The Arabic word Gharar is a fairly broad concept that literally means deceit, risk, fraud, uncertainty or hazard that might lead to destruction or loss. Gharar in Islam refers to any transaction of probable objects whose existence or description are not certain, due to lack of information and knowledge of the ultimate outcome of the contract or the nature and quality of the subject matter of it. For example, 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 distribution, the purchase of charities prior to their receipt, and the purchase of the catch of a diver.
Islam has clearly forbidden all business transactions, which leads to exploitation and injustice in any form to any of the parties of a contract. It seeks protecting the different parties from deceit and ignorance by forbidding Gharar in any commercial exchange contracts that are not free from hazard, risk or speculation about the essential elements in the transaction to either party, or uncertainty of the ability of one party to honour its rights and obligations. It requires that all Islamic financial and business transactions must be based on transparency, accuracy, and disclosure of all necessary information so that no one party has advantages over the other party.
The rationale behind the prohibition of Gharar is to ensure full consent and satisfaction of the parties in a contract. Full consent can only be achieved in full disclosure and transparency and through perfect knowledge from contracting parties of the counter values intended to be exchanged. The prohibition of Gharar protects against unexpected losses and the possible disagreements regarding qualities or incompleteness of information.
Instead, the Shari’ah promotes the principle of profit-loss sharing between banks and entrepreneurs as an approach to encourage the spirit of brotherhood and cooperation in business relationships. Mutual risk-sharing could help absorbing the weight of loss by sharing it equitably between all parties. However, risk and uncertainty are conditioned by enough adequacy and accuracy of information to make reasonable estimates of the outcomes. Tolerable risk and uncertainties cannot exist in contractual obligations.
Islam has also categorically and firmly prohibited all forms of gambling. Maysir and Qimar are forms of gambling transactions that are considered as totally inequitable in Islam. Maysir refers to the easy acquisition of wealth by chance, whether or not it deprives the other’s right. Qimar means the game of chance in which one gains at the cost of others.
Even though, gambling consists in a form of speculation and that There should not be any place for commercial operations in Islam as it is purely speculative. The prohibited speculation under the Shari’ah is not that, which relies on the analysis of a lot of economic and financial data and which involves the investment of assets, skills and labour. Rather, it is one involving an effortless gain similar to a gambling scheme or activity. This is because the buyer is engaged in a transaction aimed at making profit through trading and not through dishonest appropriation of the property of others.
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