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''Gharar'' () literally means uncertainty, hazard, chance or risk. It is a negative element in ''mu'amalat'' ''
fiqh ''Fiqh'' (; ) is the term for Islamic jurisprudence.Fiqh
Encyclopædia Britannica
''Fiqh'' is of ...
'' (transactional
Islam Islam is an Abrahamic religions, Abrahamic monotheistic religion based on the Quran, and the teachings of Muhammad. Adherents of Islam are called Muslims, who are estimated to number Islam by country, 2 billion worldwide and are the world ...
ic jurisprudence), like ''
riba ''Riba'' (, or , ) is an Arabic word used in Islamic law and roughly translated as " usury": unjust, exploitative gains made in trade or business. ''Riba'' is mentioned and condemned in several different verses in the Qur'an3:130
'' (
usury Usury () is the practice of making loans that are seen as unfairly enriching the lender. The term may be used in a moral sense—condemning taking advantage of others' misfortunes—or in a legal sense, where an interest rate is charged in e ...
) and '' maisir'' (gambling). One Islamic dictionary (''A Concise Dictionary of Islamic Terms'') describes it as "the sale of what is not present" — such as fish not yet caught, crops not yet harvested. Similarly, author Muhammad Ayub says that "in the legal terminology of jurists", ''gharar'' is "the sale of a thing which is not present at hand, or the sale of a thing whose ''aqibah'' (consequence) is not known, or a sale involving hazard in which one does not know whether it will come to be or not".


Definitions, fiqh

According to Sami Al-Suwailem, "researchers in Islamic finance" do not agree on the "precise meaning" of gharar, although there is not necessarily great difference among the Islamic schools of jurisprudence ( madhab) in the term's definition. The ''
Hanafi The Hanafi school or Hanafism is the oldest and largest Madhhab, school of Islamic jurisprudence out of the four schools within Sunni Islam. It developed from the teachings of the Faqīh, jurist and theologian Abu Hanifa (), who systemised the ...
'' legal school defines ''gharar'' as "that whose consequences are hidden", (according to Sami Al-Suwailem). According to Md Akther Uddin, scholars of ''Hanafi'' school of
fiqh ''Fiqh'' (; ) is the term for Islamic jurisprudence.Fiqh
Encyclopædia Britannica
''Fiqh'' is of ...
(Islamic jurisprudence) have defined ''gharar'' as "something which its consequence is undetermined." Sarakhsi, an Islamic scholar of the Hanafi school, described ''gharar'' as "anything that the end result is hidden or the risk is equally uncommon, whether it exists or not." Similarly, the '' Shafi'' legal school defined ''gharar'' (according to Sami al-Suwailem) as "that whose nature and consequences are hidden" or "that which admits two possibilities, with the less desirable one being more likely." Scholars of Shafi’i ''fiqh'' have described it as “something which in its manner and its consequence is hidden." The ''
Hanbali The Hanbali school or Hanbalism is one of the four major schools of Islamic jurisprudence, belonging to the Ahl al-Hadith tradition within Sunni Islam. It is named after and based on the teachings of the 9th-century scholar, jurist and tradit ...
'' school defined it as "that whose consequences are unknown" or "that which is undeliverable, whether it exists or not."
Ibn Hazm Ibn Hazm (; November 994 – 15 August 1064) was an Andalusian Muslim polymath, historian, traditionist, jurist, philosopher, and theologian, born in the Córdoban Caliphate, present-day Spain. Described as one of the strictest hadith interpre ...
of the ''
Zahiri The Zahiri school or Zahirism is a school of Islamic jurisprudence within Sunni Islam. It was named after Dawud al-Zahiri and flourished in Spain during the Caliphate of Córdoba under the leadership of Ibn Hazm. It was also followed by the majo ...
'' school of jurisprudence wrote "''Gharar'' is where the buyer does not know what he bought, or the seller does not know what he sold." To the Islamic scholar Al-Qarafi, ''gharar'' is "that which has a pleasant appearance and a hated essence". Among modern scholars of Islam, Mustafa Al-Zarqa has written that "Gharar is the sale of probable items whose existence or characteristics are not certain, due to the risky nature that makes the trade similar to gambling." Sami al-Suwailem, has used
Game Theory Game theory is the study of mathematical models of strategic interactions. It has applications in many fields of social science, and is used extensively in economics, logic, systems science and computer science. Initially, game theory addressed ...
to try and reach a more exact, measurable definition of Gharar, defining it as "a zero-sum game with unequal payoffs".


Scripture

While the word ''gharar'' is not specifically mentioned in the
Quran The Quran, also Romanization, romanized Qur'an or Koran, is the central religious text of Islam, believed by Muslims to be a Waḥy, revelation directly from God in Islam, God (''Allah, Allāh''). It is organized in 114 chapters (, ) which ...
, two verses (2:188; 4:29) are thought to refer to it. There are "numerous hadiths" forbidding ''gharar'' sales according to the Academy for International Modern Studies. In one, Ahmad and Ibn Majah narrated on the authority of Abu-Said al-Khudriy that:


Varieties

In
Islamic economics Islamic economics () refers to the knowledge of economics or economic activities and processes in terms of Islamic principles and teachings. Islam has a set of specific moral norms and values about individual and social economic behavior. There ...
and
finance Finance refers to monetary resources and to the study and Academic discipline, discipline of money, currency, assets and Liability (financial accounting), liabilities. As a subject of study, is a field of Business administration, Business Admin ...
,
jurist A jurist is a person with expert knowledge of law; someone who analyzes and comments on law. This person is usually a specialist legal scholar, mostly (but not always) with a formal education in law (a law degree) and often a Lawyer, legal prac ...
s have tried to sort out different aspects of ''gharar'' to determine whether a given financial transaction is "
shariah Sharia, Sharī'ah, Shari'a, or Shariah () is a body of religious law that forms a part of the Islamic tradition based on scriptures of Islam, particularly the Qur'an and hadith. In Islamic terminology ''sharīʿah'' refers to immutable, intan ...
-compliant" or not when ''gharar'' is present. Because some amount of ''gharar'' is "always present in all contracts and conducts", Islamic scholars (at least in recent years) generally divide ''gharar'' into two types: * ''Gharar fahish'' ("excess" ''gharar'') (also ''gharar-e-kathir'', "too much" gharar) is prohibited (''
haram ''Haram'' (; ) is an Arabic term meaning 'taboo'. This may refer to either something sacred to which access is not allowed to the people who are not in a state of purity or who are not initiated into the sacred knowledge; or, in direct cont ...
'') and discussed in ''
ahadith Hadith is the Arabic word for a 'report' or an 'account f an event and refers to the Islamic oral tradition of anecdotes containing the purported words, actions, and the silent approvals of the Islamic prophet Muhammad or his immediate circle ...
'' * ''Gharar yasir'' ("light" ''gharar'') (also ''gharar qalil'', "nominal" gharar) refers to small or trivial amounts of gharar which are tolerated (''
halal ''Halal'' (; ) is an Arabic word that translates to in English. Although the term ''halal'' is often associated with Islamic dietary laws, particularly meat that is slaughtered according to Islamic guidelines, it also governs ethical practices ...
'').


When not prohibited

Four conditions where ''gharar'' is not invalidated are: * in the aforementioned ''gharar yasir;'' * where the contract is "unilateral or charitable" (''al tabarru'at'') so that the other party to the contract is not exploited, such as a gift or bequest; * where there is a "public need for the transaction or contract" ('' maslahah'', for example in the Islamic finance instruments of ''bay' al salam'' and ''istisna`''); * where risk (''ghurm'') "inherent in productive economic activities". While both ''gharar'' and ''riba'' (
Usury Usury () is the practice of making loans that are seen as unfairly enriching the lender. The term may be used in a moral sense—condemning taking advantage of others' misfortunes—or in a legal sense, where an interest rate is charged in e ...
) are negative elements in Islamic economics, there is much less material available about ''gharar'' in the literature of Islamic economics and finance than there is on ''
riba ''Riba'' (, or , ) is an Arabic word used in Islamic law and roughly translated as " usury": unjust, exploitative gains made in trade or business. ''Riba'' is mentioned and condemned in several different verses in the Qur'an3:130
'', and "gharar is considered to be of less significance than Riba." According to Muhammad Ayub, "a consensus" among Islamic scholars has emerged in the recent past "regarding its extent rendering any transaction valid or void". While the slightest involvement of Riba makes a transaction non-Shariah-compliant, some degree of Gharar" is acceptable.


Insurance and Takaful

Orthodox Islamic scholars argue that commercial insurance (as opposed to social or cooperative insurance) contains ''gharar'' and is ''
haram ''Haram'' (; ) is an Arabic term meaning 'taboo'. This may refer to either something sacred to which access is not allowed to the people who are not in a state of purity or who are not initiated into the sacred knowledge; or, in direct cont ...
'' (forbidden). In its place ''
takaful Takaful (, sometimes translated as "solidarity" or mutual guarantee) Khan, ''What Is Wrong with Islamic Economics?'', 2013: p.403 is a co-operative system of reimbursement or repayment in case of loss, organized as an Islamic or ''sharia''-comp ...
'' or cooperative insurance "built on principles of voluntary contribution and mutual cooperation" has been proposed.


Khatar

''Khatar'' (خطر) is a kind of ''gharar'' that occurs when the "liability of any of the parties to a commutative contract is, or becomes, uncertain or contingent on some unforeseen/uncontrollable event", according to the Islamic Investment and Finance website.


See also

*
Maisir In Islam, gambling ( or ''qimâr'') is forbidden (). ''Maisir'' is totally prohibited by Islamic law () on the grounds that "the agreement between participants is based on immoral inducement provided by entirely wishful hopes in the participants ...
*
Sharia and securities trading Sharia and securities trading is the impact of conventional financial markets activity for those following the islamic religion and particularly sharia law. Sharia practices ban ''riba'' (earning interest) and involvement in ''haram''. It also f ...


References

{{Islamic banking and finance Islamic banking Credit Banking terms Arabic words and phrases in Sharia Islamic banking and finance terminology