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There are situations when we are need of coins. At times, some touts like to take advantage of the situation and take a fee to the exchange from us.

For example: For a bill of $10, they return only $9.

Is this allowed? Or is the difference counted as usury?

  • 3
    This may seem a simple question, but it's actually pretty hard to dig up good reliable information about the line between service charges and riba al-fadl for this sort of situation. Would be nice to get a good solid authoritative answer to this by someone who actually understands Islamic finance instead of just another shallow application of the like-for-like hadith. – goldPseudo Aug 6 at 1:49
2
+500

A first look at evidences

There's basically a difference of opinion on this topic.

Be aware that we usually consider the value or amount (of money) when exchanging (of money). But the existing resources for exchange say the exchange must be equal only for equal items of exchange (so the content value is that which must be compared).
And in our case we have paper (notes) and "metal" (coins):

  • Gold is to be paid for by gold, silver by silver, wheat by wheat, barley by barley, dates by dates, and salt by salt, like for like and equal for equal, payment being made hand to hand. If these classes differ, then sell as you wish if payment is made hand to hand. (Sahih Muslim)

  • Once Bilal brought Barni (i.e. a kind of dates) to the Prophet (ﷺ) and the Prophet (ﷺ) asked him, "From where have you brought these?" Bilal replied, "I had some inferior type of dates and exchanged two Sas of it for one Sa of Barni dates in order to give it to the Prophet; to eat." Thereupon the Prophet (ﷺ) said, "Beware! Beware! This is definitely Riba (usury)! This is definitely Riba (Usury)! Don't do so, but if you want to buy (a superior kind of dates) sell the inferior dates for money and then buy the superior kind of dates with that money." (Sahih al-Bukhari and Sahih Muslim)

See also this hadith in Sahih Muslim

This second hadith makes clear when riba in an exchange occurs: For example if you had 1 kg of grapes (fresh harvest) and want to exchange it by 2 kg of older grapes then this is riba. You can only do such an exchange by fair trade: selling it and buying the other kind from the money you have gained. As the doubt of riba has been lifted by finding a more appropriate exchange scale for the same types or items which have different quality.

Some opinions on legal exchange and riba

  • The scholars are in consensus about riba on the six types which were quoted in our first ahadith (the hadith of 'Ubadah ibn as-Samit). So the dhahiri's limited riba of difference (or addition) (riba al-Fadl) ربا الفضل and riba of delay (riba an-Nasi'ah) 1ربا النسيئة to this 6 types:

    Let dinar2 be exchanged for dinar, with no addition on either side and dirham be exchanged for dirham with no addition on either side. (Sahih Muslim)

  • With the exception of the dhahiri's3 (and also some tabi'yn) and shi'a according the author of fath al-Mun'im فتح المنعم (see herein Arabic) all imams of the four (sunni) schools of jurisprudence and the majority of scholars are in consensus that anything that is considered as food can be added to these six types by analogy.

  • They agreed upon the fact that riba doesn't apply for types and items that are neither food nor can be measured nor weighed nor has some kind of alikeness.

  • They disagreed about anything else due to their difference on the reason for the prohibition of riba. For example imam an-Nawawi quotes in his al-Majmo' (see here in Arabic) that according the shafi'i school exchanging a tissue for two is not considered riba as their view is that riba apply to anything that falls in the categories food or gold or silver.

    1: one may ask where in the given ahadith riba an-Nasi'ah was mentioned. It was actually mentioned in the first as the exchange must take place at once with no delay whish is expressed by the words: "payment is made hand to hand".
    While person A takes the exchanged type/item from person B. At the same time person B takes the exchanged type/item from person A.

    2: to better understand this hadith one must be aware that for centuries dinar and dirham were well defined coins of a certain weight of silver or gold (dinar was a gold coin and dirham a silver coin).
    3: the dhahir school of jurisprudence rejects analogy and therefore applies the text literally.

Imam at-Tirmidhi also quoted a version of the first hadith in his Jami' and added a commentary (which in this case -alhmadulillah- was translated on sunnah.com!) displaying the views of scholars and their interpretation on the matter:

That the Prophet (ﷺ) said: "Gold for gold, kind for kind; silver for silver, kind for kind; dried-dates for dried-dates, kind for kind; wheat for wheat, kind for kind; salt for salt, kind for kind; and barley for barley, kind for kind. Whoever increases or seeks an increase, then he dealt with Riba. Sell gold for silver as you wish, hand to hand; and sell wheat for dried-dates as you wish, hand to hand; and sell barley for dried-dates as you wish, hand to hand."

[He said:] There are narrations on this topic from Abu Sa'eed, Abu Hurairah, Bilal, And Anas.

[Abu 'Eisa said:] The Hadith of 'Ubadah bin As-Samit is Hasan Sahih. Some of them reported this Hadith from Khalid, with this chain, and he said: "Sell wheat for barley as you wish, hand to hand."

Some of them reported this Hadith from Khalid, from Abu Qilabah, from Ash'ath, from 'Ubadah from the Prophet (ﷺ). In that Hadith, they added that Khalid said: "Abu Qilabah said: "Sell wheat for barley as you wish, hand to hand."

This Hadith is acted upon according to the people of knowledge, they do not think that one may sell wheat for wheat except when it is the same kind for the same kind, and (the same for) barely in exchange for barley, kind for kind. When the items are themselves different, then there is no harm in one being more than the other if it is hand to hand. This is saying of most of the people of knowledge among the Companions of the Prophet (ﷺ) and others. It is the view of Sufyan Ath-Thawri, Ash-Shafi'i, Ahmad, and Ishaq. Ash-Shafi'i said: "And the proof for that is the saying of the Prophet (ﷺ): 'Sell barley for wheat as you wish, hand to hand.'"

[Abu 'Eisa said:] Some of the people of knowledge considered it disliked that wheat be sold for barely unless it was kind for kind. This is the view of Malik bin Anas, but the first view is more correct.
(Jami' at-Tirmidhi)

The view of imam Malik can be found here in his al-Muwatta'.

So basically one could conclude that the issue is the difference of interpretation for the 'illah "العلة" (the reason) for prohibiting riba based on the interpretation of the sources. I'll try to address this later.

Fatwas on the topic

So among modern scholars this dispute still exists the Permanent Committee for Scholarly Research and Ifta (and also ibn 'Utahymeen and ibn Jabreen) for example holds the opinion that it is permissible in case of agreement (and only if both parties get their exchange right away -with no delay from one party) as stated on these fatwas on islamweb #368827 #272335 ibn Baz explained both views and said that it is better (if possible) to "Give up what is doubtful to you for that which is not doubtful" and leave the scholarly dispute and keep the exchange equal.

The difference of opinion based on the interpretation of the reason for the prohibition of riba

The scholars held different positions on the types and items on which riba may apply:

  • The hanafi's say: The reason for the prohibition of Riba al-Fadl is due to measure and weight and the (same) kind (item) (As long as items has the same kind (oneness of a kind) and i.e. weight riba applies). And for riba an-Nissa' (or an-Nasi'ah) is the presence of one of the attributes (measure or weight or kind), while the exchange is delayed. However they made exceptions for example the exchange of gold for cooper where an-Nissa' is allowed by consensus. While wheat and barley are of different kinds but have the same attribute for measurement which is the weight, but it is allowed to exchange them for different weights, but with no delay (an-Nissa'). So hanafi's added to these 6 kinds anything that can be weighed: iron, copper, plomb, cotton, wool etc.. But they say that riba applies only to the raw material (for example: copper coins wouldn't be exchanged equally to raw copper by weighting).
    As additional evidences to support their claims they use:
    From the qur'an the verses:
    (26:181-183) and (83:1-3) which clearly show that a clear reason for riba is the inequality in measure and specifically weight!
    From the sunnah:
    the sahih hadith (See fore example in Sahih al-Bukhari, Sahih Muslim and Muwatta' Malik) which shows that it is not allowed to make a difference of anything that can be measured and weighed if it is of the same kind.
    From common sense: the rulings of Islam are there to establish justice, which means comparison and establishing equality, equality for two items can be realized by measurement and weighting. If these items are of the same kind or appearance then they should be compared based on their weight or measure.

  • The maliki's made a difference between the reason for silver and gold and the other 4 kinds. As for gold and silver the oneness of the kind and their valuableness are the main reason. While for the other four kinds we have beside the oneness of the kinds two other reasons are quoted: alimentation and collection (conservation). For example corn is similar (in these attributes) to wheat and therefor is not allowed to be exchanged with a quantity of the same kind with a difference.
    While riba an-Nassi'ah in this applies for gold and silver for the same reason stated above. While for the other four kinds it applies for the reasons of collection and taste (only). So basically the maliki's allow riba al-Fadl for any food except the 4 kinds and anything that could be added to it by analogy like any food that can't be conserved like lettuce while riba an-Nassi'ah applies for it.
    As evidences they use:

THIS IS STILL A WORK IN PROGRESS

Additional reference Another reference

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This may just be a shot in the dark but you may find my argument reasonable.

First a discussion on ilal ish-shara'i, or "bases of rules."

My understanding of prohibition of riba is that its due to the act of charging money without actually rendering an equivalent service to the customer or society.

There are a number of Shia hadiths that suggest this, in my opinion.

Two from Jafar us-Sadiq

[ ٢٣٢٧٧ ] ٨ ـ محمد بن علي بن الحسين بإسناده عن هشام بن الحكم أنه سأل أبا عبدالله عليه‌السلام عن علة تحريم الربا؟ فقال : انه لو كان الربا حلالا لترك الناس التجارات وما يحتاجون إليه ، فحرم الله الربا لتنفر الناس من الحرام إلى الحلال وإلى التجارات من البيع والشراء ، فيبقى ذلك بينهم في القرض [١].

Hisham asked Aba Abd Allah about reason of prohibition of riba. He said: Had usury been halal, people would have abandoned trades and what they need...

[ ٢٣٢٧٨ ] ٩ ـ وبإسناده عن هشام بن سالم ، عن أبي عبدالله عليه‌السلام قال : إنما حرم الله الربا كيلا يمتنعوا من صنائع المعروف.

Aba Abd Allah said: Allah forbid riba so that people won't refrain from praiseworthy industries. (source)

And one from Imam Ridha

[ ٢٣٢٨٠ ] ١١ ـ وبإسناده عن محمد بن سنان ان علي بن موسى الرضا عليه‌السلام كتب إليه فيما كتب من جواب مسائله : وعلة تحريم الربا لما نهي الله عزّ وجلّ عنه ، ولما فيه من فساد الاموال ، لان الانسان إذا اشترى الدرهم بالدرهمين ، كان ثمن الدرهم درهما وثمن الآخر باطلا ،

And the reason for prohibition of riba is due to ... corruption of properties, since when man sells a dirham for two, the price of one dirham is one, and the price of the other is void... (source)

What I deduce from the above hadiths, is that riba is made forbidden for its not in exchange for a real productive service to the individual or society.

This is why overpricing and tatfif (providing less than the price charged) is and gambling also prohibited in Islam. You earn without contribution to the person or society.

In layman's term, usury is earning without working. Thus, the usurer can enrich himself at the expense of others without making a positive contribution.

The modern response to that, though, is that interest is the time value of money, i.e. the usurer forgoes his right to use money for some time so he deserves the compensation.

But my response is that why a usurer actually does that instead of investing the money himself? It is obvious: for earning without the trouble of work and investment! In other words, the usurer puts the burden of work on some one else's shoulder expecting earnings. Obviously nobody forces the usurer to temporarily forego his right to use the money but he does that voluntarily for the advantage of earning without work!

Now some might still counter this argument by comparing riba to muzariba in Islamic commerce, in which a party advances capital to be invested by another party, expecting a share of return on the investment.

However there's an important component in muzariba that eliminates the possibility of undeserved profit: the parties will share in both profits and losses! So first of all there's no guaranteed and predetermined return. And then, since this introduces risks the creditor would have to advance something more than just providing capital, like he needs to find a competent business party, know about the state of the markets and then make sure the joint venture is successful which may require his oversight over the business process to its conclusion. All of these involvements are productive work, making the creditor worthy of profits from his credit!

Now apply this general wisdom to any contract to determine whether it is lawful. In case of exchanging coins with banknotes and vice versa, one might argue that the party providing the equivalent is not rendering any service. He is only exchanging a unit with its exact worth, so he is not doing an added work to expect a profit.

However, there's this general economic axiom that demand is an indicator of value. That is, there is generally a correlation between demand for something and its actual value. Of course, not all forms of demand are lawful and aiming at truly useful things (think of demand for haram food, alcohol , drugs, etc), but the fact remains that at least in the eye of the buyer, always, the object of demand has some use for him. So depending on your belief system, if the service or commodity is useful and legit, then the seller can expect a profit from exchanging it.

Now in case of exchanging units of currency, it is obvious that the demand is driven by a perceived use or value in the desired form of currency beyond its nominal value and in this case that would be the physical form of the currency that is desired and useful. Notes here are more valuable in terms of convenience in keeping and carrying them around. So the counter party may expect compensation from forgoing that practical value in notes for those awkward mass of coins that you want to hand him! Sounds fair, right?

So I'd venture to say that the deal is normally legit!

Wa Allahu A'lam...

  • @Medi1Saif Trading requires work if you mean being a middle man. You connect the seller to the buyer who may not otherwise find one another. It requires knowledge and work. Or bring the product from the seller to the buyer's nearby area. In stock trade, you have to make an effort to find profitable sectors to invest in and then will have a say over the company with enough shares. As for hadiths, it appears that I had read my own deduction into them as I couldn't find the one I had in my mind. But I think the three hadiths added now support my opinion. – infatuated Aug 6 at 11:17
  • @Medi1Saif I think I should've also responded to your last point. In case the buyer agrees by consent to buy something over its "fair" or "normal" price, it is often because he sees greater value in the product or service than most other buyers! So again, the value determines the price, but here the greater value is not universally acknowledged. But the seller here can be said to deserve greater compensation because this demand already indicates he is foregoing an item that appears to have just become "more" useful for others and, by generalization or potentially, more useful to him, too! – infatuated Aug 6 at 20:20
  • Note that your statement of ar-Ridah actually doesn't necessarily apply today. As early scholars when quoting "Dirham" or "Dinar" etc. where referring to a special kind of coins with a known amount of silver or gold so the difference is not likewise for a bank note which has absolutely no silver of gold content value compared to a coin which at least has a content value of copper maybe silver or maybe gold. – Medi1Saif Aug 12 at 15:02
  • @Medi1Saif, Yes there's a difference between traditional valuable metal coins whose inherent value represented their nominal value and the modern notes and coins whose nominal value only reflects their (often fluctuating) purchasing power by fiat. But the fact remains that they are both considered medium of exchange not source of added value! – infatuated Aug 12 at 15:24

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