This study examines the issue of compensating for the depreciation of money under inflationary conditions from the perspective of Shi'a jurisprudence and economic justice. The central research question is whether, within the framework of Islamic transactional jurisprudence and based on principles such as justice, no-harm (la darar), and fulfillment of obligations, a legitimate and coherent mechanism can be developed to compensate for the loss of purchasing power in loan contracts. The hypothesis of the study is that, given the credit-based nature of modern money and the role of inflation in generating unjust transfers of value, compensating for the decline in purchasing power is not only compatible with the prohibition of usury (riba), but is also necessary for the realization of economic justice. The research adopts an analytical-deductive methodology and draws on juristic sources, Islamic economic literature, legal analyses, and the rulings of contemporary jurists, particularly the recent fatwa of the Supreme Leader of Iran, to extract theoretical foundations and practical solutions. The findings indicate that Shi'a jurisprudence possesses substantial capacity to recognize compensation for monetary depreciation, since its foundational principles do not permit serious harm to be imposed on either contracting party. Moreover, contemporary fatwas reveal a shift from emphasis on nominal amounts toward recognition of the real economic value of property. Consequently, mechanisms such as contractual stipulations, judicial adjustment, and indexation may be proposed as legitimate models for preserving value without violating the prohibition of riba.

Introduction
Inflation in modern economies is not merely a macroeconomic phenomenon reflected in rising prices; it also functions as a mechanism of wealth redistribution. When inflation persists, the purchasing power of money declines, and fixed nominal obligations lose their real value. This issue becomes particularly significant in loan contracts, where repayment of the same nominal amount after a long period may result in substantial injustice to the lender. In traditional Islamic jurisprudence, loans (qard) are regarded as benevolent contracts intended to assist others rather than generate profit. At the same time, any increase over the principal amount is generally treated with suspicion because of the categorical prohibition of riba.
However, the emergence of fiat money and chronic inflation has transformed the economic nature of money itself. Unlike gold and silver, contemporary currency has no intrinsic value and derives worth primarily from purchasing power. This raises an important jurisprudential question: should repayment be based on the nominal number printed on currency notes, or on the real economic value represented by that amount at the time of lending? This study addresses that question by linking jurisprudential reasoning with the broader concept of economic justice in Islam.
Materials and Methods
The study employs an analytical-deductive methodology grounded in textual and conceptual analysis. Primary materials include classical and contemporary Shi'a jurisprudential sources, legal commentaries, writings in Islamic economics, and contemporary fatwas concerning inflation and debt repayment. Particular attention is given to the recent legal opinion issued by the office of Ayatollah Khamenei permitting compensation for loss of monetary value under certain conditions.
The research also engages comparative economic literature, especially works by Muhammad Umer Chapra, El-Gamal, and Taqi Usmani, in order to situate the issue within broader debates on justice, fairness, and the objectives of Islamic law. The method consists of three stages:
1. Conceptual analysis of money, inflation, and justice in Islamic thought.
2. Jurisprudential examination of principles such as la darar (no harm), fulfillment of obligations, fairness, and prohibition of riba.
3. Normative evaluation of practical compensation mechanisms, including contractual clauses, judicial adjustment, negotiated settlement, and inflation indexation.
Discussion
The findings suggest that the central disagreement among jurists is not over the prohibition of riba itself, but over the proper characterization of money in contemporary economies. If money is treated purely as a fungible nominal unit, repayment of the same amount appears sufficient. But if money is understood as a store of purchasing power, then severe inflation causes real loss to the lender, and nominal repayment alone may fail to discharge the debt fairly.
Islamic economic thought places strong emphasis on preventing unjust enrichment and ensuring balanced exchange relations. Chapra argues that institutions which facilitate hidden redistribution of wealth contradict the ethical objectives of Islamic economics. Inflation without compensatory mechanisms effectively transfers wealth from creditors, wage earners, and savers to debtors and holders of real assets. This resembles a concealed tax and may intensify inequality.
From a jurisprudential perspective, several principles support compensation. The doctrine of la darar rejects legal outcomes that impose significant avoidable harm. If inflation destroys a substantial portion of the lender’s capital value, strict insistence on nominal repayment may create unjust harm. Likewise, the principle of justice requires proportionality between rights and obligations. Fulfillment of contracts can also be interpreted not merely as honoring numbers, but as preserving the substantive value intended by the agreement.
Contemporary Shi'a juristic thought increasingly reflects this shift. While some earlier authorities rejected any increase beyond nominal principal, more recent positions differentiate between usurious gain and restoration of real value. The recent fatwa permitting recovery of inflationary loss based on official indicators is especially significant because it treats compensation not as profit from time, but as restoration of legitimate entitlement.
Several legitimate mechanisms emerge:
1. Contractual stipulation: parties may agree in advance to adjust repayment
according to inflation.
2. Judicial adjustment: courts may intervene where severe depreciation creates manifest inequity.
3. Official indexation: use of recognized price indices or central bank data.
4. Reconciliation (sulh): negotiated settlement where precise calculation is disputed.
These mechanisms preserve justice while avoiding riba, since the purpose is compensation rather than gain.
Conclusion
The study concludes that compensation for monetary depreciation in inflationary contexts is compatible with the principles of Shi'a jurisprudence and the broader objectives of Islamic economic justice. The issue should be understood as a transformation in the subject matter of money rather than a change in the prohibition of riba. Since modern money is value-based rather than intrinsically valuable, repayment based solely on nominal figures may fail to satisfy justice and may impose serious loss.
Accordingly, compensation for loss of purchasing power can be regarded not as unlawful excess, but as restoration of real entitlement. Mechanisms such as indexation, contractual clauses, judicial modification, and negotiated settlement provide workable models for contemporary Islamic legal systems. In this sense, dynamic jurisprudence is capable of reconciling fidelity to classical norms with the realities of modern inflationary economies.