Azah Atikah Anwar Batcha

Research Scholar, Universiti Teknologi Malaysia (UTM)

The 19th Muzakarah of Nusantara Shari’ah Scholars (INCEIF–ISRA), held in Bangkok, Thailand on 16^th July 2025, brought together Shari’ah scholars and advisors, Islamic finance practitioners, regulators, legal practitioners, academics and researchers to deliberate on contemporary issues affecting the Islamic financial system. Among the most noteworthy developments was the dedicated attention given to modern money and the mechanism of money creation. This reflects an important shift in scholarly discourse, signalling that contemporary Shari’ah scholars are increasingly recognising the need to examine not only Islamic financial products but also the monetary system within which those products operate.

The most significant implication of the Muzakarah is that it also marks the emergence of Islamic monetary economics as a more prominent area of scholarly research. Scholars are increasingly engaging with these issues in greater depth, moving beyond a surface-level consideration to examine their underlying assumptions, institutional structures and ethical consequences. For many years, Islamic finance research focused primarily on ensuring that financial contracts, banking products and capital market instruments complied with Shari’ah principles. While these efforts have significantly advanced the industry, comparatively, less attention has been devoted to the nature of money and the process by which it is created.

The inclusion of dedicated sessions during the Muzakarah on The Concept of Modern Money in the Financial System and How It Relates to Money Creation as well as Preliminary Shari’ah Review on the Concept and Operation of Modern Money demonstrates that scholars now consider these issues worthy of independent and systematic examination. The discussions also indicate a shift from limiting the debate to the classical question of whether paper currency assumes the legal status of gold and silver. While this remains an important juristic issue, the contemporary monetary system presents a much broader set of questions.

Today’s money is predominantly created through commercial bank lending under the fiat monetary system. This is contrary to the common assumption that banks lend from existing deposits. When commercial bank lending creates new deposits, loans do not necessarily come from a pre-existing pool of money; rather, the act of lending itself creates new deposit money. The creation of money through bank lending is therefore not simply constrained by the availability of existing reserves but is influenced by the demand for credit. 

This makes the relationship between money, debt and financial institutions involved central to Shari’ah evaluation. A proper evaluation of modern money thus requires knowledge of how money is created, how monetary expansion affects wealth distribution and financial stability, and how these mechanisms relate to the higher objectives (maqāṣid) of the Sharīʻah, particularly the preservation of wealth (ḥifz al-māl) and the preservation of intellect (ḥifz al- ‘aql).

As Islamic finance continues to mature, future research is likely to move beyond the Shari’ah compliance of financial products towards a more comprehensive examination of the monetary system itself. This development arising from the Muzakarah may encourage renewed ijtihad on issues such as money creation, monetary authority, financial stability and the role of money in achieving the objectives of the Sharīʻah. This 19th Muzakarah therefore serves as an important milestone, demonstrating that modern money deserves significant Shari’ah scholarship and intellectual attention.

References

https://www.bnm.gov.my/-/dgaz-spch-mcsn2025

https://www.bnm.gov.my/documents/20124/18749898/adnanzaylani-mcsn2025.pdf.