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Volume :5 Issue : 12 1988      Add To Cart                                                                    Download

Change in the Value of Money

Auther : By: Ajeel Anashmi

Change in the Value of Money

(i.e. Devaluation, Appreciation and Demonetization of Currency) in Islamic Jurisprudence

By: Ajeel Anashmi

Appreciation and devaluation of currency is considered one of the most serious economic problem of modern contemporary societies because it leads to inflation; an economic situation in which prices rise in turn as the supply of money is increased.

Muslim jurists have investigated this problem from different angles:

1. Fradulent change in the value of money whether done by the state or by individuals is undesirable or prohibited depending on the details of each case.

2. The change in the value of currency whether it is in Dinar or Dirham. Jurists agree that on the date of maturity, debts are settled in the same amount borrowed irrespective of change in the value of money (appreciation or depreciation of currency)-

3. Change in the value of money: The four Jurists differed in this respect. However, they all concentrated on investigating three aspects of the problem:

1. Obsolesence

• Abu Haneefa considers the selling contract as invalid if the currency is not any more in circulation or if it has become obsolete.

• Abu Yusuf and Muhammad lbn Al-Hassan are of the opinion of the validity of the contract on the maturity date (according to Abu Yusuf) or on the day of the devaluation of the currency (according to Mohammad).

• Malikeyah (according to their prevalent opinion and Shafi’ya jurists and Al-Layth lbn Sa’ad are of the opinion that if the currency has become obsolete the debtor will not be under any obligation other than repaying the same amount of money he had actually received on the date of the contract. However, it was also reported about Shafiya jurists saying that the vendor has the option of selling by the old currency or otherwise annul the selling contract.

• Hanabelah” and Malikeyah” (as against the prevalent opinion) as well as Abu Yusuf and Muhammad (as mentioned above) are of the opinion that if money has become obsolete or devaluated the same amount borrowed should be repaid. However, they differed about the time of currency valuation. Most of them think that the time is the day of receiving the money. Muhammad and some of the “Hanaballah” say that the time is the date of devaluation or the date on which people stopped to use the currency. Another group of “Hanaballah” says that it is the date of the dispute.

2. Case Two

We say that the use of currency is discontinued when it is not in circulation any more, though it may be found in money exchanges or hoarded at peoples’ homes.

Most of the ‘Hanafi jurists have agreed to Abu Yusuf and Muhammad’s opinion (an authorized dictum) . “Malikeyah”, “Shafi’yah” and “Hanabellah” have all agreed that the value should be repaid when the circulation of the currency is discontinued. However, they have not agreed on the date of cur

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