{{Short description|Uncertainty, hazard, chance or risk in Arabic}} {{italic title}} {{Blacklisted-links|1= *https://uaelaws.files.wordpress.com/2012/01/prohibition-of-gharar-in-islam.pdf *:''Triggered by <code>\bfiles\.wordpress\.com\b</code> on the global blacklist''|bot=Cyberbot II|invisible=false}} '''''Gharar''''' ({{langx|ar|غرر}}) literally means uncertainty, hazard, chance or risk.<ref name="IIBI">{{cite web|title=Glossary of Financial Terms|url=http://www.islamic-banking.com/glossary_G.aspx|website=Institute of Islamic Banking and Insurance|accessdate=29 August 2016|archive-url=https://web.archive.org/web/20160910234624/http://www.islamic-banking.com/glossary_G.aspx|archive-date=10 September 2016|url-status=dead}}</ref> It is a negative element in ''mu'amalat'' ''fiqh'' (transactional Islamic jurisprudence), like ''riba'' (usury) and ''maisir'' (gambling).<ref name="IIF">{{cite web|title=INTRODUCTION TO ISLAMIC FINANCE|url=http://onlineapps.ined.uitm.edu.my/nfs-shared/Download/2012487054/Chapter%201%20-%20Introduction%20to%20Islamic%20Finance.pdf|accessdate=30 August 2016|page=1.3}}</ref> 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.<ref>{{cite book |last1=Qazi |first1=M.A. |page=15 |title=A Concise Dictionary of Islamic Terms |year=1979 |publisher=Kazi Publications |location=Lahore}}</ref><ref name="ahmed-2012">{{cite web|last1=Ahmed|first1=Naeem|title=A Discussion on Gharar in the light of Maqasid Al Shariah|url=https://www.researchgate.net/publication/235715309|website=.researchgate.net|accessdate=30 August 2016|date=November 2012}}</ref> 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".<ref name="UIF-2007"/>
==Definitions, fiqh== According to Sami Al-Suwailem, "researchers in Islamic finance" do not agree on the "precise meaning" of gharar,<ref name="AL-SUWAILEM">{{cite journal|title=TOWARDS AN OBJECTIVE MEASURE OF GHARAR IN EXCHANGE|url=http://www.irti.org/English/Research/Documents/IES/119.pdf|journal=Islamic Economic Studies|volume=7|issue=1, (October 1999); 2, (April 2000)|pages=61–102|last1=AL-SUWAILEM|first1=SAMI|accessdate=1 August 2016|archive-url=https://web.archive.org/web/20170816233704/http://www.irti.org/English/Research/Documents/IES/119.pdf|archive-date=16 August 2017|url-status=dead}}</ref> although there is not necessarily great difference among the Islamic schools of jurisprudence (madhab) in the term's definition.
The ''Hanafi'' legal school defines ''gharar'' as "that whose consequences are hidden", (according to Sami Al-Suwailem).<ref name="AL-SUWAILEM"/> According to Md Akther Uddin, scholars of ''Hanafi'' school of fiqh (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."<ref name="MPRA"/>
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."<ref name="AL-SUWAILEM"/> Scholars of Shafi’i ''fiqh'' have described it as “something which in its manner and its consequence is hidden."<ref name="MPRA">{{cite web|last1=Uddin|first1=Md Akther|title=Principles of Islamic Finance: Prohibition of Riba, Gharar and Maysir|url=https://mpra.ub.uni-muenchen.de/67711/1/MPRA_paper_67711.pdf|website=MPRA. Munich Personal RePEc Archive|accessdate=30 August 2016|page=4|date=13 October 2015}}</ref>
The ''Hanbali'' school defined it as "that whose consequences are unknown" or "that which is undeliverable, whether it exists or not."<ref name="AL-SUWAILEM"/> Ibn Hazm of the ''Zahiri'' school of jurisprudence wrote "''Gharar'' is where the buyer does not know what he bought, or the seller does not know what he sold."<ref name="AL-SUWAILEM"/>
To the Islamic scholar Al-Qarafi, ''gharar'' is "that which has a pleasant appearance and a hated essence".<ref name="IB">{{cite web|title=Gharar|url=https://www.islamicbanker.com/education/gharar|website=Islamic Banker|accessdate=29 August 2016}}</ref>
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."<ref name="AL-SUWAILEM"/> Sami al-Suwailem, has used Game Theory to try and reach a more exact, measurable definition of Gharar, defining it as "a zero-sum game with unequal payoffs".<ref name="AL-SUWAILEM2">{{cite journal|title=TOWARDS AN OBJECTIVE MEASURE OF GHARAR IN EXCHANGE|url=http://www.irti.org/English/Research/Documents/IES/119.pdf|journal=Islamic Economic Studies|volume=7|issue=1, (October 1999); 2, (April 2000)|pages=61–102|last1=AL-SUWAILEM|first1=SAMI|accessdate=1 August 2016|archive-url=https://web.archive.org/web/20170816233704/http://www.irti.org/English/Research/Documents/IES/119.pdf|archive-date=16 August 2017|url-status=dead}}</ref>
==Scripture== While the word ''gharar'' is not specifically mentioned in the Quran, two verses (2:188;<ref>{{cite quran|2|188|s=ns}}</ref> 4:29<ref>{{cite quran|4|29|s=ns}}</ref>) are thought to refer to it.<ref name="MPRA"/><ref name="IF">{{cite web|title=Gharar (risk and uncertainty)|url=https://pureislamicfinance.wordpress.com/islamic-finance/gharar-risk-and-uncertainty/|website=Islamic finance|date=23 January 2013|accessdate=30 August 2016}}</ref>
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:<ref name="AIMS">{{cite web |title=Prohibition of Gharar in Islam |url=https://uaelaws.files.wordpress.com/2012/01/prohibition-of-gharar-in-islam.pdf |website=AIMS-UK Islamic Banking and Finance |accessdate=31 August 2016 |archive-date=2 February 2017 |archive-url=https://web.archive.org/web/20170202002501/https://uaelaws.files.wordpress.com/2012/01/prohibition-of-gharar-in-islam.pdf |url-status=dead }}</ref> {{quote|The Prophet (pbuh) has forbidden the purchase of the unborn animal in the mother's womb, the sale of the milk in the udder without measurement, the purchase of spoils of war prior to their distribution, the purchase of charities prior to their receipt, and the purchase of the catch of a diver.}}
==Varieties== In Islamic economics and finance, jurists have tried to sort out different aspects of ''gharar'' to determine whether a given financial transaction is "shariah-compliant" or not when ''gharar'' is present.<ref name="UIF-2007"/> Because some amount of ''gharar'' is "always present in all contracts and conducts",<ref name="MPRA"/> Islamic scholars (at least in recent years)<ref name="UIF-2007"/> generally divide ''gharar'' into two types:<ref name="UIF-2007"/><ref name="MPRA"/> * ''Gharar fahish'' ("excess" ''gharar'') (also ''gharar-e-kathir'', "too much" gharar)<ref name="UIF-2007">{{cite book|last1=Ayub|first1=Muhammad|title=Understanding Islamic Finance|date=2007|publisher=Wiley & Sons.|page=58|url=https://books.google.com/books?id=HjwL-vOKEVQC&q=gharar&pg=PA58|accessdate=30 August 2016|isbn=9780470687710}}</ref> is prohibited (''haram'') and discussed in ''ahadith'' * ''Gharar yasir'' ("light" ''gharar'') (also ''gharar qalil'', "nominal" gharar) refers to small or trivial amounts of gharar which are tolerated (''halal'').<ref name="UIF-2007"/><ref name="MPRA"/>
=== When not prohibited === Four conditions where ''gharar'' is not invalidated are:<ref>Al-Darir, M. S. (1997). Al-Gharar in Contracts and Its Effects on Contemporary Transactions, IDB Eminent Scholars’ Lecture Series, no. 16 (IDB/IRTI, Jeddah). Cited in: {{Cite book|url=http://iugc.yolasite.com/resources/Reference%20Book%2004%20-%20Islamic%20finance,%20law%20economics%20and%20practice,%20M.%20El%20Gamal.pdf|title=Islamic Finance : Law, Economics, and Practice|last=el-Gamal|first=Mahmoud A.|publisher=Cambridge|year=2006|isbn=9780521864145|location=New York, NY|page=202|ref=MeGIFLEP2006|access-date=2017-03-10|archive-url=https://web.archive.org/web/20180403160351/http://iugc.yolasite.com/resources/Reference%20Book%2004%20-%20Islamic%20finance,%20law%20economics%20and%20practice,%20M.%20El%20Gamal.pdf|archive-date=2018-04-03|url-status=dead}}</ref><ref>Al-Zuhayli, W. (1997). Al-Fiqh Al-Islami wa Adillatuh (Dar Al-Fikr, Damascus). vol. 5, pp. 3415–31), Cited in: {{Cite book|url=http://iugc.yolasite.com/resources/Reference%20Book%2004%20-%20Islamic%20finance,%20law%20economics%20and%20practice,%20M.%20El%20Gamal.pdf|title=Islamic Finance : Law, Economics, and Practice|last=el-Gamal|first=Mahmoud A.|publisher=Cambridge|year=2006|isbn=9780521864145|location=New York, NY|page=202|ref=MeGIFLEP2006|access-date=2017-03-10|archive-url=https://web.archive.org/web/20180403160351/http://iugc.yolasite.com/resources/Reference%20Book%2004%20-%20Islamic%20finance,%20law%20economics%20and%20practice,%20M.%20El%20Gamal.pdf|archive-date=2018-04-03|url-status=dead}}</ref><ref>El-Gamal, M. (2001). “An Economic Explication of the Prohibition of Gharar in Classical Islamic Jurisprudence,” Islamic Economic Studies, 8(2). Cited in: {{Cite book|url=http://iugc.yolasite.com/resources/Reference%20Book%2004%20-%20Islamic%20finance,%20law%20economics%20and%20practice,%20M.%20El%20Gamal.pdf|title=Islamic Finance : Law, Economics, and Practice|last=el-Gamal|first=Mahmoud A.|publisher=Cambridge|year=2006|isbn=9780521864145|location=New York, NY|page=202|ref=MeGIFLEP2006|access-date=2017-03-10|archive-url=https://web.archive.org/web/20180403160351/http://iugc.yolasite.com/resources/Reference%20Book%2004%20-%20Islamic%20finance,%20law%20economics%20and%20practice,%20M.%20El%20Gamal.pdf|archive-date=2018-04-03|url-status=dead}}</ref> * 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) 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'',<ref name="UIF-2007"/> 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.<ref name="mohsin">{{cite web|last1=ALI|first1=MOHSIN|title=ISLAMIC FINANCE WITHIN TRADING FRAMEWORK 4.1.2|url= [url forbidden by wikipedia] http:// islamic financial systems1 .blogspot.com/2013/09/islamic-finance-within-trading.html|website=Islamic Financial Systems|accessdate=10 March 2017|date=20 November 2011}}</ref>
===Insurance and Takaful=== {{main|Takaful}} Orthodox Islamic scholars argue that commercial insurance (as opposed to social or cooperative insurance) contains ''gharar'' and is ''haram'' (forbidden). In its place ''takaful'' or cooperative insurance "built on principles of voluntary contribution and mutual cooperation" has been proposed.<ref>{{Cite book |url=http://iugc.yolasite.com/resources/Reference%20Book%2004%20-%20Islamic%20finance,%20law%20economics%20and%20practice,%20M.%20El%20Gamal.pdf |title=Islamic Finance : Law, Economics, and Practice |last=el-Gamal |first=Mahmoud A. |publisher=Cambridge |year=2006 |isbn=9780521864145 |location=New York, NY |page=147 |ref=MeGIFLEP2006 |access-date=2017-03-10 |archive-url=https://web.archive.org/web/20180403160351/http://iugc.yolasite.com/resources/Reference%20Book%2004%20-%20Islamic%20finance,%20law%20economics%20and%20practice,%20M.%20El%20Gamal.pdf |archive-date=2018-04-03 |url-status=dead }}</ref>
===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.<ref name="IaF">{{cite web|title=Islamic Finance. Q&A: What Is the Difference Between Gharar and Khatar?|url=http://investment-and-finance.net/islamic-finance/questions/what-is-the-difference-between-gharar-and-khatar.html|website=Investment & Finance|accessdate=30 August 2016|date=21 August 2014}}</ref>
==See also== * Maisir * Sharia and securities trading
==References== {{reflist}}
{{Islamic banking and finance}}
Category:Islamic banking Category:Credit Category:Banking terms Category:Sharia terminology Category:Islamic banking and finance terminology