Definition of Gharar

The Arabic word gharar means risk, uncertainty, and hazard. Unlike ribaa, gharar is not precisely defined. Gharar is also considered to be of lesser significance than ribaa. While the prohibition of ribaa is absolute, some degree of gharar or uncertainty is acceptable in the Islamic framework. Only conditions of excessive gharar need be avoided.

The concept of gharar has been broadly defined by the scholars in two ways.

  • First, gharar implies uncertainty.
  • Second, it implies deceit.

The Qur’an has clearly forbidden all business transactions, which cause injustice in any form to any of the parties. It may be in the form of hazard or peril leading to uncertainty in any business, or deceit or fraud or undue advantage. Apart from the above simplistic definition of gharar, some definitions of gharar seem to have a parallel in the concept of uncertainty in conventional finance. Gharar is defined by the Hanafi jurist al-Sarakhsi as any bargain in which the result of it is hidden.

Source: Obaidullah, 29.

Advertisements

8 Comments

Filed under Basics and Definitions

8 responses to “Definition of Gharar

  1. FINANCE, personal finance, business finance, Financial economics, Experimental finance, Financial instruments – best web resources for finance, search information site.
    …Personal financial decisions may involve paying for education, financing durable goods such as real estate and cars, buying insurance, e.g. health and property insurance, investing and saving for retirement.

  2. Pingback: Terms to learn re: Islamic Finance « Shariah Finance Watch

  3. sofi

    how do you determine the existence of gharar, is it at the point when a seller is unable to deliver a certain project(incompleted)-at the tail end or from the beginning one might assume that gharar might exist even before the project starts?

  4. Jake

    Bit of an English grammatical nuance: The sentence “The Qur’an has clearly forbidden all business transactions, which cause injustice in any form to any of the parties” should read “…business transactions that cause…”

    A comma and ‘which,’ make a non-restrictive subordinate clause. In other words, the definition above could be rewritten, “The Qur’an has clearly forbidden all business transactions. Business transactions cause injustice in any form to any of the parties. This is clearly not what is meant

  5. This article is really helpful for getting a general knowledge about Islamic Economics. However, you can read this one for more information about;

    http://islam-economy.org/islamic-economics/production-factors-labor-capitalland/

  6. Does “gharar” fit in with Frank Knight’s classic differentiation between risk
    and uncertainty? Thoughts?

    Thanks.

    cambridgeforecast@post.harvard.edu

  7. sajal

    Anyone can You help me by answering the differences between Ghurm (Risk) and Gharar(uncertainty).

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s