Shaykh Farid Dingle is asked about the proof for there being zakat on paper and other fiat currencies in the Shafi‘i school.
Assalam alaykum wa rahmat Allah wa barakatuh.
Someone is arguing that there is only zakat on gold and silver, because books like al Tuhfa, Fath al Mugin say there is only zakat on gold and silver coins.
What is the proof for zakat on paper currency in the Shafi‘i madhhab?
Wa alaykum assalam wa rahmat Allah wa barakatuh.
In the Name of Allah, Most Merciful and Compassionate.
Paying zakat on paper money is obligatory in the Shafi‘i school, contrary to what might be understood from some key works in the school.
The reason for this is that paper money has now become globally accepted as currency, so it is dealt with in all aspects.
Imam al Nawawi says, “Our scholars reject there being any [zakat or interest] in [non-gold and non-silver] coins because the legal reason for [such rulings] is that gold and silver are almost innately currencies (جنس الأثمان غالباً), in contradistinction to such coins, which, even if they do have currency in certain places, are not treated as currency in such a universal way.” (Majmu, Nawawi)
Such authoritative works in the Shafi‘i school that explicitly reject this are referring to a time period in which paper money was not yet fully treated as currency in the financial and economic world, and therefore their words must be interpreted in such a light.
Now that these alternative currencies do have currency everywhere, and are treated as currencies even more than gold and silver, they take the ruling of gold and silver in zakat and interest.
Today, without question, the rules of zakat and interest apply to paper money.
For more detail on this issue, please see this fatwa in Arabic issued by the Ministry of Fatwa of Jordan.
I pray this helps,
Checked and approved by Shaykh Faraz Rabbani.