17 Mar 2007
There have been many arguments in favour of the money to be considered as a commodity and that its price should be determined based on its demand and supply in the open market, obviously price being the interest or usury.
By implication, utilising money to earn money should be justifiable.
What is the definition of a commodity? What does Islamic jurisprudence say about money to be considered as commodity?
The economic definition of a commodity is a product that can be 'sold' to make profit.
Goods and commodities such as grain, metals, cloth - or any other consumer goods for that matter - are traded in the market on the principle of payment to be made by the buyer against delivery or on deferred basis, as per his agreement with the seller. It is not with the assumption that the buyer will 'return' the commodity to the seller.
Not exchanged
In fact, to ward off the possibility of a returned item, sellers may print the footnote on their cash memo or invoice which says that "goods once sold will not be taken back or exchanged".
It is a fact that a trader's nightmare is to have his sold goods returned. It is equally undesirable for an accountant to undo a sale by recording 'sales return' entry.
In light of the above, it is clear that the sale of a commodity or goods is intended for a profit but with clear intention of not having it returned.
It can also be deduced from this discussion that in a sale and purchase transaction, cash is only on one side of the equation and the commodity is on the other side.
Let's apply this logic to money.
The lender of money parts with it with a clear intention to earn interest (or call it making 'profit' in the trading sense), but also have it returned after a period agreed to by him with the borrower.
In the case of delay, the lender not only insists on prompt return of money with interest, but often also adopts harsh measures against the borrower, including an increase in the amount of interest for the delayed period.
The borrower might even be put behind bars for not returning the money with normal as well as compound and penalty interest.
Do you think the trader of a commodity would resort to such steps in order to get his 'sold' commodity back?
Nature
In view of the foregoing, the definition of 'commodity' does not really fit money and as such its 'trading' in a conventional sense leaves a lot to be desired in terms of the nature and character of a true commodity.
Another reason why money cannot be a commodity is the lack of wear and tear in it, as opposed to a product. As such a soiled currency note of Dh1,000 would command the same value as one that has been newly printed.
The writer is VP & Head of Sharia Structuring, Documentation & Product Development, Dubai Islamic Bank.
By Sohail Zubairi
Gulf News 2007. All rights reserved.
