Dinar vs Dirham: What’s the Difference? History, Pros & Cons

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Dinar vs Dirham: What’s the Difference? History, Pros & Cons

Dirham is a silver-based currency that is commonly used in Arab countries and the Middle East. Today, the metal coins have been distributed as collectibles and investment instruments.

In addition, many people use it as zakat, dowry and savings. Although it cannot be used for daily transactions, investing in dirham currency is quite profitable because its value is relatively stable.

To get to know more about dirham, from its history, differences with dinar, dirham as an investment instrument, to its advantages and disadvantages, check out the full review below.

What is Dirham?

Dirham is a silver coin that is widely used as a means of payment in Arab and Middle Eastern countries. This coin is round in shape with two sides arranged in a circle.

On one side, there are the words “Lailahaillallah” and “Alhamdulillah”. On the other side, the name of the ruler and the date of minting are printed.

History of Dinar and Dirham

The use of dinars and dirhams began during the time of the Prophet Muhammad. These two gold and silver coins were used as a medium of exchange because they were considered valuable and valuable, replacing the barter system previously used by the Arab community.

The term “dinar” stems from the Latin word “Denarius” used by the Romans, while “dirham” comes from the Persian “Drachma”.

These coins began to circulate as a result of trade between the Arabs and Sham, which was under Roman and Yemeni or Persian rule.

At the time of the Prophet Muhammad, the weight of dinars and dirhams was determined through a standard created by him and his best friend, Arqam bin Abi Arqam, namely 7 dinars equivalent to the weight of 10 dirhams.

In the history of Islamic government, the use of dirham was first applied during the reign of Abdul Malik bin Marwan, with metal weights based on the size of the “solidus”, the currency of Byzantium.

Difference between Dinar and Dirham

After knowing their history, here are the differences between dinars and dirhams that are important to know.

1. Shape

Both coins are round and thin, similar to other coins. However, the design and engraving of each coin can differ depending on the country and company that issued it, which also affects the price of the coin.

2. Materials of Manufacture

Dinars are made of gold, while dirhams are made of silver. The weight difference between the two is quite significant, with the dinar weighing around 4.295 grams, while the dirham is around 2.975 grams.

In addition to the difference in material and weight, the precious metal content is also different. Dinars generally contain higher levels of precious metals than dirhams.

3. Value and Price

Due to the difference in materials and precious metal content, the prices of dinars and dirhams also differ. Dinars, which are made of pure gold, have a much higher price compared to dirhams.

On the other hand, dinars are also considered more favorable for investment due to their more promising price increases.

Uses in Indonesia

Since dinars and dirhams are made of precious metals such as gold and silver, their use is limited to the following purposes, among others:

1. Collectibles

Dinars and dirhams are favorite collectibles of many collectors due to their beautiful ornaments that make them suitable for decoration. Their small and thin shape also makes them easy to store without requiring a large space.

Besides being a collection, dinars and dirhams, which are made of gold or silver, can also be used as savings that can be sold at any time.

2. Investment Instrument

Gold and silver as precious metals tend to have a more stable value because they are not significantly affected by market fluctuations. This makes dinars and dirhams suitable as investment instruments, both for beginners and investors with a conservative risk profile.

3. As Gifts, Souvenirs, and Marriages

Dirhams are quite popular coins to be used as gifts, souvenirs, or dowries. Besides having a high selling value, dirham is also recommended in Islam as a type of wedding gift from the groom.

For your information, despite their many uses, dinars and dirhams cannot be used for buying and selling transactions in Indonesia.

In Indonesia, the payment system requires the use of rupiah as the official currency in all commercial transactions.

Dirham as an Investment Instrument

As explained earlier, dirham is one of the promising investment instruments for beginner investors because of its relatively stable value.

Dirham is known to offer relatively high value stability, making it an attractive option for investment. Because they are made of silver, dirhams do not experience significant price fluctuations as is often the case with stocks.

Such stability makes it a safe and reliable option for investors, especially those who are just starting to invest or who prefer minimal risk.

For investment, dirhams are considered a good choice for beginners and investors with a conservative risk profile. In this case, novice investors can feel more comfortable investing in dirhams due to their stable nature and less susceptibility to drastic market changes.

Value of Dirham in Rupiah

Image Source: Wise.com

Quoting the Wise.com page, the current value of dirham is around IDR 4,080, as of August 6, 2024 at 13:32 WIB. This means that to exchange rupiah money for dirhams, you need to prepare around IDR 4,080 for every 1 dirham.

Currently, dirham coins in circulation usually have values of 1, 5, 10, 25, and 50 dirhams, while dirham banknotes are available in denominations of 5, 10, 20, 50, 100, 200, 500, and 1,000 dirhams.

The value of 1 dirham in rupiah can fluctuate according to foreign exchange rates. Here is the approximate value of 1 dirham from several countries that use dirham, along with its value in rupiah, among others:

1. United Arab Emirates Dirham (AED)

The currency of the United Arab Emirates (AED) is one type of dirham that has a fairly stable and strong exchange rate against the rupiah. However, this exchange rate can fluctuate according to market changes.

Currently, the exchange rate of 1 United Arab Emirates dirham is estimated to be around IDR 4,080, meaning that if you own 1 United Arab Emirates dirham, it is worth around IDR 4,080.

2. Moroccan Dirham (MAD)

Morocco uses the Moroccan dirham (MAD) as its currency. The exchange rate of 1 Moroccan dirham against the rupiah can also fluctuate following market conditions.

It is estimated that the exchange rate of 1 Moroccan dirham is around Rp1,200. So, if you have 1 Moroccan dirham, it is worth around Rp1,200.

3. Algerian Dirham (DZD)

Algeria uses the Algerian dirham (DZD). The exchange rate of 1 Algerian dirham against the rupiah can fluctuate. The exchange rate of 1 Algerian dirham is estimated to be around IDR 9. So, if you have 1 Algerian dirham, it is worth around Rp9.

4. Libyan Dirham (LYD)

Libya uses the Libyan dirham (LYD). The exchange rate of the Libyan dirham is influenced by political and economic conditions in the country. It is estimated that the exchange rate of 1 Libyan dirham is around IDR 800. So, if you have 1 Libyan dirham, it is worth around Rp800.

How to Convert Dirham Value to Rupiah

Before deciding to invest, it is important to understand the conversion of dirham value to rupiah. Here are the steps to convert dirham value to rupiah, namely:

Visit a currency converter site, such as www.xe.com or www.valutafx.com.
In the “Amount” field, enter the number of dirhams you wish to convert.
In the “From” field, select “Dirham” and choose the country where the currency is issued.
Select the “Indonesia” option in the “To” column to display the value in rupiah.
Done! You can now view the dirham to rupiah conversion rate.

Steps to Investing in Dirhams

As mentioned earlier, dirham is a promising investment instrument thanks to its attractive design and stable value. However, before you start investing, there are some important things to consider, including:

1. Determine Investment Objectives

Define your purpose for investing in dirhams, whether it’s for education expenses, retirement savings, or other purposes. Having a clear goal will help you stay focused and consistent in your investment.

2. Know the Rules Related to Dirham

It is important to understand that although dirham is a widely recognized currency, this coin cannot be used for buying and selling transactions in Indonesia.

This is regulated in Article 2 Paragraph 1 and Article 21 Paragraph 1 of Law Number 7 Year 2011 on Currency, which states that only Rupiah is valid as a medium of exchange and transaction in Indonesia.

3. Buy Dirham from a Trusted Company

To ensure the authenticity and quality of dirhams purchased, make transactions only with trusted companies such as PT Antam, UBS, or other leading mining companies. Also, make sure that the purchased dirham has been equipped with a certificate of authenticity.

4. Start with a Small Amount

Although dirhams tend to have a stable value, it’s best to start investing with a small amount. This will make it easier to monitor fluctuations in the value of dirhams and help reduce investment risk.

5. Use Unused Money

Make sure to set aside a budget for daily needs, medical expenses, and spare money before investing.

Use only unused or surplus funds for investment. It will help to anticipate possible losses or urgent needs that may arise.

Advantages and Disadvantages of Dirham Investment

Advantages:

The following are some of the advantages that come with investing in dirhams, among them:

Dirhams have an aesthetically pleasing design, making them suitable as collectibles or gifts.
The dirham weighs 2.975 grams, has a diameter of 25 mm, and has a silver content of between 91% and 99.95%.
Dirhams are still used as a medium of exchange in some countries, such as the United Arab Emirates and Morocco, so they can be traded globally
You can sell dirhams by the piece, unlike gold bars which usually have to be sold in full units
When selling dirhams, you will not be charged for manufacturing costs
Dirhams are easily available because they are produced by PT Antam and several other companies

Disadvantages:

Besides the above-mentioned advantages, dirhams also have some disadvantages. The following are the drawbacks of investing in dirhams, namely:

Dirhams are subject to 10% Value Added Tax (VAT) as they are categorized as jewelry.
The selling price of dirhams is influenced by the design and motif, even though the silver content is the same
Dirhams are more suitable for long-term investments as their selling price tends to be stable. Profits are usually realized after 5 to 10 years.
The supply of dirhams may be affected by fluctuations in global silver production

Conclusion

In conclusion, the dirham is a silver coin used in some countries as a medium of exchange and as an investment instrument.

It has a high silver content, usually between 91% to 99.95%, and a uniform size weighing about 2.975 grams and 25 mm in diameter.

Its attractive design makes it popular as a collectible, gift or dowry, while its stability in value makes it attractive to investors.

As an investment, dirhams offer the advantage of stability in value that tends not to be affected by large market fluctuations.

However, investing in dirhams is more suitable as a long-term option, with potential gains only being realized after 5 to 10 years.

In addition, dirhams can be traded internationally and can be sold by the piece, unlike gold bars which usually have to be sold in full quantities.

On the other hand, dirhams also have some disadvantages, including the fact that they are subject to 10% Value Added Tax (VAT) because they are considered jewelry.

Not only that, the selling price of dirhams can be affected by the design and motif, even if the silver content is the same. The supply of dirhams can also be affected by fluctuations in global silver production which can affect their value and availability.

FAQ

1. What is a dirham?

Dirham is a silver-based currency that is widely used in Arab countries and the Middle East.

2 What is the difference between dinar and dirham?

Dinars are made of gold with a content of 91.7 percent to 99.99 percent, while dirhams are made of silver with a content of 99.95 percent.

3. Why is dirham used as an investment instrument?

Dirham is used as an investment instrument because its value tends to be stable and is not affected by market fluctuations.

4. How to convert dirham to rupiah?

Use a currency converter site like xe.com, enter the number of dirhams, and select the country and currency you want to convert.

5. What are the drawbacks of investing in dirhams?

The disadvantages of investing in dirhams include being subject to 10% VAT, the selling price is determined by the design and motif, and it is a long-term investment.”

Besides Dirham or Dinar You Can Invest in Crypto Assets

Well, now you know what dirham is, starting from its history, the difference with dinar, dirham as an investment instrument, to its advantages and disadvantages.

Besides investing in dirhams and dinars, you can also invest in crypto assets. If you are interested in crypto investment, from buying Bitcoin, buying eth, to other crypto assets, then you can buy it at INDODAX Market.

On the other hand, to facilitate crypto trading easily and safely, you can also download the crypto trading application from INDODAX through the Google Play Store and through the App Store right now!

In addition, INDODAX itself continues to be committed to providing easy access for investors to enter the crypto market.

As a disclaimer, basically, investing in crypto assets also carries its own risks, as in other types of investments. The risks include the fluctuating value of crypto assets and the high level of volatility in crypto assets.

Therefore, for investors, it is best to do independent and in-depth research first before starting crypto asset investment.

So, what are you waiting for? Let’s start crypto asset investment right now only with INDODAX!