During the lifetime of the Prophet Muhammad and his early companions, the Arabs and early Muslims used coinage that originated from neighboring empires. For the most part, gold and bronze coins were imported from the Byzantines while the silver was imported from the Sasanians. The early Muslims depended upon these empires for their monetary supply. They did not issue their own coins until the reign of the third Rashidun caliph and companion of the prophet 'Uthman ibn 'Affan.
Under 'Uthman's reign and after the Muslims overcame the Sasanian Empire and conquered their territories, the first Islamic coin was introduced out of necessity, since the Sasanians were no longer in power and the early Muslims could not afford to halt any minting operations. This first Islamic coin imitated the style of the Sasanian drachm from the reign of Yazdigerd III, who was the last Sasanian king. Note: although there might have been coins struck by the Muslims before this first known issue, there is no concrete evidence or indication on the coin itself to suggest this; therefore, this coin is considered the first definitive Islamic coin.
The following is a Sasanian drachm from the reign of Yazdigerd III:
It is worth noting that the entire span of legends on the coin is in the Pahlavi script (a written form of the Middle Persian language). The obverse (front face of the coin) carries a portrait of the Sasanian king Yazdigerd III wearing a crown. To his right is his name in Pahlavi, and to his left is the inscription in Pahlavi that roughly translates to "may his glory grow". On the reverse side we find a scenic image of a fire altar surrounded by two attendants, and this is indicative of the religion that the Sasanians followed: Zoroastrianism. To the right is usually a Pahlavi abbreviation for the mint name (where the coin was minted) and to the left is the Pahlavi inscription indicating the regnal year when this drachm was minted.
The first Islamic coin imitated the style of Yazdigerd III's drachmas, even bearing images of the Sasanian king and the fire altar. The following is a high-grade example of the first Islamic coin:
As is clear, the imitation of the Sasanian style is evident on this Arab-Sasanian style dirham (Arabic for drachm). What truly distinguishes these Islamic issues from earlier Sasanian issues is the addition of an Arabic word/phrase in the outer margin field on the obverse. In the case of this dirham, it is the addition of the "basmala" (which is "bism Allah", Arabic for "in the name of God"), although in very crude Arabic script. There are other examples with other phrases known from Arab-Sasanian issues, ranging from "jayyid" ("good") to the whole kalima ("there is no god except Allah and Muhammad is the messenger of Allah") on later issues under the Umayyads.
Furthermore, Arab-Sasanian issues also mention the date and mint name in the Pahlavi script, except for some very rare later issues. This dirham of 'Uthman carries the mint abbreviation for Sijistan, which is SK in Pahlavi. The date mentioned is the regnal year 20, which corresponds to the end of AH 30 and the majority of AH 31 (in the Hijri calendar).
Arab-Sasanian issues continued to be minted under the Rashidun caliphs, the Umayyad caliphs, and even the Zubayrid rulers, anti-Umayyad rebels, and the Kharijites. The minting of this pre-reform style remained even for a number of years after the reformation of coinage in AH 77 into purely Islamic issues with no Byzantine or Sasanian influences.
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