JENTAYU EMAS RESEARCH GROUP
Saturday, June 7, 2014
IS THE DINAR PREPARED TO REPLACE RINGGIT MALAYSIA AS THE LEGAL TENDER FOR A JUST AND RIBA FREE ISLAMIC FINANCIAL SYSTEM ?
Numerous efforts to revive the use of Dinar as currency have taken place within the country and region of late. Malaysia somehow has become the centre point for promoting the effort on Dinar. Awareness on the role of gold as currency which was widely used then during the Islamic empire has become more intense now in view of the current economic crisis that has overwhelmed countries such US, Greece and Ireland. Interestingly, Tun Dr. Mahathir had pre-warned the coming of the crisis in 1999 after the 97’s Asian Economic Crisis. Malaysia is the only Muslim country that is taking the lead now to promote the use of gold for international trade settlement. It is also the only country that promotes the study on Dinar where talks have been held numerously on the subject matter either at the federal, state or individual level.
The Dinar issue is big, difficult and sensitive as it is closely associated with the religious integrity, dicta and the business management i.e. muamalat of an Islamic economic system. We are well informed that Dinar is the currency strived for by the Sunnah. Today many discussions concerning the use of the Dinar as an alternate currency for mankind replacing fiat money are held. Islam requires the use of the Dinar by its subjects in order to rid the world of usury that allows the economy in a state of inflation-free.
Legal tender in the form of paper money is a medium of payment allowed by the law or recognized by a legal system to be valid for meeting a financial obligation. It is the value apparatus of products and services generated from the various economic activities.
As currency, Dinar and Dirham offers inflation proof mechanism as naturally, they carry the intrinsic value. Dinar is the most effective instrument that store value to cushion off the effects of currency devaluation either due to the act of currency speculators or even war.
Thus, the pertinent question now is, has the time arrived to re-live the use of Dinar as currency that replace the current paper money system towards a just and riba free system?
To evaluate the question, we have to understand the reality that the existing world monetary system is founded on an paper money system which is closely related to and based on an economic chain system, finance and society trust. Specifically, this mechanism is known as a Capitalist System. Logically, if the Dinar need to be introduced today, we have to ensure that it is able to unlock mankind from the misery of the capitalist system towards an economic chain system based on the foundation of Islamic Economic System, Islamic Finance that command the trust of world society in its efficacy in maintaining the needs of Maqasid-Al-Syariah.
It needs to be reiterated that we do not want the Dinar issue to be viewed in the context of political propaganda to get voter support. Should this happen, we would never resolve the problem of using the Dinar as religious dicta must not be politicised. Indeed, in our effort to uphold the sunnah dictum in line with the needs of Maqasid-Al-Shariah, we may fail in our noble effort if we allow our thoughts and views be contaminated with political agenda.
More often than not, Dinar is also referred to as Gold Dinar. Dinar itself denotes to gold. Thus, Gold Dinar means no different. Terminology wise then, we can drop the word Gold, which would suitably fulfill the Hadith regarding Dinar and Dirham.
Abu Bakar Ibn Abi Maryam reports Rasullulah saw: “A time is certainly coming over mankind in which there will be nothing (left) that will be of use (or benefit) save a Dinar and a Dirham”.
(Musnad Imam Ahmad Ibn Hanbal)
DINAR IS PAPER CURRENCY’S ADVERSARY
As often uttered by Tun Dr Mahathir Mohammad whereby……Knowledge Is Not Understanding. Translated to Bahasa Melayu, it means ….Ilmu Yang Banyak Tidak Memastikan Fahaman. Knowledge and Understanding needs differentiation here. In the context of the Dinar, comprehensive knowledge regarding it is yet to be attained amongst the Dinar researchers. As a matter of record, the research on Dinar is a still at its infancy stage notwithstanding the many views being discussed. In fact, none has achieved a consensus viewpoint in regards to the acceptable application of Dinar. As such, ensuring its success as the currency of choice replacing the paper money is still attracting many unresolved questions.
Before we make vehement pronouncements on it being the currency to replace the Ringgit Malaysia (RM), we need to examine this issue holistically to include all paper currency systems, capitalist economic system and the available religious dicta, rather than from a limited rhetoric angle.
To begin, we appeal that the Finance Minister’s statement to Y.B Dr Dzulkefly Ahmad, Member of Parliament of Kuala Selangor on 19 October 2010 not to be misinterpreted as a statement tainted with political prejudice. Instead, the Minister’s view must be addressed with careful thoughts and positive thinking in order to understand the constraints surrounding the subject matter.
Truly, the Finance Minister’s statement only clarifies the system imposed upon all world governments today. As the Malaysian government only recognises RM as its currency, the use of the Dinar and Dirham in Kelantan is against the Federal government regulations and contravenes Act 61, 62, 63 of Bank Negara Act 2009 whose proviso is only Bank Negara Malaysia (BNM) qualifies to issue paper and coin currency that is the legal tender in Malaysia.
In the event that the Kelantan government insists on using the Dinar as alternative currency via barter trading (voluntary exchange), this will invite various problems from the World Bank and IMF. Further it will trigger chaos among the trading community arising from improperly structured mechanisms of implementation. The question is, is the mode of implementation by the Kelantan government done following adequate preparations, because it would be beyond our wish that the future of Dinar as currency be doomed by the capitalists due to poor and unwise planning.
On a positive note, the Finance Minister’s statement does not imply that we condone the setbacks posed by the capitalist monetary system, but the fact of the day is, the paper currency system remains the one and only system recognised worldwide. The world today is colonised by this comprehensive financial and capitalist economy system for so long that not a single country can be rid of it. For example, primary commodities like oil has long been traded in the US dollar and not in the currency of the exporting country. This is clear-cut oppression upon Islamic countries whereby the Muslims themselves are helpless against this obvious tyranny!
THE USE OF DINAR TODAY MAY LEAD THE UMMAH TO THE PATH OF RIBA IF IT FAILS TO UPHOLD ITS NOBLE ROLE!
We understand the strength of the Muslim’s economic system lies in the Dinar and Dirham monetary system. Undeniably, the Dinar has its own extraordinary qualities in its stability and intrinsic values. Nonetheless, various studies need to be done if it were to be used as a currency to ensure that its implementation is not thwarted by the World Bank and IMF via its current colonising manipulations in failing all efforts targetting for a pure Islamic financial system.
History tells us that the Capitalist succeeded over its attempt to control the world financial system ever since the French Revolution culminating with the fall of the Ottoman Islamic Empire. We believe as long as this capitalist system exists, the whole world will be ensnared in usury, and all efforts to introduce an alternative Islamic financial system based on the principles of just and fairness will be curtailed. The threats posed by the capitalist system pervades ever so deeply, hiding the realisation that despite countries like Indonesia and Kelantan attempt to re-live the use of Dinar and Dirham as widespread as possible, ironically we are not anywhere better than our current position of enslaving ourselves with riba within the monetary system.
The above statement may elicit discontent among many, but before it is rejected, do reflect upon the fact that the Dinar and Dirham, if improperly executed, will empower riba when it should achieve otherwise.
1) As long as gold is pegged to the USD and traded in the world market as a commodity, gold price will fluctuate following demand and the common market. Speculation will enhance this daily fluctuation, of which measure is the capitalist system’s primary instrument of profiteering from buying and selling price differences. To maintain resilience as a currency, the Dinar cannot be subject to periodic price fluctuations. If otherwise, profiteering arises from buying a cheaper Indonesian Dinar and selling at higher price in Malaysia. Today, Moscow’s Dirham and Kelantan’s Dirham are valued differently at significant price gap, making the Dinar and Dirham more of a commodity rather than a currency. In this context, it is subject to usury, just like buying and selling paper currency traded in the Forex currency market. This was stressed by Tun Dr. Mahathir Mohamad in his article ” Gold backing of Currency Doesn’t Make It Islamic” dated 26th October 2010, “"Profiteering must be avoided, and there must be a limit to money creation".
2) Dinar price fluctuations from time to time arise from fluctuating of gold prices. As long as there is the element of ‘spread’ in buying and selling Dinar, then there will be usury. As of today, the gold price is at its highest peak ever. Even though gold price is high right now, we are faced with obstacles reselling it on the market as a result of the insurmountable ‘spread’ factor. Granted its true, using the Dinar and Dirham in business transactions is valid and fulfills the rule of ‘deliver and receive’ and of equal weights at any one time (Yadan-bi-Yadin mithlan-bi-mithlin), but effectively, manipulating the Dinar and Dirham for profit, deviates from the requirements of Maqasid Al-Syariah. Tun Dr. Mahathir Mohamad tried to impress upon this fact in his above article by surmising ……
“Backing currency with gold does not make it Islamic, it became Islamic only if transaction in the currency did not involve interest or riba”.
3) Despite 1,000 shopkeepers accepting the Dinar in Kelantan, this does not imply that we are ready to face the obstacles barring the use of the Dinar as currency even though via barter trading (voluntary exchange). One obstacle begging review is the usage of the Fulus System to deal with transactions below the Dinar and Dirham rate. At this moment, is the Kelantan government equipped with a Fulus mechanism that can ensure a smooth flowing of Dinar and Dirham? Prof Umar Vadillo suggests a Fulus mechanism utilising the present RM currency. We do not see the logic of this in ensuring the use of Sunnah currency, as Kelantan’s Fulus system would still be embroiled in paper currency steeped in usury.
4) In today’s reality, most of us are devoid of insight as of how to ensure a successful Dinar as we perceive it only as a tool of investment. We are not far from today’s truth as the Dinar is indeed invested as a commodity. Rather than aspiring to see its success as currency, the fact of the day is majority of dinar proponents are inclined to keep Dinar for investment purpose. Of course, with the gradual uptrend in gold price, majority are attracted to the potential of fast profit! Thus, reflecting the reality of today that the role of Dinar has become more of an investment purpose rather than as currency.
The role of Dinar as currency must not be exploited for profit. Some of us buy the Gold Dinar merely to pawn it in Ar Rahn, the Islamic pawn-broker, buy more Dinar and pawn it further. This cycle is repeated in anticipation of a Dinar appreciation, thus targetting maximum profitability. Indeed, these are the perpetrators who will destroy the Islamic monetary system should the Dinar materialise as a currency one day. Why? Because these are the individuals involved in converting the Dinar from a currency to a commodity, with the aim of profiteering on a fluctuating gold market.
So long as they prevail, the Dinar will never survive as a trading currency. And it is feared that this inclination towards profiteering will obviate the Dinar from daily use. Isn’t this speculation and manipulation are the traits of riba? So, we should allay ourself from being critical of the Federal government for not participating in the Kelantan government’s Dinar venture.
Apart from perceiving the Dinar and Dirham in the light of usury, other inter-related issues posing concerns and require solutions are:
1) Even if the Dinar and Dirham is successfully practiced in the country, its application in international trading is still suspect. A local marketing activitiy alone is insufficient to churn a more widespread economic activity. This would be among the reasons why Tun Dr. Mahathir Mohamad clarifies that the present usage of the Dinar be implemented in servicing payments via a bilateral BPA or multilateral MPA trade agreements between countries. And this is only possible provided the participating countries agree to agree. We must view that the solution proposed by Tun Dr. Mahathir Mohamad is a practical one for a country to begin with to liberalize itself from the paper money system. As such, the intention is for participating countries to free-up themselves from the threat of foreign exchange currency fluctuation.
Definitely, it would be unjust to wrong the Federal government for not supporting the Dinar and Dirham. Truthfully, no Islamic country is prepared to use the Dinar monetary system purely because of prolonged economic colonisation. Malaysia is one among the few exponents championing causes towards an Islamic financial and economic system. We do not appreciate the tendency towards belittling our own country by some quarters when we should pride ourselves in the fact that we have produced many Islamic intellectuals who have since passed on. In fact, Tun Dr Mahathir was the first Islamic leader to re-introduce the Dinar concept as the answer to capitalist economic ills.
2) The personal safety of Dinar users have never been studied. The world has for long been polluted by the capitalist economic system which widens the rich-poor economic gap, and is never fair. This situation will encourage the poor robbing the rich. So, if Dinar is used as currency today, are we assured of our safety from robbery and theft as both crimes are prevalent when the economic gap between the rich and poor widens. Ironically, we feel so long as a pure Islamic economic system fails to exist, the use of the Dinar and Dirham would be difficult to enforce, since its use should be in tandem with the implementation of a total Islamic economic system and syariah. For example, the enforceability of hudud would ensure an economic system free from crimes of theft. In some countries that implement Hudud, traders need not lock up their trade premises when they attend mosques. Thus, in our view, for Dinar to be effective and meaningful, the whole ambit of Islamic economic system and Syariah must first be in placed.
3) Another factor needing attention is the Gold Reserve. Today most gold reserves are kept by central banks and individuals who indirectly influence the gold price and its supply. Taking into consideration the stated fact, how possibly can we release enough Dinar for the ummah use as currency? Essentially, when this happens coupled with gold traded on the commodity market, Dinar price will be too high as seen today.
This refutes various allegations that Tun Dr Mahathir champions the Dinar and Dirham as alternative currencies to the RM in daily trade. He in fact clarifies that the place for Dinar could only be practically function in servicing payments in bilateral BPA or multilateral MPA trade between countries.
Excerpts from Tun Dr. Mahathir Mohamad’s speech at the opening of International Islamic Capital Market seminar at the Securities Commission (Kuala Lumpur 26-03-02)
... 37. ... The proposal is to make this Dinar a currency for international trade only. It is not meant to replace the currency of any country. ...
Excerpts from Tun Dr. Mahathir Mohamad’s speech at the opening of Global Islamic Finance Forum 2010
(Kuala Lumpur 25-10-10)
…. The place for gold would be in the settlement of international trade as it involved large sums of money and payment in physical gold would be inconvenient because of its bulk.
In an entry in his blog dated 14 September 2010
http://chedet.co.cc Tun Dr. Mahathir Mohamad explained:
….”The procedure of using the Gold Dinar in trading activities between two countries entails gold currency reserves in the form of gold bricks or gold bars whose value is determined by market gold price, and not in the form of coins.”
We feel that some of the Dinar proponents fail to appreciate Tun Dr. Mahathir Mohamad’s intention when the remarks made were, “Didn’t Tun Dr Mahathir himself once launched the gold coin named Kijang Emas issued by Bank Negara Malaysia ”.
Granted Tun Dr. Mahathir Mohamad launched the Kijang Emas, but it was a coin deserve for investment purpose. Kijang Emas is a form of investment that can be traded at Maybank at current market gold price.
We take the view that for as long as the world financial system is governed by institutions controlled by the capitalists, it is impossible to enforce Dinar as currency. Due to this, if today we declare Dinar as a currency, but our attitude towards the Dinar is that it is still a commodity, then naturally the gold and silver itself will fail to function as a currency as otherwise required by Islam.
We need to comprehend that success in anointing the Dinar as a legal currency does not necessarily mean the economy is also Islamic. On the other hand, what needs to be put into perspective is attitude, understanding as well as the entire finance and economy set up. So long as democracy prevails as the government of the day, usage of the Dinar and Dirham as a currency would meet a blind end as it is not pegged to the Ulil Amri governorship of Islamic Rulers.
History tells us that Rasulullah SAW did not introduce the Dinar and Dirham currency system, but it was pre-existent before his period. Islam accepted the gold and silver as currency and officially ‘Islamized’ it after Rasulullah SAW’s outlined the currency trading guidelines to be followed by the ummah.
Nonetheless, we believe Dinar and Dirham will only find its position as currency after the collapse of the capitalist system, that has been the backbone of the wide spread usury via the use of paper money. In addition, the emergence of the Ulil Amri governorship that acts as guardianship for the ummah would further complement the role of Dinar and Dirham as currency.
Jentayu Emas Research Group will continue to show commitment in exploring and sharing all knowledge for the purpose of educating the ummah to enhance understanding on the role of Dinar as the storage for value and as an instrument that deny inflation.
In conclusion, let us be rational of not placing the Federal Government in error ensuing from jealousy and ill-will. Do not also politicize this Dinar and Dirham currency issue prior to detailed studies. As long as we are short-sighted, we will never reach a solution to revive the age of Dinar and Dirham as the Sunnah currency. The Federal Government’s actions are the solutions to today’s problems in ensuring our economic fundamentals function well to guarantee social and commercial stability.
We shall instead research and analyze the experiences of past civilization as a reference point for our next move in launching Dinar and Dirham as currency. This is crucial as Dinar and Dirham should also act as a mechanism that facilitates economic activities particularly on international trades between Muslim countries. Past experiences and history are definitely as important guide or us to succeed in re-living the use of Dinar and Dirham.
We view that if the Caliphate ruling system materializes tomorrow, we are sure the Federal Government’s answers will differentiate towards dignifying the Sunnah currency for the Muslim ummah. It would a period for the ummah to untie themselves from the riba strangulation by freeing themselves with the use of Dinar and Dirham.
Finally, in our pursuit to freeing ourselves from the threats of riba, it is important for us to be able to think broader outside the cocoon of our environment so as to develop critical thinking. As mentioned by Tun. Dr. Mahathir ....Knowledge is not understanding. Most people don’t think, they follow other’s thoughts…
Salam Hormat ,
JENTAYU EMAS RESEARCH GROUP
Muhamad Nizam Shaidon - email@example.com
1 Muharram 1432 - 7 December 2010