Islam and the Quran

Lending and Receiving in Different Currencies

Question: Is it allowed (in terms of Islam) to lend someone in $ currency and request the repayment in another currency like pound sterling, or index its provision with gold?

The differential in borrowing and lending can be calculated according to the changes in value of gold or silver or the rate of inflation. Nowadays gold and silver are not in use as money, and we use them like other commodities. They also gain and lose value in time period. For example, while an ounce of gold (31g.) was $850 in the first months of 1980, its value decreased to $335.5 on 9 March 1982. The loss of value in gold is higher than dollar in these two years. But the volatility of gold in the stock market and the changes in its value occur in short-term. Gold is capable of maintaining its value over the long term.  Depreciation of money could be calculated according to the changes in value of gold and by the way, this could protect us from loss in many cases.

Although using inflation rate is the most appropriate way to calculate the depreciation of money in time period, there are also difficulties in determining the exact inflation rate.

The third way is using foreign currencies which are valid in the market as a basis. They are also banknotes, and therefore are exposed to both inflation and fluctuations parallel to the trends in international stock markets.

Consequently, it would be appropriate to give and receive blessings to each other (both debtor and drawer) after repayment, just in case of any potential or unknown losses, because it is very difficult to fully identify the loss in the value of money in time period.

Add comment

Categories