Question:

What is the ruling on exchanging rands for rands?  For example: Ahmad needs change for a R100 note, so Muhammad takes the note and gives him the only 3 R20 notes that he has with him and tells him he’ll give him the rest later on in the day. Is this permissible? Or will this be considered as ribaa un nasee’ah

Answer:

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

There are multiple scenarios of trading different currencies.  Each scenario has a different ruling:

1. If there are two identical currencies, then it is permissible to exchange them provided that both the counter values are equal. An excess on either side will be regarded as interest and is Harām.  For example, exchanging R100 note for coins equalling R100 is permissible.  However, exchanging a R100 for 3 R20 notes and leaving the rest deferred is not permissible. 

2. If there are two different currencies in a cash transaction, then it is permissible to exchange them at any rate agreed upon. For example, exchanging £100 for R1500 will be permissible.

3. If there are two different currencies exchanged with a deferral, the following laws must be adhered to:
A)   One transacting party must acquire possession of the counter currency at the time of striking the deal.
B)   The currencies may only be sold at the current market rate; otherwise it will become a means of effecting interest-bearing transactions.[1]
       
And Allah Ta’ālā Knows Best

Mufti Faraz Adam  
www.darulfiqh.com