Gharar Meaning in Islam:

Gharar means uncertainty, hazard, chance, or risk. Islamic dictionary describes it as “The sale of what is not present”. It comes from the Arabic word “ghara,” which means “to deceive” or “to cheat.” In Islamic banking and finance, gharar ( الغرر ) refers to any transaction that involves excessive uncertainty or risk, which goes against the principles of shariah (Islamic law). Gharar in Islamic banking may be defined as: “The uncertainty that is present in the basic elements of an agreement is the wording, subject matter, consideration, and the liabilities”. It is one of those impediments, which limit the power of decision-making. An agreement that has any element of بيع الغرر, is not valid in Islamic jurisprudence.

Prohibition of Gharar in Hadith:

It’s prohibitionis well-rooted in Hadith, or the sayings and actions of Prophet Muhammad (peace be upon him). Following are prohibited in the light of Hadith:

  • Sale of unborn Camel’s baby, still in the Mother’s womb;
  • Flowers, before they appear on the plant;
  • Milk in the Lactose Glands;
  • Fish that come in one throw of the net;
  • Fruits on the Tree from mere estimation;
  • Any one of the animals from the herd; and;
  • Wool on the body of the animal.

“Gharar is an Arabic word, which means “risk.” In Islam, it is used to refer to the risk of losing something of value. For example, if a person invests money in a business, and the business becomes insolvent, then the person will lose his/her investment. Gharar is also used to refer to any risk that is unknown. Gharar is not restricted to monetary loss. It can also refer to property loss or bodily injury”.

Key Note!

Concept of Gharar in Islamic Banking and Finance

In Islamic banking, the concept of gharar plays a crucial role in ensuring that financial transactions are conducted ethically and in line with Islamic principles. It promotes transparency and fairness in financial dealings, protecting individuals from entering into exploitative or harmful agreements. It also encourages individuals to seek out more stable and secure forms of investment, such as profit-sharing agreements instead of high-risk speculation.

Key Elements of Gharar


The first element is uncertainty. This occurs when the specifics of a contract or deal are not clearly defined, resulting in ambiguity about the terms, conditions, or outcomes.


Secondly, الغرر involves a high level of risk. It implies that there’s a significant chance of loss for one party, as the outcome of the transaction is unknown or unpredictable.


Another critical element is the presence of asymmetrical information, where one party possesses more or better information about the transaction than the other. This imbalance creates an unfair advantage and can lead to exploitation.


Lastly, speculation plays a role in it. This entails making decisions based on conjecture or assumption, instead of concrete information, thus adding an extra layer of uncertainty and risk.

Examples of Gharar


One prime example of gharar is the sale of unharvested crops. In this case, both the buyer and seller have no clear knowledge about whether the crops would survive until harvest, the quality of the produce, or even the quantity that would be produced. The presence of such uncertainties makes this transaction gharar, as it carries high risks and potential deception.


Another example could be the sale of a property which is under legal dispute. The seller and buyer are uncertain about the outcome of the legal process, and whether the buyer would gain rightful ownership of the property. This situation presents an uncertain outcome and a potential risk of loss for the buyer, thereby constituting gharar.


Types of Gharar

There are three main types of gharar recognized in Islamic law:

1. GHARAR AL-FAHISH (Excess Uncertainty)

This type refers to highly uncertain transactions, and the outcome is unknown to both parties involved. Examples include gambling and speculative investments.

2. GHARAL AL-MUZABANA (Ambiguous OR Misleading Contract)

This type of بيع الغرر refers to transactions where the terms and conditions are unclear or open to interpretation, leading to uncertainty for one or both parties involved.

3. GHARAR AL-TASWIR (Uncertainty Due to Inadequate Information)

It refers to transactions where one party has insufficient knowledge or information about the transaction, leading to uncertainty and potential exploitation.

Educational Opportunities in Islamic Finance

The International Centre for Education in Islamic Finance offers an array of educational opportunities for individuals interested in this field. By pursuing a Ph.D. in Islamic Finance, individuals delve into extensive research and contribute innovative ideas to the industry’s body of knowledge. A master’s degree in Islamic Finance provides a comprehensive exploration of the subject, equipping students with the knowledge and skills needed to navigate the complex landscape of Islamic banking. For professionals seeking specialized knowledge without a long-term commitment, an Islamic Banking diploma or an Islamic Finance certification is a viable option. For those who prefer the flexibility of learning from their own home or office, Islamic Banking courses online, enable students to learn at their own pace.

Causes of Gharar?

Understanding these causes is crucial for Islamic financial institutions aiming to eliminate gharar and adhere to Shari’a principles. The primary causes are multifaceted and often interconnected.

  • Firstly, lack of transparency plays a significant role. This typically occurs when all the necessary details about a transaction are not fully disclosed, leading to information asymmetry and likely resulting in gharar.
  • Secondly, incomplete contracts contribute to it. Such contracts, characterized by missing or ambiguous terms, can lead to misunderstanding and uncertainty for the involved parties.
  • Thirdly, unpredictable circumstances or unforeseen events, such as natural disasters, can induce it, especially in contracts related to agriculture or real estate.
  • Lastly, deceptive practices are a major cause, where one party intentionally deceives another to gain an unfair advantage, thereby creating gharar.

How to Avoid Gharar in Trade

In the context of trade, gharar poses significant challenges for both parties involved. It is an element that disrupts the equity of transactions, primarily due to uncertainty, deception, or risk. Its existence in trade agreements can lead to unjust enrichment or loss, causing disputes, and undermining trust between parties. In Islamic finance, any business contract containing it is considered invalid. This prohibition is to ensure fairness, transparency, and ethical conduct in trade. Traders need to understand and identify potential sources of gharar in their transactions to maintain adherence to Islamic principles and uphold the integrity of their dealings.

gharar meaning

Comparison of Gharar with Other Prohibited Elements:

1. Jihalah:

It means unawareness or blindness, and it is one of the causes of Gharar. For example, a transaction can be known from all angles, but the Subject Matter’s delivery can be difficult.

2. Qimar:

It is an event, in which there is a possibility of a total loss to one party. Every gambling is a form of Qimar, but it is not limited to gambling.

3. Speculation:

Every speculative transaction is not gambling maysir (maisir) until it has any element of it. This is because these activities are carried out in the hope of profiting from the rise and fall of the prices of commodities or assets.

4. Contemporary Law:

It means the present and prevailing law. It is the contract in which any party in the agreement, at the time of execution of the agreement, cannot decide as to how much it would give or take.


In conclusion, gharar is a concept in Islam that prohibits transactions involving excessive uncertainty or risk. It is considered to be against the principles of fairness and transparency in financial dealings. Islamic finance aims to promote ethical and responsible financial practices, and the avoidance of gharar plays a significant role in achieving this goal. By understanding it, individuals can make informed decisions when it comes to their finances and contribute to a more just and equitable financial system. So, it is essential to recognize and avoid it in all forms, whether it be in personal transactions or the wider context. By doing so, we can ensure that our financial practices align with our values and principles as Muslims.