{"id":6478,"date":"2022-05-31T19:57:32","date_gmt":"2022-05-31T19:57:32","guid":{"rendered":"https:\/\/ifg.local\/articles\/what-is-gharar-islamic-finance-definitions-series\/"},"modified":"2023-09-21T10:03:40","modified_gmt":"2023-09-21T10:03:40","slug":"what-is-gharar-islamic-finance-definitions-series","status":"publish","type":"post","link":"https:\/\/www.islamicfinanceguru.com\/articles\/what-is-gharar-islamic-finance-definitions-series","title":{"rendered":"What is Gharar? | Islamic Finance Definitions Series &#8211; IslamicFinanceGuru"},"content":{"rendered":"<h1>What is <em>Gharar<\/em>?<\/h1>\n<p align=\"left\"><i>Gharar<\/i> means \u2018uncertainty\u2019 and is associated with deception involving uncertainty and risk. It is rooted in the Arabic word \u2018to deceive\u2019 (<i>gharra<\/i>).<\/p>\n<p><!--more--><\/p>\n<p align=\"justify\"><i>G<\/i><i>harar <\/i>is a broad concept, involving scenarios including:<\/p>\n<ul>\n<li>\n<p align=\"justify\">When the claim of ownership is unclear or suspicious.<\/p>\n<\/li>\n<li>\n<p align=\"justify\">When the existence, quality or characteristics of the commodity are not certain.<\/p>\n<\/li>\n<li>\n<p align=\"justify\">Pure speculation where an outcome depends on excessive uncertainty and this risk is not shared.<\/p>\n<\/li>\n<\/ul>\n<ul>\n<li>\n<p align=\"justify\">Where consequences are concealed due to lack of openness between parties or a lack of information of the contract or the nature and quality of the subject matter or where a deal is made based on a misunderstanding.<\/p>\n<\/li>\n<\/ul>\n<p align=\"justify\">To clarify- selling something without physical possession is not inherently <i>gharar <\/i>so long as the promise of delivery carries some credibility.<\/p>\n<h2>Examples<\/h2>\n<p align=\"left\">G<i>harar <\/i>can include:<\/p>\n<ul>\n<li>\n<p align=\"left\">Gambling (<i>maysir<\/i>).<\/p>\n<\/li>\n<li>\n<p align=\"left\">Contracts not drawn out in clear terms.<\/p>\n<\/li>\n<li>\n<p align=\"left\">Derivative transactions (such as forwards, futures, options, and forms of speculation such as short selling).<\/p>\n<\/li>\n<li>\n<p align=\"left\">Selling something of uncertain quality.<\/p>\n<\/li>\n<\/ul>\n<h2>Evidence and explanation<\/h2>\n<p>In the Quran we are told:<\/p>\n<ul>\n<li>\n<p align=\"justify\">\u201cDo not consume your property wrongfully, nor use it to bribe judges, intending sinfully and knowingly to consume parts of other people\u2019s property.\u201d [2:188]<\/p>\n<\/li>\n<\/ul>\n<ul>\n<li>\n<p align=\"justify\">\u201cYou who believe, do not wrongfully consume each other\u2019s wealth but trade by mutual consent. Do not kill each other, for God is merciful to you.\u201d [4:29]<\/p>\n<\/li>\n<\/ul>\n<p align=\"justify\">The reference of \u2018not consuming property wrongfully\u2019 (<i>al-batil<\/i>) is interpreted as <i>gharar <\/i>and other predatory business practices.<\/p>\n<p align=\"justify\">Abu Hurairah (ra) narrated: \u201cThe Messenger of Allah (saw) prohibited the <i>g<\/i><i>harar<\/i> sale, and the <i>hasah<\/i> sale.\u201d [<em>Tirmidhi<\/em>]<\/p>\n<h2>Why is <em>gharar<\/em> bad?<\/h2>\n<p><em>Gharar<\/em> dealings are harmful to certainty and openness in business dealings.<\/p>\n<p>The prohibition of <em>gharar<\/em> protects businesses against transactions that involve high uncertainty or deceit as they have the scope to cause injustice and involve risk being asymmetrically shouldered (such that will result in a one-sided loss or a gain at the other\u2019s expense). It also ensures genuine consent in dealings as genuine consent can only be achieved through transparency.<\/p>\n<p>The prohibition of <em>gharar<\/em> protects against unexpected losses, disagreements, misunderstandings and distrust and consequently promote satisfaction in business dealings.<\/p>\n<p>For a complex analysis and application of the concept of gharar, check out our articles on <a href=\"https:\/\/islamicfinance.guru\/articles\/personal-finance\/insurance-haram-halal\" rel=\"noopener\">insurance<\/a> and <a href=\"\/articles\/personal-finance\/is-life-insurance-haram-or-halal\" rel=\"noopener\">life insurance<\/a>.<\/p>\n<p>This article is part of the <a href=\"https:\/\/www.\/islamicfinanceguru.com\/islamic-finance-definitions-series\/\">Islamic Finance Definitions Series<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What is Gharar? Gharar means \u2018uncertainty\u2019 and is associated with deception involving uncertainty and risk. It is rooted in the Arabic word \u2018to deceive\u2019 (gharra).<\/p>\n","protected":false},"author":30,"featured_media":6479,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","wds_primary_category":0},"categories":[27,6],"tags":[33],"acf":[],"_links":{"self":[{"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/posts\/6478"}],"collection":[{"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/users\/30"}],"replies":[{"embeddable":true,"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/comments?post=6478"}],"version-history":[{"count":0,"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/posts\/6478\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/media\/6479"}],"wp:attachment":[{"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/media?parent=6478"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/categories?post=6478"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/tags?post=6478"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}