A brief look at the ’fulus argument’ for exempting money from riba prohibitions
A few months ago, Shaykh Yousef Wahb wrote a detailed examination of a question that periodically resurfaces in Islamic finance circles:
If the prohibition of riba (usury or interest) were based on gold and silver, do modern paper currencies get a pass?
The argument often hinges on the historical treatment of fulus: low-value copper or bronze coins.
Since some classical jurists didn't apply the full spectrum of riba prohibitions to these secondary coins, a plausible analogy emerges: maybe today's paper money, which has no intrinsic value, is just like fulus.
This is a brief exploration of that claim and why, according to Wahb, the analogy ultimately fails.
The Classical Three-Tiered Monetary System
To understand the argument, we first need to appreciate the monetary world of classical Islamic law, which recognized three distinct types of currency:
- Gold (Dinar): The primary store of value, used for major assets, bridal gifts, and international trade.
- Silver (Dirham): The workhorse of the classical economy, used for everyday transactions, wages, and pricing goods.
- Fulus: Base-metal coins (usually copper or bronze) that functioned as small change for minor, local purchases.
Gold and silver were the bedrock of the economy.
Fulus, on the other hand, circulated on the margins with fluctuating value and acceptance.
Because of their secondary and unstable nature, many Shafi'i scholars treated them more like commodities than primary money, exempting them from some of the strict rules of riba that governed gold and silver exchanges.
The "Fiat equals Fulus" Argument
The move to paper money in the 19th and 20th centuries prompted some scholars to analogize these new notes to the classical fulus. The reasoning went as follows:
- Fulus were non-precious token money.
- Modern paper and polymer notes are also non-precious token money.
- Therefore, fiat currencies should inherit the same legal exemptions from riba as fulus.
This view, while a minority opinion, was championed by influential figures. Wahb's paper points to the early 20th-century Shafi'i scholar Ahmad al-Khatib as its most explicit advocate.
Building on the groundwork of 19th-century jurists like al-Anbabi - who saw paper money as a "representative currency" distinct from gold - al-Khatib argued that modern banknotes should be treated exactly like historical fulus. This line of reasoning often relied on classical texts that specified that riba prohibitions did not apply to fulus.
Where the Analogy Breaks Down: Wahb's Analysis
In his article, "From Gold to Paper: The Applicability of Ribā to Modern Currencies in Shāfiʿī Jurisprudence," Yousef Wahb highlights several critical flaws in this line of reasoning.
Function, Not Material, Is Decisive
The Shafi'i school's exemption for fulus was never absolute.
The key determinant wasn't the metal but the currency's economic function.
Classical jurists recognized that if fulus ever ceased to be secondary and became the primary medium of exchange, they would then be subject to the same riba prohibitions as gold and silver.
Today, fiat currencies are not gap-fillers; they are the entire system.
They have completely taken over the function that gold and silver once held, making the original reason for the fulus exemption obsolete.
The Roles Have Flipped
In the pre-modern era, gold and silver were the dominant currencies, and fulus played a subordinate role.
Today, the situation is reversed.
Fiat currencies are the primary mediums of exchange and units of account globally, while gold and silver are now treated more like commodities or alternative investments.
The historical context that gave rise to the fulus exemption has been completely inverted.
A Tale of Two Ribas: Sales vs. Loans
In the pre-modern world, money was not standardized. Gold or silver coins, for instance, could differ in weight, purity, or condition.
This created a market for on-the-spot exchanges where someone might, for example, trade 10 pristine, full-weight coins for 12 older, worn ones. This type of unequal transaction involving like-for-like commodities was explicitly prohibited, as it represented an unearned surplus in trade (riba al-buyu’).
The classical discussions around fulus were overwhelmingly focused on these very sales transactions, such as exchanging 10 copper coins for 12 on the spot.
This is a very different category from riba in loans (riba al-duyun).
The prohibition on charging interest on a loan applies to any currency or commodity, not just gold and silver. Therefore, even if one accepted the "fiat = fulus" analogy for spot exchanges, it would be irrelevant to the issue of interest on loans, which is the cornerstone of modern banking.
Conclusion
While the analogy between fiat currency and fulus is superficially appealing, it overlooks the fundamental legal reasoning and economic reality that underpinned the classical rulings.
Modern fiat currencies perform the exact function that made gold and silver subject to the prohibitions of riba.
Their role as the primary medium of exchange, unit of account, and tool for lending means they fall squarely under the umbrella of riba regulations.
So, do fiat currencies get a pass?
The overwhelming consensus of contemporary Islamic jurisprudence, as detailed by scholars like Wahb, is a clear "no."
The fulus exemption is closed in an economy dominated by fiat money.
References & Further Reading
Yousef Aly Wahb, "From Gold to Paper: The Applicability of Ribā to Modern Currencies in Shāfiʿī Jurisprudence," UCLA Journal of Islamic and Near Eastern Law 21, no. 1 (2024). - Permalink via eScholarship
The argument that fiat currencies are like fulus and exempt from riba rules is most clearly articulated by Ahmad al-Khaṭīb in his monograph, as cited in Wahb's footnotes:
Ahmad al-Khaṭīb al-Shāfiʿī, Iqnāʿ al-nufūs bi-ilḥāq Awrāq al-anwāt bi-ʿumlat al-fulūs (Beirut: 1911). (See Wahb, "From Gold to Paper," footnote 154, page 97).
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Written by Farooq Maseehuddin
Farooq Maseehuddin is the founder of MuslimMoney.co, a Canadian platform dedicated to helping Muslims take control of their personal finances.
He teaches across a range of topics including budgeting, investing, financial planning, Islamic inheritance, money conversations in families, and how to teach kids about money—all through both practical tools and traditional Islamic guidance.
Farooq holds a B.Ed. and M.Ed. from the University of Alberta and has spent nearly two decades as a high school teacher and Muslim community organizer.