Money in Islam refers to all possessions that hold monetary value, such as livestock, commodities, houses, and buildings. Islam encourages earning wealth through legitimate means (e.g., trade, agriculture, industry, and handicrafts). [1] Conversely, illegal earnings like bribery, fraud, and interest are declared haram (forbidden). [2]
Islam, while encouraging spending money in legitimate ways, also forbids extravagance and miserliness. In the Qur'an, Allah says,
And do not make your hand chained to your neck or extend it completely, lest you sit blameworthy and destitute.
— Al-Isra, Ayah: 29
From an Islamic perspective, wealth truly belongs to Allah, and humans are merely its guardians or trustees. [3] Therefore, Islam imposes two conditions regarding wealth, [4]
Following the provisions of Sharia in earning wealth, because people will be questioned on the Day of Judgment. The Prophet of Islam Muhammad said,
The feet of any servant will not move on the Day of Judgment until he is asked... and about his wealth – from where he earned it and where he spent it.
— Sunan al-Tirmidhi, Hadith/2417
Adopting a moderate approach in spending. Allah has forbidden extravagance, as it is a misuse of wealth. At the same time, miserliness is also haram (forbidden), as it is an injustice to the soul and contrary to the spirit of social empathy. In the Qur'an, Allah says,
And those who, when they spend, do so not excessively or stingily but are moderate between the two.
— Al-Furqan, Ayah: 67
According to Fiqh, wealth is categorized into the following classes based on various aspects:
Islam permits the use of wealth to acquire more assets through legitimate means, opening avenues that contribute to social justice and community development, such as:
The functions of wealth in Islam are:
The free market principle is an Islamic principle as cited per the primary islamic source in the Quran.[ citation needed ] Islam considers commodities with intrinsic value as currency.[ citation needed ] The following are some examples of commodities that can be used as currency: gold (as Gold Dinar), silver (as Silver Dirham), dates, wheat, barley, and salt. The mentioned six items are derived from a hadith[ citation needed ] i.e. gold, silver, dates, wheat, barley, and salt and were used as money in barter system. As the items mentioned in hadith, therefore, also known as Sunnah money.
Paper money or electronic money can be used, as long as, it is backed by one of these commodities at a fixed exchange rate (in other words the paper is just a contract stipulating that the bearer can redeem the paper for a fixed measure (weight) of that particular commodity). Until 1971, most currencies of the world were backed by gold. However, only governments could redeem paper, not the average citizen. [6]
The price of a commodity is set by the market as long as fiat currency (paper) is not used. On the other hand, the price/value of commodities can be manipulated/adjusted by the creators of fiat money (by virtue of the market law of supply and demand). [7]
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