana’i”
C] Shaykh Jalaluddin al-Mahalli & Shaykh Jalaluddin al-Suyuti

Allah says in the Qur’an (4, 29):

{ يَٰأَيُّهَا ٱلَّذِينَ آمَنُواْ لاَ تَأْكُلُوۤاْ أَمْوَٰلَكُمْ بَيْنَكُمْ بِٱلْبَٰطِلِ إِلاَّ أَن تَكُونَ تِجَٰرَةً عَن تَرَاضٍ مِّنْكُمْ وَلاَ تَقْتُلُوۤاْ أَنْفُسَكُمْ إِنَّ ٱللَّهَ كَانَ بِكُمْ رَحِيماً }

Tafsir:

“O you who believe, consume not your goods between you wrongly, unlawfully according to the Law, through usury or usurpation, except it be trading (tijāratan, also read tijāratun), so that the goods be from trade effected, through mutual agreement, through mutual good-will: such [goods] you may consume. And kill not yourselves, by committing what leads towards destruction on account of some affiliation, be it in this world or the Hereafter. Surely God is ever Merciful to you, when He forbids you such things.”

“Tafsir al-Jalalayn”
D] Qadi Abu Bakr Ibn al Arabi (d. 1148)

Allah says in the Qur’an (3:75):

“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. “

Tafsir:

“the benefit that can be taken from this is the prohibition of entrusting (amanah) the People of the Book with goods. The question concerning entrusting property is legislated by the text of Qur’an.”

“Ahkam al-Qur’an”
E] Imam Abu Abdallah Al-Qurtubi (d. 1273)

Allah says in the Qur’an (4:59):

“O you who believe! Obey Allah and obey the Messenger and those in command among you..”

Tafsir:

“The ayat is an order to obey the Sultan in respect to seven obligations: the minting of the dinar and the dirham, fixing weights and measure, legal judgments, Hajj, Jumu’ah, the two Eids and Jihad.”

“Al-Jami’ li-Ahkam al-Qur’an”

15 thoughts on “Understanding the Gold Dinar and Silver Dirham

  1. Over here Americans are not happy to hear what this Malaysian educated imam has had to say about building a mosque in the shadows of the World Trade Center in New York.

  2. Din, thanks for the article. I really couldn’t understand what all this fuss about the dinar/dirham was about in the first place. I remember Octo trying desperately to sell this form of alternative currency amongst ‘Muslim’ states (whatever that means) as an adjunct to barter trade in the late 90’s. As with many of his ‘miraculous’ speculations/inspirations – it died an inglorious death, after meeting resistance from almost everyone else. I heard Kak Pidah was aghast and almost aplopectic, not to mention Zeti..

    Now that the “class act” in Kelantan has revived the ‘idea’, I think its good that the Shariah Counselor of WIM has comeout with a strong definition of this dinosaurian concept. I can only see the attempts by the less erudite politicos of Pas trying to take cover, despite their yearnings of another Caliphate. Wish-list one thing, Scripture is another.

    My real opinion of it? See Martin Luther’s reaction to the selling of ‘indulgences’ by the Roman Catholic Church in the !400’s. Medieval thinking in dire need to reinvent itself. But heck, i’m no minnow in Islamic jurisprudence, Syafie’ or otherwise – but it can be seen as a retrogressive step to the return of dhimmi-hood of the non-muslims, if Pas isn’t careful.

    Yo Bean, the can Center go up sans the mosque? Sort of a compromise. I’m a believer of ecumenism (in a broad context). I think that the other religious communities don’t mind so much, as these yokels, who have a problem of vengefulness gone wrong.

  3. Do you, Din, really think those at Bank Negara can handle an Islamic concept like ‘shariah coin’? They couldn’t handle the request made by an UMNO Youth member in the 70s for compensation when he dumped stacks of boxes filled to the brim with crisp Japanese banana notes on their counter!
    _______________
    Mongkut Bean,

    The Japanese banana notes ended when the Japanese were defeated. Bank Negara is not obliged to redeem them. It is too early to tell whether the Kelantan initiative can take off nation wide. But the Gold Dinar and Silver Dirham will never replace the ringgit in Malaysia, not unless we as members of the public lose confidence in the ringgit as a store of value and medium of exchange.

    Bank Negara chaps are typical central bankers, conservative and protective of their own turf. Even Mahathir could not persuade the Bank to support his Gold Dinar idea as the currency of the Muslim world to replace the US dollar.–Din Merican

  4. Five Reasons to Buy Gold Coins

    Whether you’re looking for protection against devalued currency or looking for the best diversification, look to gold bullion coins as the premier choice for all investors. And here’s why:

    Easy Start-up. starting your gold portfolio using gold bullion coins just might be the easiest investment there is. Unlike many bullion bars, gold bullion coins can be bought as small as 1/10 of an ounce. And, yes, while there are 1oz. bullion bars, should you decide to sell, gold coins can be sold a lot easier.

    Easy to Sell. There’s multiple reasons gold coins sell faster than bars, take the international appeal for coins, the guaranteed weight and purity, or the ease at which investors can tell if coins have been tampered with. There’s no bullion option quite like bullion coins.

    Easy to Store. Because of the coin’s small unit nature, it’s much easier to store 50 one-ounce gold bullion coins than a single 50 ounce gold bar. In addition to the small unit nature, gold coins will also fit into all kinds of discreet hiding places around a house that are far too small for a gold bar. However, it’s strongly recommended to store any type of gold bullion in proper storage such as a safe.

    Easy to Split. If you have 50 ounces in coins you can easily sell a few, on the other hand if you have 50 ounces in a single bar, you have to sell the whole thing. It’s your portfolio of gold that might need to “cash in” on your gold investment, and coins give you this option.

    So, whether you want to invest in 5 ounces or 50 ounces gold bullion coins give you, the investor, the most ease. It’s easy to start, easy to sell, easy to store, and easy to split. So, what’s your hangup, BNM? After losing money and gold reserves, just learn one or two from Kelantan.. This is not an overnite idea! It has taken, Umar Vadillo, upteen years to perfect the technique.

    Meanwhile, get Noh Yaakop to speculate on your behalf and lose more money! Please focus on money transactions by ill gotten means from politicians, their cronies, wives and relatives and GET over money back. Don’t give lame answers like money changer, can’t you follow the money trail…? If you don’t have expertise in this area, let the Kelantan Government try it first.

  5. Perdana Menteri Datuk Seri Najib Razak hari ini berkata hanya Bank Negara Malaysia (BNM) sahaja yang boleh mengeluarkan wang yang diiktiraf dan sah di negara ini.
    Tetapi wang emas (dinar) dan perak (dirham) sah/ BUKAN HARAM di seluruh dunia. Nilainya adalah nilai semasa emas dan perak.
    Kira-kira 1,000 peniaga di bandar ini bersetuju menerima dinar emas dan dirham perak dalam transaksi perniagaan mereka.
    Dinar dan dirham itu dikeluarkan oleh anak syarikat Perbadanan Menteri Besar Kelantan (PMBK), Kelantan Golden Trade.
    Husam berkata, pihaknya menyedari dinar dan dirham yang dikeluarkan di negeri ini tidak boleh menggantikan mata wang sedia ada.

    Katanya, mata wang syariah tersebut hanya boleh digunakan apabila kedua-dua pihak bersetuju untuk menukar barangan atau perkhidmatan berdasarkan nilai semasa dinar dan dirham. Boleh by pass FOREX !!

  6. Pingback: The A2Z Articles Directory | Why Consumers Should Choose Debit Cards Over Credit Cards

  7. Personally, I believe the day will soon come when the final global financial collapse, triggered by the ‘great nation’ of the U.S. of A. causing paper money to be worthless (cannot even be used to wipe your arsehole). When it will happen, I don’t know but I do know that the American and the Feds cannot possibly be creating and printing money out of thin air, unless we continue to believe that the ‘IOUs’ are worth anything. Eventually, the world will come back to full circle, and back to the true gold and silver standard, scrapping the IOUs from the big governments, inspite of the arsenal of big guns and nukes they carry. To me, no harm buying gold and/or silver, as a form of diversifying your wealth. Nobody has really lost any money from buying gold, unless you are speculating on short terms.

  8. “The only currency that is legal tender in Kelantan is the Malaysian ringgit. According to the Malaysian constitution, ninth schedule, list I sub 7.a the states of Malaysia do not have the right to issue coins.”

    The above is provided in the Constitution. Only the Federal Government has the right to issue legal tender.
    ____________
    Kathy, please read the Imam’s statement carefully. The Malaysian ringgit is still legal tender. The Gold Dinar and Silver Dirham can be used in Kelantan to, for example, pay zakat. People can hold them in their kitty, if they choose to do so.–Din Merican.
    ______________
    The challenges that will brought about is implications on how business is run, does the State then have to contend with two currencies? How do they overcome this Constitutional Rule without ratification by the Federal Govenrment?

  9. The romantic in me sees us going back to Abu Nawas time.
    Cant wait to go to Kelantan to trade in Dinar and Darham.
    I will don the tarbush, ring the bell and shout :
    “Mari-mari awe dan mek. Nak beli minyak unta ni 1,000 dirham. Kalu nak beli mek ni, 1000 dinar.’
    Tok guru kata tokse guno riyal (Kelantanese for ringgit). Itu dah kuno, hok Barise Nasional.

  10. Although I fully support the use of Dinar and Dirham I can’t help it but feel the Dirham especially is way too much overpriced for the amount of silver it has. I can get a 1/10oz (3.11 grams) silver rounds for about less than half the price I would pay for a Kelantan dirham. I guess that cost of minting + taxes would probably the cause of the higher price…hmm…

  11. Dear congkak,

    Actually the dirham is underpriced if compared to the dinar.
    Formerly it used to be 1 dinar is about 12 or 15 dirham when exchanged if we refer to some early records about their exchange rate.
    (This is close to the zakat rate which is a minimum of 20 dinar or 200 dirham- hence a 1 to 10 ratio)

    Now if we refer ringgit-wise or dollarwise for exchange:
    1 dinar can be exchanged with about 50 dirham
    ( since 1 dinar is about RM 600 and 1 dirham is about RM 13)

    This means current economic system has pushed the dirham to be
    not in balance with the dinar in terms of zakat ratio.

    But it is also a time for us to buy more dirham since it is ‘cheaper’ according to current economic system. Let us use more dirham and naturally this will push the dirham to nearer the zakat ratio.

    Give them the papers and we go after the dirhams and dinars.

    yy

  12. Believe in quran

    The world should take the silver and gold as the total amount of ‘money’ in the world.
    let the value of silver be pushed up to accomodate the fiat money.

    silver very cheap now at 1:52 ratio of gold:silver

Leave a Reply to imran Cancel reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.