Mufti Taqi Usmani about Islamic Finance in Russia, Fiat money and Cryptocurrency (Part I)


Respected Sheikh Mohammed Taqi
Usmani we’re very honored with your visit here to
Moscow and ahlan wa sahlan, welcome! You had a very busy days here in Moscow and my
first question is how the impression of Russia particularly
financial aspects, Islamic financial aspects Because you’ve seen there are a lot of questions, people here asking about that Bismillahi ar-Rahmani ar-Raheem. Alhamdulillahi rabb al-alameen. wassalatu wassalamu ala rasuihi al-kareem wa ala aalihi wa ashabihi ajma’een. Amma ba’d In fact I was very much impressed by this visit to Russia. This was not my first visit to this beautiful country. I have been here some 12 years ago. And during this period I found that Russia, and Moscow particularly, has developed more than it was when I visited first. And also it was very incouraging, I found the people were very gentle and very kind. And I met the hospitality that should be between brothers alhamdulillah and also it was very fruitful because alhamdulillah we had certain opportunities to discuss the issues facing Russia. and also become closer to understanding each other particularly in the field of Islamic finance. It was a great opportunity for me to introduce Islamic finance and the philosophy underlying it. We had very good discussions during the meetings, during the seminars. I had an opportunity to speak in detail about Islamic finance. Alhamdulillah I received a lot of very pertinent questions about financial matters, particularly about Islamic finance. and I had an opportunity to clarify some issues that were disturbing the minds of many So I think that this visit is much more useful than it was in my first visit. I thank my brothers in Russia and the public of Russia and intelligentsia. I am very thankful for being very kind to me. and first of all thanks to you and alhamdulillah that we had opportunity such an opportunity to take knowledge to take
advice from you Sheikh and you travel to a lot of countries what do you think is
the level of understanding of Islamic finance in Russia now? Compared to other Islamic and non-Islamic countries In fact, I have visited so many countries where Muslims are a minority, where the system is secular but I cannot say for sure which country is more receptive to Islamic finance But the meetings I have attended and the people I have met, both I found are very eager to learn about Islamic finance and to experience it in the business activities. It is very incouraging to me. And… to tell you frankly, I did not imagine such kind of reception of Islamic finance as I found in this visit of mine and let’s move directly to financial
issues. The core instrument of Finance is money. So what is the main specific issue or issues of money, what is the difference between money according to the Shariah and according to the secular understanding. This is a very pertinent question about Islamic finance. I have explained it in my lecture that money, the nature of money… The first philosopher, according to my limited knowledge, who spoke about money and money’s nature was imam Gazali (rahimahullahu taala) some six hundred years ago He was the first person who spoke about money and about its nature. He said that money is not a commodity and cannot be traded as such. He said that whenever money will be made a commodity or considered to be a commodity then it will harm the economic atmosphere at large. After imam Gazali there were many philosophers who also said that money is a medium of exchange. So the first person said according to
my limited knowledge who said that it is a medium of exchange was imam Gazali But then after him came many philosophers who admitted that it is a medium of exchange. But unfortunately, they could not go further to reach the logical consequence or logical result of this principle, that it is a medium of exchange Because many people wanted to take money as something that can be traded in. and for that purpose the main obstacle was that in all religions, including Judaism, Christianity, Islam, the riba which is interest was prohibited. So at the very beginning, they tried to interpret money, or interpret riba or interest as to make it a commodity so it can be traded in Once this obstacle was removed, , and this interpretation had dominated among the philosophers, and among the economists, , then they allowed interest on the basis that it was usury that was prohibited, which is a consumption loan. but if it is a commercial loan, then charging something above the principle should not be prohibited. Once they reached this conclusion, it led to a number of transactions that were not in fact based on sustainable economy So therefore there came paper currency, and after paper currency came financial papers that were traded, then came the creation of money through banks — which has nothing real, this is an artificial creation of money And then came the derivatives in the form of futures, and options and swaps. These derivatives grew more and more to make the economy a bubble or a balloon, that could burst any time And this was the basic reason for the volatility of the economy throughout history. And there were many occasions where the world faced a crisis of recession crisis of trade cycle And lastly, in 2008, it was the biggest crisis that was faced by the world. At that point in time they admitted that our basic system of economy is faulty and should be reformed. But again, the people who benefitted from this kind of economy, they would not be ready to accept that we should make revolutionary changes in our economic system. Therefore, we are proceeding in the same direction as they wanted. I understand that derivatives are prohibited by Islam because it is just a bubble. But what about fiat money? what is the attitude of the Shariah to the
fiat money that paper money which are backed by the government. Does it
conform to the Shariah perception of money or every single currency should be
backed by gold or some goods or some other assets? A clear position is that
money, even if it is paper money, should have been backed by some commodity, like gold, silver etc. But the problem of earning money without real money led to acceptance of paper money. At the outset, paper money was fully backed by gold or silver, in yearly years But unfortunately, there came fractional reserve system through which the amount of gold and silver behind the paper money reduced. And at the last moment all the countries you know all the countries said that “we don’t
have anything except dollars” But the USA you know announced for the whole world that “I have dollars and these also are backed by gold and therefore any any time you can
come to me and get gold from us by showing these dollars. In the 1970s, it was for the first time tht USA backed out and said: we are not able
to give to you gold or silver So now, we are left with some papers only, there is nothing behind it. The same can be said about cryptocurrency, because they are not backed by any goods and as you mentioned during one of the
lectures that you are not ready to give any fatwas (decision) about that But can we conclude that cryptocurrency has the same drawback as the Fiat money is one thing and the other thing as you
mentioned there’s pure speculation as far as I understood. There are some basic differences between paper money and crypto currency. The basic difference is that, even though paper money has no backing at the moment but still they are backed by a basket
of goods and services If you go to any country, these notes or currency notes that are backed by an index of goods and services. Conversely, the crypto currency has no such backing so far. It was first invented by a person who is not known so
far and then he started to market it The first transactions that he undertook was to buy a pizza. Through this type of currency Then speculators came in. At that point, the rate, I think, was hundreds [units] of crypto currency for a dollar. So the speculators came, and now it raised, in the case of bitcoin, to a large amount. so it goes up, goes down through speculation This is the basic difference between paper money and crypto currency. So, to sum it up about the problems in
the financial system in the current system of currency we can say that the
globe now is standing on the edge of a financial crisis, which can arise
any time because all the reasons you mentioned so do you see any solution to
this threat and what can be done to overcome it. Is there anything that can be done or it’s just a matter of time t that the crisis will come? The basic solution, according to me, and Allah knows best, is that we should go back to treating money as a medium of exchange. Except in cross-border transactions. In cross-border transactions we need to
have to exchange some currency with other currencies. We should limit the exchange of currencies to cross-border transactions only. But if you analyze the
present situation is that the money or the currencies are sold and bought by
speculators and a very tiny percentage of these transactions is for the trade
purpose. Otherwise it is speculation But it refers not only the currency
but to the shares also and to… even to commodities. A lot of kinds [of it] like we speak about grain the same the speculation is everywhere Yes. Speculation is the basic cause of this crisis and therefore from sharia point of view, I speak from the Shariah point of view stocks should be traded in, no problem but they should not be short sale, in a sense that you sell something you do not own So, this is prohibited from sharia point of view. If we restrict our stock exchange transactions without short-selling, then the problem can be solved. As far as the standards [are concerned], and we are speaking about shares. AAOIFI Shariah standards (and your heading the Sharia Council of AAOIFI) set up certain criteria for shares to enable Muslims to
or other investors to invest according to the Sharia and those criteria
involve [among others] some part of prohibited income like: up to five percent of
prohibited income and up to 30 percent of interest based loans in the total
market value of the company so and some other criteria. So there are actually two
questions regarding that. The first [question] is why is this compromise [existing] because it is…
there is a part of prohibition in the company, it exists, and the second one if
we speak about Russia that if we screen the companies which are at the stock
exchange we cannot find even companies which comply to those criteria because
the amount of debt of these companies is huge, [it is] much more. In fact, as you rightly said, this is a compromise. It is not an ideal situation, it is a compromise. This compromise is based on necessity, [it exists] not as a principle. As a principle, even 5% should not be taken, but, you know, there is a necessity in the sense that the whole world is, you know… the business of the whole world is through the companies So if we prohibit purchasing any kind of stock, then people will be without any particular type in which they could invest according to the shariah. For that purpose the compromise was made, but this is not an ideal situation. Now, once this is a compromise so this compromise [is] based on necessity,
based on real need it may vary from country to country. This may vary from country to country therefore there are some countries in which not 30 percent, but also in some cases 40% was allowed… So, it’s a matter of local fatwa. Local fatwa, yes. And speaking about investment… A lot of Muslims in Russia are asking what is the best way
to invest. They have some funds, maybe small or bigger funds… What is the best way to
invest? Where to invest? Because we speak about stock market, but is it the
best way? I am not fully aware of the tools or the channels in which money could be invested [in Russia] but I feel that if there are some funds, there are some investment companies, I heard about some [investment] companies that have been established in Russia, Islamic investment companies , today I think we met some people from Kazan, who have such kind of company and Dagestan Yeah, and also Dagestan These investment companies should be used for investment and if, you know, stocks are analyzed, you know, there was a time when even in the US or any other country you could hardly find a company in which halal investment might be done. With those criteria? Yeah But when we started the Dow Jones Islamic Index, then the number of companies increased and many companies you know, made themselves to comply with these conditions, and gradually the number of [companies in the] index raised So, similarly, I think, if one analyzes the stocks in Russia, then maybe an index could be created in which Muslims could invest. There is such an activity as purchasing of debts, especially when we speak about
bankrupt companies so what does the Shariah say about it? There’s usually an auction is
going on and people raise the hands or for prices to buy the debts of companies. Debts? Debts. The company is bankrupt. But still a bankrupt company has some assets. Yes, and those assets of the company
are being brought on the auction Is it allowed to go and take it
cheaper than on the market? They are (assets of the company) usually sold out cheaper than the market price. The matter depends on the liquidator. The liquidator should be very fair to the company and to the participants. The problem is, in practice it is not always so. The liquidators usually not follow the market price. The market price, you know, does not reflect the real value of the company, the real value of the assets Therefore, the market value by and large is an artificial value because of speculation, because of certain factors which make it very artificial. But the real value, not book value, historical value, but the value of the real assets, so the liquidator when he pushes the company through an auction, he should have in his mind the real value of the assets the company has. So, it may be less than the market price, but it will reflect the real price of the assets owned by the company. So far as debts are concerned, debts cannot be traded (according to the shariah), except to a par value. In case of the debts, [when] there are real assets and debts both, then there is a principle in shariah, that they are not really the object of purchasing, but they are, you know, tabi’ … to the assets. tabi’ means… they are… relevant or going with it… related to related, yes. Related to the [asset] If I want to buy debt. The debt. This is not allowed. But if I am purchasing a business which comprises some assets, real assets and also some debts, then I can do that. And a small question about… Nisab in gold and nisab in silver What’s the difference between them? Yes, what the Muslims should be oriented at which kind of nisab? You know, at the moment normally silver has been taken as the basis of nisab. Silver? The minimum one? Yes. Minimum one. Because it is more beneficial to the poor people. But there are some countries in which the difference is so high, that even a person who owns, for example, some percentage of silver cannot be regarded as a person who is able to give something in charity. In that case there are many options. We have in fiqh (Islamic law) many options. Some contemporary scholars say that in that case we could base our nisab on gold, not on silver. And some people say “No, we still base our nisab on silver, but calculating the silver nisab, the way of calculation of nisab different… You know? So it’s again the matter of local fatwa… And my last question refers to your purpose of the visit actually to Moscow the project
Agrofinmost or Agri financial bridge which is… involves an increase of exports
of agricultural goods in Russia and with with the use of Islamic financial
instruments such as sukuk and there are two actual questions. The first is why
Islamic investment don’t come to Russia until now just briefly me your
opinion if you if you have any. The second one what do you think about the trends in the sukuk market I’ve heard that there is lack of supply of the
sukuk and that’s why there is over… oversubscription to many issues of sukuk. And do you think that Russia should issue sukuk on the foreign exchange
and where should it be, Dubai, Bahrain or any other? Yes, of course, as I explained earlier it is a very good project that you are thinking to start. It will be beneficial for both Russia and Muslim countries. The idea is very good, but in order to practice it, we have to study the involved issues very deeply and if we are able to carry out a structure which is shariah-compliant on the one hand and also beneficial for both parties, I think it will be very useful. And if the sukuk are issued on that basis, they’ll have a good market inshallah. And which… on which stock exchange? So, it should be sukuk in USD or in some… … euro, or in some other international
currency but where which is the country where to come with this issue to… to sell… I think UAE will be in the best position. A lot of people have a question. How did you come to this sphere? Fiqh muamalat al maliya And sphere of Islamic finance? Fear of Islamic finance is both sides. There is fear from those who do not really understand what Islamic finance really is. They say that when we speak about Islamic finance, it means that we Islamize the whole country. This is not true. This is from one side. The other side is that people outside Russia they are a bit apprehensive as to what will happen with their capital. This kind of fear should be removed firstly by explaining the real sense of Islamic finance and to the outer world that it is the best place for investments. And how did you personally get involved into this sphere, I mean from your maybe from your youth, young years, when you were a student… how did you get interested or is this the kind of family tradition to study in
this sphere because we know that your son also is a well-known scholar in the
field of Islamic finance. How did you get involved in this? I got involved because when I read the Holy Quran. And the Holy Quran you know, says that whoever is involved in interest (riba), is waging war against Allah, Subhanahu wa Taala. This was a very alarming statement by the Holy Quran. So I tried… When I saw that the whole world is drowned in riba, in interest, my conscience led me to the effort that this kind of war with Allah should be removed. Ma shaa Allah. And I wish that your work your theses, your books really bring the a new … a new picture on the World, of the globe, of the economy that we see now it will it will be moving for the better. And coming back to the project of Agrofinmost you have been invited to enter the council,
the board of the project and which kind of advice can you give like step by step
or what are the main important points the project team should focus on to succeed? I think first of all, to make an effort to reach a better structure for issuing sukuk. And maybe… It will require two things. One is help from shariah scholars. The second is the experience of professional persons. Sheikh [Muhammad], thank you very much jazakallahu hairan, for your time for your profound answers for your visit and we hope that
this is your first visit in a series of visits to Russia and we’ll see you again
and again and have opportunities to share… take knowledge from you. Let me explain to you, because it has been asked, whether people will be interested in the investment in Russia. You know, there was some kind of fear so far. Lack of trust. Yes, lack of trust and some kind of fear. But you in Russia present an open policy that will remove this fear, inshallah. So as soon and as far as you go on that line, to be open to the whole world, I think these obstacles may be removed. In sha Allah

21 thoughts on “Mufti Taqi Usmani about Islamic Finance in Russia, Fiat money and Cryptocurrency (Part I)”

  1. السلام عليكم ورحمت اللَّه وبركاته если вазможна перевести на русский язык بارك الله ثيكم

  2. 00:44 – impression on the visit to Russia
    04:40 – the essence of money according to the Shariah and how the interest based economic system started
    08:39 – derivatives and the financial crisis: a balloon which can burst any time
    10:24 – the paper money and its Shariah perception
    12:23 – cryptocurrency according to Islamic law
    14:45 – can anything be done to overcome the financial crisis?
    17:12 – the criteria for investment into shares: is it a compromise?
    19:48 – where Muslims can invest in Russia?
    21:50 – bankruptcy and purchasing of debts: what are the rules?
    25:23 – which nisab is the basic one?
    27:04 – the #Agrofinmost project and its prospects
    29:48 – why there is a fear of Islamic finance in some cases?
    30:40 – how did sheikh Muhammad personally came tp the sphere of Islamic finance

  3. Hazrat Mufti Taqi SB is a precious asset of the whole ummah. May Allah protect him , elevate him and give barakah in his vast knowledge

  4. Hes name.. Mufti Taqi Usmani.
    ❤️❤️❤️❤️❤️❤️❤️❤️❤️❤️❤️❤️Ths person is dimond of islamic education and very respect full person ❤️❤️❤️❤️❤️❤️❤️Allah bless them

  5. مفتی تقی عثمانی صاحب کی چند معتبر اور مستند تصنیفآت:-

    ۱- تقلید کی شاعری حیثیت۔
    ۲- حجیتِ حدیث۔
    ۳- درس ترمذی۔
    ۴- مارف لقرآن (انگلش)۔
    ۵- ۔اسلام اور سیاسی نظریات۔
    ۶- الوم القرآن۔
    ۷- تقریر ترمذی۔
    ۹- فتاویٰ عثمانی۔
    ۱۰- تکملہ فتھل ملحم۔
    ۱۱- انعام الباری۔
    ۱۲- فقہی مقالات۔
    ۱۳- ملکیتی زمین اور اسکی تحدید۔
    ۱۴- بائبل سے قرآن تک۔
    ۱۵- احکام ال زبایہ۔
    ۱۶- مؤقف امت ال اسلامیہ مینال قادیانیت۔
    ۱۷- فقہ ال بویو۔
    ۱۹- توضیح ال قرآن۔
    ۲۰-حضرت معاویہ اور تاریخی حقائق۔
    ۲۱- پُرنور دعائیں۔
    ۲۲- ضبط ولادت۔
    ۲۳- اصلاحی خطبات۔
    ۲۴- ذکر وا فکر۔
    ۲۵- جہانِ دیدہ۔
    ۲۶- دنیا میرے آگے۔
    ۲۷- سفر در سفر۔
    ۲۸- اکابر علماء دیوبند کیا تھے۔
    ۲۹- ہمارے عائلی مسائل۔
    ۳۰- اُسول ال افتاء وا آدابوہو۔

  6. People should support Jamia Darul Uloom Karachi if they wish to help Mufti Taqi Usmani and serve his mission. This man is a gem and will do all that which is in his capacity to serve the interest of muslims in the education sector and in promoting Islamic Finance

  7. Познавательное видео! Прорабатываем эти вопросы в нашем кооперативе! Благодарим за информацию!!!

  8. Mujhy khushi hai k mainy is zamany min khud ko paya k jis vaqat hzrt vala ka zamana moujod hai الحَمْدُ ِلله

Leave a Reply

Your email address will not be published. Required fields are marked *