Name: Moaz Ilyas

AG-NUMBER=2020-ag-4664

Subject :Islamic Modes of Financing

Presentation Topic : Gharar

Definition of Gharar – What is the Meaning of the word Gharar in
Islam?

 Gharar is an Arabic word which means a high

level of uncertainty and risk in monetary
transactions. An unambiguous sale. A
transaction where the outcome is unknown.
Gharar transactions are high risk and
hazardous transactions such as insurance.
What is Gharar (Uncertainty) in Islam? – (Read
This First!)

Gharar means uncertainty. In Islamic finance

gharar is seen as a deceptive practice. Where
someone is either buying or selling
something that is unknown. Any transaction
where the price and/or receivables of the
item/service is not known in full at the point
of sale is gharar (uncertain/unknown).
Examples of Gharar

 Examples of Gharar include;

 If someone sells you a can of food that does not
have a label and so you are uncertain what you are
buying. This is Gharar (uncertainty).
 If someone sells you crops that have not yet
harvested.
 If someone tried to sell you fish in the sea that has
not been caught or an animal that has not yet been
born.
 Selling milk that is still in the udders of the
animal and not yet extracted out.
 Futures and Options Contracts
Types of Gharar

 There are two types of Gharar:

 Gharar Yasir (light or minor uncertainty)
 Gharar Fahish (excessive or major

uncertainty).
 Both forms of gharar are not haram. Gharar

Fahish is the haram kind of Gharar. Gharar

Yasir is under the halal class of Gharar.
What is Gharar Fahish (Major or Excessive
Gharar)?
 Gharar Fahish (excessive gharar) is an
excessive amount of uncertainty or
ambiguity. The amount of uncertainty is so
high that the sharia considers it unjust and
predatory. Gharar Fahish is therefore
prohibited (haram) in Islam.
What is Gharar Yasir (Minor or Light
Gharar)? – The Halal type of Gharar!

 Gharar Yasir (light or minor gharar) is a trivial

amount of uncertainty that is present in all
transactions. The amount of uncertainty is so
small that the sharia considers it negligible.
Gharar Yasir is therefore NOT haram. It is just
mild or moderate uncertainty that cannot be
avoided.
Why is Gharar Haram (Prohibited) in Islam? – Explained!

 Gharar is haram (prohibited) in Islam to prevent

injustice and deceit. Any transaction where the
outcome is not known can lead to disputes and
injustice. Islamic finance is built on the premise of
openness, certainty and justice. Gharar
(uncertainty) defies the very purpose of Islamic
finance.
 The effects of gharar may not be seen straight
away. But they can have a huge impact on a
person’s finances in the future. This is why one of
the foundational premises in Islamic economics is
the prohibition of Gharar.
What is the difference between Riba (Interest) and
Gharar (Uncertainty)?

 The main difference between Riba and Gharar

is that Riba (interest) is an increase added on
the exchange of money for money
transactions. While Gharar (uncertainty) is
where someone is either buying or selling
something that is uncertain/unknown.
 This is the distinction between riba and

gharar. Both these types of transactions are

prohibited (haram) elements in Islamic
finance.
Conclusion

 Gharar (uncertainty) is one of the prohibited

elements in Islamic finance. The other two
being riba (interest) and qimar/maysir (gambling).
These three together form the unholy trinity of
Islamic Finance.
 It is haram (prohibited) for a Muslim to deal in
transactions of Gharar Fahish (major uncertainty).
It is halal (permissible) to deal in transactions of
Gharar Yasir (minor gharar).
 And Allah the Most Wise and Most Knowledgeable
knows best.