Part I: Seigniorage of fiat money and the maqasid al‐Shari’ah: the unattainableness of the maqasid

Abstract

PurposeTo reason whether the interest‐based fiat monetary system is compatible with the objectives of the Islamic law or the Shariah.Design/methodology/approachThis is a theoretical paper that uses the quantity theory of money and the objectives or maqasid al‐Shariah as expounded by scholars as basis for logical deductions therefrom.FindingsThe socio‐economic implications of fiat monetary system imply that the maqasid al‐Shariah cannot be attained. Indeed, the system is likely to cause a move away from the maqasid.Research limitations/implicationsThe paper is based primarily on theoretical deductions. Further empirical investigation would shed further light.Practical implicationsPractical implications are numerous. The definition of what is money is then crucial to address the socio‐economic implications caused by the fiat monetary system. For Islamic economics, this would imply that the process of Islamization of knowledge/disciplines is futile without addressing this issue first. Accordingly, the establishment of Islamic economics, banking and finance warrants a serious look into the current definition of money and monetary systems.Originality/valueIt calls for a definition of Shariah‐compatible money. This is beneficial to the researchers, proponents and practitioners of Islamic economics, banking and finance.