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Reason for Prohibition

The reason for prohibiting riba in dealing with these six commodities is that they represented — at the time — the basic necessities of the citizens; without such basic commodities, they could not live comfortably. Gold and silver, at the time of Prophet Muhammad (pp), were the basic currencies used to buy and sell and to define prices in the market to settle transactions. They were called tathmeen: the two commodities used to establish prices in the market because gold and silver represented a way to store value because they do not change over time.

If riba were practiced in dealing with these items, it would have hurt the interests of the citizens and would lead to a breakdown in the fabric of the society. RF law prohibited such dealing as a mercy to mankind and to protect the interests of the citizens by preserving market stability.

The reason for the “hand-to-hand” or spot transaction prohibition in trading reference commodities is to prevent and make it prohibited to create a speculative futures and/or options market in these commodities and changes its use as a reference in calibrating prices. The wisdom of the prohibition in this RF fundamental market rule would eradicate speculation and lead to a credible pricing reference system for measuring fair value.

From the preceding discussion, one can conclude that the reason for prohibiting riba in gold and silver was that gold and silver were used to price things, and riba was prohibited on the other four food items because they were necessary food staples. If these qualifications are found by analogy to apply on other items, the rule applies. Such items are used as reference commodities in the RF Commodity Indexation Discipline discussed earlier.

Based on this determination, the rule can be extended using the discipline of “Measured Analogy” (qiyas). The rule can be stated in general as:

1. If the two items transacted are from the same material and are used for the same purpose (e.g., gold for gold, or wheat for wheat), then both riba al-nassee'ah and riba al-fadl are prohibited. The following conditions must be satisfied in order for a like-for-like transaction to be ruled as an RF transaction (riba free):

a. The quantity on the buy and sell side must be equal, regardless of quality.[1]

b. The buy and sell must be done on the spot (e.g., hand to hand, as the Prophet [pp] said).

2. If the two items to be transacted differ in their material but are used for the same application, then the rules of riba al-fadl can be invoked on the condition that riba al-nassee'ah is not used. Gold can be sold for silver, or wheat can be sold for barley, and the transaction must be done on the spot (hand-to-hand), but the quantities do not have to be equal. It was reported that the Prophet (pp) said[2]:

. . . it is acceptable to sell wheat for barley and you can get more barley but it has to be hand to hand [an on-the-spot transaction].

If the two items to be transacted are different in material and in purpose of use, there are no restrictions in applying time in the riba al-nassee'ah and excess over the original amount in riba al-fadl. For example, food can be sold for silver, and one dress for two dresses, or two cups for one cup. In summary, riba al-fadl can be practiced on any item, aside from the reference calibrating commodities: the two metals (gold and silver) and the food staples (wheat, barley, dates, and salt). The Prophet (pp) emphasized this concept when a companion brought to him an excellent type of dates from Khaiber (a city in what is now Saudi Arabia). The Prophet (pp) asked, “Are all the dates of Khaiber like this?” The man said no, but we barter one volume (a volume-measuring unit that was used at that time, called saa) of this dates for two volumes (saa) of ours (they were lower quality, smaller dates). The Prophet said: “Do not do that because that is exactly riba and it is forbidden.” The way to do it, according to RF discipline, is to sell your dates for money (silver dirham, gold dinar, or another calibrating reference staple commodity except for the same commodity — i.e., not other dates), and buy the good dates with the proceeds.[3] By this rule, one can buy 10 bushels of wheat (food) for one ounce of gold on-the-spot [cash price] or deferred at two ounces of gold after two years. Because the gold is a metal and the wheat is a food, this transaction is halal (divinely allowed). Also, buying 7 bushels of wheat for 10 bushels of barley is allowed on-the-spot, but increasing the price to 7 bushels of wheat for 15 bushels of barley to be paid (delivered) after one year is haram (divinely prohibited) because both are food items. As a more modern example and by using the concept of analogy, if one wants to buy heating oil by exchanging two gallons of fuel oil for one gallon of gasoline, it is not allowed by the RF discipline because both are used as a source of energy and al-fadl can only be applied on two items with different uses. In this case, one can offer to exchange the heating oil for another medium (currency), such as gold or silver, or for a food product such as wheat or rice. Then one can take the proceeds and buy the gasoline with it at market price. This is what we advocate and present for the first time as the RF disciplines in this book; the RF Commodity Indexation Discipline and the RF Marking-to-Market Discipline.

When the Islamic state, with its laws and systems, expanded beyond Arabia, many of the jurists were exposed to different environments, economies, monetary systems, and cultures that used essential commodities that were not known in Arabia. To deal with the intricacies of concluding whether such practices were acceptable to the Judeo-Christian-Islamic Shari'aa law, the jurists used the system of “Measured Analogy” (qiyas, as explained in Chapters 3 and 4). For example, this analysis allowed them to add other commodities to the six reference commodities identified by the Prophet (pp), such as rice, which is used in Asia more than wheat, and corn, which is used more as a staple food in Latin America. Muslims continued for centuries to apply these rulings in their dealings.

  • [1] Muslim; the scholar in Hadeeth reported that a person came to the Prophet (pp) to gift him with dates. The Prophet (pp) asked him how he could afford this high-quality, large-size dates and said: “This is not our type of dates.” The person said, “Oh Prophet Muhammad (pp), we sold two containers of our dates for one container of the better-quality large dates.” The Prophet (pp) said: “This is what Riba is!” He proceeded to tell the person: “Return these dates. Then sell it [our dates] in the market for [real] money and use the money to buy the other dates.” In another story reported by the scholar Abu Dawood: A person brought the Prophet (pp) a gold bracelet that had beads woven in it, which he had purchased for nine or seven dinars (gold currency at that time). The Prophet (pp) said: “This transaction must be conducted by separating the gold from the beads. Return it. And price each separately.” And the scholar Muslim further reported orders to separate the gold from the beads, and said that the gold should be exchanged for the same weight of gold.
  • [2] By the Hadeeth scholar Abu Dawood.
  • [3] Narrated by Bukhari, one of the recognized authorities on the compiling of the Prophet's Hadeeth.
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