Indexing Debt to Gold: A Jurisprudential and Economic Study

Abstract

This study examines the concept of linking debt to gold from both jurisprudential (fiqh) and economic perspectives, focusing on the impact of sharp fluctuations in the purchasing power of fiat money (inflation) on long-term financial obligations. The research addresses the challenge of preserving the real value of debts amid contemporary economic instability and safeguarding creditors’ rights. It explores whether indexing debt to gold constitutes an effective and legitimate economic solution. The study analyzes the permissibility of linking debt to gold, reviews the opinions of Islamic jurists, and compares the financial implications of indexing debts to gold versus repayment in fiat currency to determine which approach better achieves fairness between contracting parties. A descriptive-analytical and comparative methodology is employed. The findings indicate that the majority view upholds repayment in kind (al-mithl). However, in cases of significant and recognized currency fluctuations, repayment based on value rather than strict nominal equivalence is closer to justice, provided that valuation follows neutral standards such as gold or a basket of essential commodities. The study concludes that such indexing mechanisms preserve debt value and protect the rights of both creditor and debtor in line with the principles of justice and solidarity in Islamic law.