Zakāt in contemporary Shi‘a

Fiqh

On Currency or Metal?

ALI ABIDI

May 2, 2011
Introduction..................................................................................................................................3
Importance and function of Zakāt................................................................................................3
Various views of Zakāt on Monetary Instruments.......................................................................5
A historical perspective on Metal and Paper Currency...............................................................6
Comparing arguments for and against Zakāt on Currency..........................................................7
Arguments against Zakāt on Currency....................................................................................7
Arguments for Zakāt on Currency...........................................................................................8
A comparative analysis..........................................................................................................10
Conclusion.................................................................................................................................11
Appendix 1.................................................................................................................................13
....................................................................................................................................................13
Appendix 2.................................................................................................................................14
Bibliography..............................................................................................................................15
Introduction
Zakāt is counted as one of the fundamentals of Islam. It appears several times in the Quran, in
both its foundational meaning (to purify)1 and its specific juristic meaning: purification of one’s
wealth by parting with a particular fraction to be distributed to the poor, as well as some other
defined categories.2 Its obligation was made ample clear during the time of Prophet Muhammad,
although there is dispute as to the obligation of handing it over to the Islamic government –
which is said to have been formalized by the first Caliph in the lead up to the Ridda wars.3 What
is generally agreed by jurists is that zakāt must be given in three categories: Animals, Crops and
Monetary wealth at a rate of 2.5%. All Shi‘a jurists certify a sub-division into nine traditional
items: camels, cattle and sheep for livestock; wheat, barley, dates, and raisins for crops; and gold
and silver coins for monetary wealth. But beyond these, there is disagreement on additions.

The purpose of this paper is to investigate the category of monetary wealth. Currency (or liquid
monetary worth) in today’s economy carries the bulk of the financial value of all three
categories, unlike the period in which zakāt was legislated whereby barter trade, agriculture and
animal husbandry had a much wider economic role. In such a scenario, one is forced to
contemplate if legislating mandatory charity for the poor, in regards to the maqsad al-Sharia
(purpose of Islamic Law), should account for the changes in the world economy?

Furthermore, gold and silver coins are virtually out of circulation; does this imply that the
category of ‘monetary wealth’ is disbanded for our era? What exactly did the Divine intend when
the law was set by His prophet to tax gold and silver; was it a tax on their currency attribute? Or
was it a tax on the metal attribute? These questions lie at the center of our discussion.

Importance and function of Zakāt

Firstly, the matter of charity and purification of wealth via supporting the poor and needy is a
major theme in the Quran. There are several verses that mention zakāt, out of which at least 27

1
For example see Al-Quran 91:9: “He succeeds who purifies it (i.e. his soul)”
2
See Al-Quran 9:60 for the categories: fuqarā (poor), masākīn (needy), the zakāt tax administrators, those whose
hearts incline towards Islam, those in bondage, those in debts, in the cause of God, and stranded travellers
3
MADELUNG, Wilfred, The Succession to Muhammad, Cambridge (UK): Cambridge University Press, 2001
verses mention the twin obligation of salāt (canonical prayer) and zakāt together.4 There are also
plenty on verses indicating the obligation for charity and punishment for not expending it.5

Additionally, there are various sound narrations from the Prophet, and those transmitted from his
family, regarding the importance and function of zakāt, forty of which have been compiled by
Tajri for the World Federation of the KSIMC.6 They include: ‘Allah has not imposed anything
more serious than zakāt upon this nation, and due to it many of them shall perish’,7 ‘Indeed
Allah has imposed on the rich people a measure that will suffice their poor ones. Thus if the
needy one is at a loss, or is overly strained, or is unclothed, then it is due to what the rich one
has withheld’,8 ‘zakāt has only been enforced to ensure the sustenance of the poor and to secure
the availability of their wealth’,9 and the admonition: ‘Secure your wealth with zakāt’.10
Interestingly, these and many other narrations in the compilation use the Arabic term amwāl
(wealth) in portraying the target to be taxed and the share of the poor in it. In regards to gold and
silver coins, one should contemplate if the wealth was their currency attribute or metal worth?

One obvious observation from the various verses and narrations is the underlying goal of the
suppression of poverty via the support of the poor by the rich. The major question one is faced
with, is if the traditional nine categories are fulfilling this function? If not, is there a need to
revisit the nine categories? Should they be re-interpreted in the light of changed circumstances?

A recent case study into the poverty faced by a section of the Shi‘a Muslim community of
Zanzibar (East Africa) concluded that the increased poverty in the community was due to the
failure of the rich to pay zakāt on their wealth to support the poor.11 The blame was placed upon
the frozen perception of the traditional categories, which exempts the current-day wealth
(currency) of the rich. In a similar vein, Datoo in the January 2009 Editorial of the Federation
4
MANJI, Inayat, Zakat: QuranicSolution rejected – Sinfully, Federation Samachar, Issue # 8, Dar-es-Salaam
(Tanzania), Federation of Khoja Shia Ithna Asheri Jamaats of Africa, January 2009
5
For example: Al-Quran 2:219 and 9:34-35
6
TAJRI, Muhammed Reza, The Sublime Purification: Zakat - 40Ahadith, Middlesex (UK): World Federation of the
KSIMC, 2009
7
Ibid., p.2, ref: Al-Kafi, Volume 3, Page 497, and Bihar al-Anwar, Volume 93, Page 22
8
Ibid., p.6, ref: Bihar al-Anwar, Volume 93, Page 28
9
Ibid., p.8, ref: Al-Kafi, Volume 3, Page 498, and Bihar al-Anwar, Volume 93, Page 18
10
Ibid., p.15, ref: Bihar al-Anwar, Volume 93, Page 13 & Kanz al-Ummal, Volume 15, Page 831
11
Dastan of the State of Poor Ithna-Asheris in Zanzibar 1930-1960 and Know Why?, Third Revised Edition, 2010,
pp.17-18
Samachar raised a question on behalf of what he called the ‘healthy critical mind ingrained with
taqwa (piety)’: ‘If zakāt is wājib (mandatory), how come I have never paid any dues to the poor
with the niyyat (intention) of zakāt when I have been blessed with wealth exceeding far more
than my basic needs and the poor are aplenty amidst me agonized with humiliation?’12

Various views of Zakāt on Monetary Instruments

Different edicts exist amongst Shi‘a jurists based upon their interpretations of the guidance
provided in the primary sources, including regarding zakāt. According to Modarressi, differences
in ijtihād (juristic derivation) stem from which method jurists apply from the four main
‘procedural principles’: barā’a (exemption), ihtiyāt (caution), takhyīr (choice) and istishāb
(continuation on the basis of no fundamental change).13 The last three of these are relevant in
regards to the different approaches of Shi‘a jurists vis-à-vis zakāt. While Khoei (d.1992 AD)
exclusively maintained the tax on the nine traditional items,14 presumably on the basis of
istishāb, two jurists who followed him enhanced the traditional position: Sistani expanded his list
to include ‘business good’15 while Fadlallah (d. 2010 AD) expanded it to include ‘banknotes’; 16
both of these approaches were explicitly specified on the basis of ihtiyāt. However, another
jurist, Muhammad Rizvi, says paying zakāt on items other than the traditional nine is a matter of
takhyīr,17 while yet another, Mohsin Naqvi, stipulates that zakāt on paper currency is fully
mandatory because ‘the concept of richness is different from what it was centuries ago’ and must
be accounted for in line with the Quranic spirit of helping out the ‘poor faction of society’.18

In the lattermost case, istishāb is broken and thus the innovative ruling reflects a re-interpretive
ijtihād. In fact, the whole basis of ijtihād in Shi‘a jurisprudence is the ‘exertion of rational
procedure’ or ‘rational demonstration’ to derive solutions for cases where there would be ‘no

12
DATOO, Husseinali (Ed.), Editorial, Federation Samachar, Issue # 8, Dar-es-Salaam (Tanzania), Federation of
Khoja Shia Ithna Asheri Jamaats of Africa, January 2009
13
MODARRESSI, Hossein, An introduction to Shi'i Law: A bibliographical Study, London (UK): Ithaca Press,
1984, p.10
14
KHOEI, Sayyid, Islamic Laws, http://www.al-islam.org/laws/al-khui/24.htm, accessed May 2, 2011
15
SISTANI, Sayyid, Islamic Laws, http://www.al-islam.org/laws/zakat1.html, accessed May 2, 2011
16
FADLALLAH, Sayyid, Fatāwa, http://english.bayynat.org.lb/Fatawa/s7ch1.htm, accessed May 2, 2011
17
RIZVI, Sayyid Muhammad, 2009, Zakāt in Shi‘a Fiqh, p.5, http://www.islamic-
laws.com/pdf/ZAKAT_IN_SHIA_FIQH.pdf, accessed May 2, 2011
18
NAQVI, Mohsin, personal communication, February 1, 2009
resolution of a problem’ without it.19 It is thus imperative that a matter as important for society as
zakāt, with dire economic consequences, should be re-evaluated in the modern context.

Ijtihād has been performed in both the Shi‘a and Sunni schools vis-à-vis zakāt. The spectrum of
Shi‘a views has been mentioned above. As for the Sunnis, the Shafi‘ites consider currency
taxable on the grounds of ‘zakāt on debts’ since banknotes are ‘drafts representing debts of the
issuing banks’ that are fully capable of payment; Hanafites on the basis of ‘claims of the bank’
circulating amongst individuals; Malikites on the basis of ‘a means of exchange’ convertible into
gold and silver on demand; while the Hanbalites do not consider paper currency zakāt-able until
the point when it is specifically converted into gold and silver.20

In as far as paper currency is concerned, the Hanbalite position is identical to that espoused by
Rizvi, who claims it to be the standard Shi‘a position.21 Yet in 1931 Kashif al-Ghitā, the highest
ranking Iraqi Shi‘a scholar then, wrote that the Shi‘a position on zakāt was identical to all ‘four
Sunni schools’.22 Which begs the question: when and how did the variations develop?

A historical perspective on Metal and Paper Currency

Kashi al-Ghita’s afore-mentioned statement may be taken at face-value since it agrees with the
history and conditions of his time. Firstly, the Iraqis were resistant to all forms of dominance that
their recent colonial master (Britain) exerted, including the financial aspect. The Iraqi dinar had
not even been introduced until 1932, prior to which the India rupee was used;23 even then
coinage was the main medium of exchange. Paper money when available was pegged to its
associated value in gold and silver. But the Indian currency and banknotes did not sit well with
the locals; firstly, because the British ‘established the exchange rate by proclamation’ and
secondly because Arabs preferred to deal in ‘gold’ rather than ‘paper’. 24 These conditions
19
SACHEDINA, AbdulAziz, The Just Ruler in Shiite Islam, New York (USA): Oxford University Press, 1988,
pp.71-72
20
QARADAWI, Yusuf (Au), KAHF Monzer (Tr.), Fiqh al-Zakah, Vol.1, Jeddah (Saudi Arabia): Scientific
Publishing Center, King Abdul Aziz University, 2000, p.133
21
RIZVI, 2009, p.5
22
KASHIF AL-GHITA, Muhammad Husayn, Asl ash-Shi'ah wa usuluha (The Origin of Shi’ite Islam and its
Principles), Ansariyan Publications, http://www.followislam.net/books/shiaorigin/04.htm#3, accessed May 2, 2011
23
http://en.wikipedia.org/wiki/Iraqi_dinar, Wikipedia, accessed May 2, 2011
24
BERNSTEIN, Jack, The Mesopotamia Mess: The British Invasion of Iraq in 1914, Redondo Beach (California):
InterLingua Publishing, 2008, p.156
ensured the dominance of gold and silver coins and consequently a common perspective on
zakāt.

However, monetary policy changes had already begun in the 1920s for Iraq (various decades
back or forward in other countries) and within half a century monetary policy was totally
overhauled. Paper money was first introduced in the form of ‘I.O.Us issued by banks, that
guaranteed their substitution for fixed amount of gold or silver’; then in the second stage banks
were permitted to hold only partial reserves of gold and silver; and in the last stage the obligation
of gold and silver standards on currency was lifted while ‘national currencies’ became
‘compulsory’ and paper money could no longer be converted to gold or silver.25 The new worth
of monetary wealth was now designated through paper money. All exchanges in the market
today are done on the basis of paper money or its equivalent via cheques, electronic cheques, or
credit and debit cards. Notably however, while the instruments may have changed, the monetary
worth of individuals remains intact – albeit in a different form.

Comparing arguments for and against Zakāt on Currency

The transformation to paper currency heralded disagreements on the applicability of zakāt. A

relevant question in this regard is: should paper money be seen as the effective replacement of
gold and silver coins, or as a parallel medium but not its effective replacement? From a currency
perspective there is no doubt that paper money has replaced gold and silver. But from a metal
perspective this is not true. Paper is fiat money that does not represent its value in kind, rather in
buying power. If the aim of zakāt was to tax the metal aspect of gold and silver, then paper
currency is clearly excluded from zakāt; but if it is to tax the buying power, then zakāt
applicability can be strongly argued. We present and analyze both sets of arguments below.

Arguments against Zakāt on Currency

25
QARADAWI, 2000, p.133
The first argument against zakāt on currency is the superiority of naql (textual prescription) over
aql (intellect). Rizvi claims that increase beyond the traditionally specified items is recourse to
‘personal inclination’ and that none has the right to interpretively ‘extend that list’ since there are
‘no such (textual) indications’.26 However, this literalism takes a hit when Rizvi stipulates that
zakāt is not on all forms of gold and silver but only on coinage; 27 for if zakāt is only on coinage,
then this would imply that it is the currency aspect of gold and silver which is being taxed, which
presents scope for interpretation.

Another argument is provided by Sistani when he says in response to a question regarding the
non-payment of zakāt on monetary worth, that ‘there is a difference between zakāt and what you
should pay as your religious dues’; he goes on to detail out the religious dues as being khums (the
fifth tax on surplus). 28 Ofcourse one could question how is khums applicable to the new paper
currency while zakāt is not? Furthermore, khums in Shi‘a jurisprudence is meant to be given half
to the Hashimi-clan needy and half to the Imam for administration and whatever else he deems
fit. As such, its function is different from that specified for zakāt (support of the poor).

The third argument presented is that the zakāt is applicable on the metal attribute of gold and
silver currency and whose actual metal must be in possession of the owner. Rizvi argues that if
the metal coins are not in actual possession but held by a bank, then the promissory notes are not
to be taxed; likewise banknotes fixed to the gold standard are not to be taxed; and finally, current
currencies ‘fixed only to the printing press’ of government treasuries have no relation to the gold
and silver metals, and so are definitely not to be taxed. 29 This argument of metal attribute will be
further analyzed in detail in the next sections.

Arguments for Zakāt on Currency

26
RIZVI, 2009, p.2
27
Ibid., p.5
28
See Appendix 1
29
RIZVI, 2009, p.6
The first argument permitting zakāt on paper currency is that this new form of currency
represents amwāl. Since all transactions today are made via paper currencies or its equivalent, it
has become the new form of monetary worth. And since the Quranic verses and ahadīth
specified tax to be upon the wealth, paper currency should figure in as the predominant
contemporary indicator of wealth today. Monetary worth is not determined by the worth of the
paper upon which money is printed, but by the real buying power it represents. The idea of zakāt
being upon wealth in general has began to be recognized by jurists; Besides himself, Fadlallah
has indicated Montazaeri agreeing with this as well as jurists in the past who opined for zakāt to
be upon all forms of grains.30

A second related argument is provided by Naqvi who states that the ‘spirit’ of Quranic
commandments has been neglected in favor of ‘mere words’; as such, the spirit of zakāt which
was meant to ‘help out the poor’ is violated when the current-day forms of wealth are not taxed. 31
He states that the ‘concept of richness’ today is different from centuries ago, and that ‘zakāt is
wājib (obligatory) on all riches in our days, without any exception’.32

Both arguments above are based on aql. However, these aql-arguments also gain support from
naql vis-à-vis the Quranic verses 9:34-35 that mention painful punishment for those who hoard
up gold and silver, and do not spend thereof in the path of God. The idea here is that if it is the
metal component of gold and silver that is applicable for zakāt based on the wording, so must the
words of Quran in regards to hoarding likewise be confined to the metal component. But none
would logically accept that the verses 9:34-35 are limited to the hoarding of gold and silver
metals while it is legitimate to hoard pounds and dollars!

Furthermore, the attribute of being ‘spent’ in verse 9:34 clearly indicates that gold and silver are
considered for their buying power and not the metal aspect.33 This concurs with the wording of
amwāl (wealth) previously cited in other naql citations, thus indicating the interchangeable use
of wealth with gold and silver. Fadlallah indicates that the wealth circulated in the old days was

30
See Appendix 2
31
NAQVI, Mohsin, personal communication, February 1, 2009
32
Ibid.
33
QARADAWI, 2000, p.124
gold and silver, which accounts for the use of those terms. 34 Accordingly, since wealth today is
banknotes, then it means that the gold and silver of yesterday correspond to banknotes today!

A comparative analysis

Some of the main themes of differentiation above are: the suppression (or not) of the use of aql
with respect to naql, the applicability (or not) of changed circumstances, taking the function and
spirit of zakāt into account, the concept of wealth in terms of buying power, and the definition of
gold and silver – i.e. defined for its currency attribute versus its metal attribute.

Upfront, since it is agreed by consensus amongst Shia scholars that jewelry, ornaments and any
other form of gold and silver (other than coinage for currency) is not applicable for zakāt, it
would mean that the attribute of gold and silver being taxed must be its currency attribute. Even
if the naql argument is used, one ought to define what is gold and silver? For example, is gold a
shining yellow metal? Could then any shining yellow metal be zakāt-able? Is the gold in question
that which was used in Arabia and that came from byzantine? Would it mean that gold
originating from elsewhere is not zakāt-able? And since the ahadīth also use the words dinar and
dirham, would those golden and silver currencies not called by these labels be exempt from
zakāt? What of the dinar and dirham currencies today that carry the labels but are not in gold and
silver metal form, are they zakāt-able or not? The purpose of these questions is to establish that
the aql argument has to be incorporated at one level of another in order to identify the effective
attribute in gold and silver that designated these metals unto the zakāt-able list.

Some indications for identifying the attribute of gold and silver that makes them liable to zakāt
may be derived from rulings 1907 and 1914 of the Islamic Law compilations of Khoei and
Sistani35 wherein they state that zakāt on gold and silver is only applicable when they are used as
coinage for transactions, even if the stamp be effaced, and even if ‘more than usual quantity of
another metal is mixed’ as long as they are referred to as gold and silver coins i.e. for the sake of
transactions; Hence the transaction attribute carries more weight than the metal attribute.

34
FADLALLAH, Sayyid, Fatāwa, http://english.bayynat.org.lb/Fatawa/s7ch1_1.htm, accessed May 2, 2011
35
KHOEI, Sayyid, Islamic Laws, http://www.al-islam.org/laws/al-khui/24.htm, accessed May 2, 2011
SISTANI, Sayyid, Islamic Laws, http://www.al-islam.org/laws/zakat1.html, accessed May 2, 2011
Furthermore, rule 1915 by both jurists stipulates that one may pay the zakāt using currency other
than gold and silver as long as it holds equivalent monetary value. So even though Khoei and
Sistani did not rule for zakāt tax on banknotes, their rulings clearly indicate that the attribute of
taxation was the transactional worth. Fadlallah brings this matter to its logical conclusion by
asserting that ‘by the same token, it can be said that the currencies of this day and age serve the
same purpose of gold and silver money which was circulated in the olden days, i.e. comparing
like with like’.36 So the effective element of gold and silver applied in the old days (that still
figures in law manuals today) is essentially the same which is found in banknotes, i.e.:
transactional worth, monetary value, buying power, or whichever synonym one may use.
Banknotes are therefore not merely analogous to gold and silver, rather their effective functional
replacement.

Conclusion

Among the indications for the need of enhancement in zakāt laws is the existence of several laws
(twelve each in the manuals of Khoei and Sistani) regarding monetary taxation on gold and silver
coins in circulation, yet there are no more any such coins in circulation! An analysis of these
laws demonstrates that the effective element inherent is that of monetary worth, since any gold
and silver outside of monetary circulation must not be taxed. The Quranic verses 9:34-35
demonstrated that the words gold and silver were used analogous to wealth, and the prohibition
of hoarding gold and silver was essentially the prohibition of hoarding wealth, since the attribute
of ‘being spent’ was used. This attribute in today’s day and age no longer applies to gold and
silver coins, but to banknotes. Furthermore, without a tax on the transactional instrument of
banknotes, there would be a huge gap in the benefit for the poor; while this gap did not exist in
the old days because the transactional instrument of that time (gold and silver) was taxed.

As pertains to restricting the tax on the traditional nine items via naql, one is forced to
contemplate: if a nation used rice as its staple grain (and none of the stipulated crops), practiced
animal husbandry of bisons (and none of the stipulated animals) and transacted its trading via
paper currency, then does it mean that zakāt is effectively absent for such a nation?! One is
therefore forced to apply aql to account for changed circumstances. Since zakāt is a fundamental
36
FADLALLAH, Sayyid, Fatāwa, http://english.bayynat.org.lb/Fatawa/s7ch1_1.htm, accessed May 2, 2011
pillar or act of Islam, it is not sensible for it to simply disappear. It is more appropriate to identify
its effective element and seek out its manifestation in every era and location. That effective
element for monetary worth, as has been established from prior arguments, is clearly not the
metal aspect, rather the transactional worth. And in contemporary times it exists in the form of
paper currency.

The oft-cited issue of convertibility between the precious metals and paper becomes mute in the
light of identifying the effective element. Similarly, the basis of ihtiyāt (precaution) for taxing
banknotes becomes mute since the effective element is being taxed, and not an analogous
parallel entity. In the same manner than khums today is taxed on the effective element of paper
currency (previously it was charged on gold and silver), it is sensible for zakāt too.

The imposition of zakāt on paper currency would also serve to preserve the Quranic spirit of
support for the poor by the rich, and would ensure continuity for the function of zakāt. The
conclusion may then be drawn that the nine traditional categories of the past only represented the
wealth of old times, and today we should apply zakāt upon contemporary wealth categories.
Appendix 1

A letter to Sayyed Sistani in regards to the function of zakāt and its response.
Appendix 2

A letter to Sayyed Fadlallah in regards to Zakāt on currencies and jurist who consider it
mandatory. The Arabic response mentions Ayatullah Montazaeri as legislating zakāt on current-
day currencies, besides Fadlallah himself, as well as opinions of earlier jurists Ibn Junayd and
Yusuf vis-à-vis legislation of zakāt to be applied on all forms of grains.

Arabic:
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