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Islamic Finance by Keon Chee, Daud Vicary Abdullah

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PROHIBITION AGAINSTUNCERTAINTY (GHARAR)

When an investment is made in an asset, such as a business or a stock, investment returns coming from the future can be either positive or negative. Such uncertainty always exists.

Uncertainty in Arabic is called gharar. Gharar also means “risk” and “hazard”. Unlike riba, gharar is not precisely defined.

Gharar is considered to be of lesser significance to riba in that while the prohibition of riba is absolute, some degree of gharar is acceptable. Only excessive gharar, where uncontrollable risk leads to speculation and gambling, must be avoided.

“If the seller of a home intentionally conceals a termite problem, the buyer would be exposed to unfair risk or gharar.”

Gharar also implies deceit, and this can ...

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