CHAPTER 7:
RIBA (USURY), GHARAR
(UNCERTAINTY) AND MAYSIR
(GAMBLING)
BY:
SHARIFAH FAIGAH SYED ALWI
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LESSON OUTLINES:
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•
•
•
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At the end of the lessons, the students would
be able to explain on the following:
Definition and concept
The concept of riba, gharar and maysir in the
Quran and Sunnah
Categories of riba, gharar and maysir
Examples of riba, gharar and maysir in
banking and finance
Current Issues
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What is Riba in Islam?
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Prohibition Of Riba In Islamic Law
◼ Basis Of Prohibition :
 ‘unjustified enrichment’
(al-akl al-amwal bi al-batil)
 receiving monetary advantages in business
transactions without giving a just counter value
 elimination of exploitation in business
transactions
Surah al-Baqarah:188
 Surah al-Nisa’ 4: 29
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1) Surah al-Baqarah : 188
‫وال أتكلوا اموالكم بينكم ابلباطل‬
‫وتدلوا هبا إىل احلكام‬
“And do not eat up your property among
yourselves for vanities, nor use it as bait for
the judges …..”
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2) Surah al-Nisa’ 4: 29
‫أييها الذين امنوا ال أتكلوا اموالكم بينكم ابلباطل إال‬
‫أن تكون جترة عن تراض منكم‬
“O ye who believe, eat up not your property
among yourselves in vanities: but let there be
amongst you traffic & trade by mutual
goodwill”
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The Prohibition Of Riba
In Islamic Law
 Riba was prohibited by the Quran in
four stages:
 1st in al Rum:39;
 2nd in al Nisa’: 160-161;
 3rd in Ali `Imran:130; and
 4th in al Baqarah:275-281.
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PROHIBITION OF RIBA IN THE QURAN
4 STAGES
First Stage
(30:39)
• Compare riba
with zakat &
charity
• Praising zakat &
charity, not riba
Second Stage
(4:160-161)
• Attaching the
practice of riba
with the Jews
• Consider the
practice as an
iniquity (zulm)
Third Stage
(3:130)
• Prohibiting the
practice of
charging double
and multiple riba
Fourth Stage
(2:275-281)
• Conclusively
prohibiting all
forms of riba
• Any excess over
the capital is
disallowed
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Stage 1:
• Surah al-Rum (30 : 39)
‫وما ءاتيتم من راب لريبوا ىف اموال الناس‬
.... ‫فال يربوا عند هللا‬
“That which you give in usury for increase
through the property of (other) people, will
have no increase with Allah…”
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Stage 2:
• Surah al-Nisa’ 4:161
....‫وأخذهم الراب وقد هنوا عنه وأكلهم أموال الناس ابلباطل‬
“That they took usury though they were
forbidden; and that they devoured men’s
wealth wrongfully…”
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Stage 3:
• Surah Ali-Imran 3 :130-132
‫أييها الذين أمنوا ال أتكلوا الراب أضعفا مضاعفة‬
‫واتقوا هللا لعلكم تفلحون‬
“O ye who believe, devour not usury doubled
and multiplied but fear Allah that ye may
prosper”
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Final Stage on
The Prohibition of Riba
• Surah al Baqarah (2:275)
‫ ذلك أبهنم قالوا إمنا البيع‬، ‫مثل الربوا‬
‫… وأحل هللا البيع وحرم الربوا‬
“… they say: trade is like riba, but Allah has permitted
trading and forbidden (haram) riba (usury) …”
• NOTE:
- prohibition of riba is conclusively and
decisively made (qat’i)
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Hadith On The Prohibition Of Riba
There are also a number of narrations
from the Sunnah on the prohibition of
riba
From Jabir :
“The Prophet s.a.w. cursed the receiver
and the payer of interest (riba), the one
who records it and the two witnesses to
the transactions; and said:” They are all
alike (in guilt).”
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Observation
From the provisions in the
Quran and Sunnah, all Muslim
jurists unanimously agree (ijma’)
that riba is prohibited (haram.
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The Definition of Riba
• Literally: excess, expand, increase,
growth
• Any unjustified excess above and over
the capital, whether in loans (between
creditor and debtor) or in trade (with
similar commodities)
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Division Of Riba
Riba’ al-Duyun
(Riba’ in Loan
Contract)
Riba’ al-buyu’
(Riba in exchange
contracts )
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1.Riba’ al-Duyun
• The debtor borrowed money to be paid in certain
time, and the amount is more that the amount
borrowed
• A creditor gives a periodic loan and takes monthly
interest. The capital sum lasts until the expiration
of the period. Upon expiry, if the debtor cannot
pay, the period to pay back the capital will be
extended and interest will be charged
• Arising out of exchange contract, a buyer must pay
a consideration. If he failed to settle on time, the
period will be extended by increasing the amount
(principle + interest).
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1.Riba’ al-Duyun (2)
•
•
•
There are two types of riba al-duyun:
1. Riba al-qardh (i.e. riba is imposed
from the beginning)
Riba al-jahiliyyah (i.e. there is no riba at
the beginning; riba is only imposed after
default)
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2. Riba al-Buyu’
• This type of riba occurs from trading or
exchange transactions, in which a
commodity is exchanged for the same
commodity from the ribawi
commodities/items in unequal amounts
or/and there is delay in the delivery of one
of the commodities.
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2. Riba al-Buyu’(2)
• This type of riba is mainly based on the saying of
the Prophet:
• “Gold for gold, silver for silver, wheat for wheat,
barley for barley, dates for dates, and salt for
salt; should be exchanged like for like, equal for
equal and hand to hand (on the spot). If the
types of the exchanged commodities are
different, then sell them as you wish, if they are
exchanged on the basis of a hand to hand
transaction.”
Narrated by Muslim.
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2. Riba al-Buyu’(3)
•
There are two types of riba al-buyu’:
•
1. Riba al-fadhl - Any additional quantity or
inequality in the exchange of goods from the
similar type of ribawi items (quantity factors).
i.e different weights, measurements or
numbers.
2. Riba al-nasiah or riba al-yad – Any delay in
the exchange of the ribawi items from the
same type and category (time factor).
i.e. payment of the price and delivery of the
goods are made at two different times, not
immediate.
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•
Ribawi Items
• There are 2 categories of ribawi items
(based on the hadith Rasulullah SAW;
• 1. Currency
• Gold : 916,835, 750
• Silver
• RM
• USD
• Singapore Dollar
• Australian Dollar
• Hong Kong Dollar
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Ribawi Items (2)
•
•
•
•
•
•
•
•
•
2. Foodstuff
wheat, barley, dates and salt
Grains
Rice : Bathmati, A1
Corn
Salts
Salt
Sugar
Condiments
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Contd..
• There are two conditions that have to be
fulfilled in barter transaction involving ribawi
items;
• 1. The commodities must be of equal amount
(equal counter values), meaning to say that for
example in a barter transaction, if the parties
want to exchange wheat with wheat, it must
be an equal exchange, i.e. 2 kg wheat in
exchange for 2 kg wheat.
• 2. It must be on the spot exchange, that is if
delivery of one of the commodities is delayed,
riba al-buyu’ or riba al-yad occurs.
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Contd (2)
• 3. However, if the commodities differ, for example
exchange of wheat for dates, the amount may
differ as long as delivery takes place on the spot.
• The examples of ribawi items being exchanged;
• 1. Currency A with currency A: Equality and on the
spot- RM 200 with RM 200 exchanged on the
spot.
• 2. Currency A with currency B: RM 100 with USD
380 exchanged on the spot.
• 3. Currency with Food: No riba
• 4. Food A with Food A: Equality and on the spot.
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• 5. Food A with Food B: On the spot
Riba In Modern
Financial Transactions
• Riba’ al-duyun in loans and certain
controversial contracts (bay’ al-’inah, bay’
al-dayn, etc)
• Riba’ al-buyu’ mainly in bay’ al-sarf
(exchange of currencies)
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What is Gharar in Islam?
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Definition Of Gharar
• Meaning of gharar:
• Literally: risk, uncertainty, hazard
• Gharar is defined as an element of uncertainty
and/or deceit.
• Gharar is also defined as an element of
deception, either through ignorance of the goods,
the price, or through faulty description of the
goods, in which one or both parties stand to be
deceived through ignorance of an essential
element of an exchange.
• For example, gambling is considered as a form of
Gharar because the gambler is ignorant of the
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result of the gamble.
Cont’d
• It is also the sale of probable item whose
existence or characteristics are not
certain, due to the risky nature which
makes the trade similar to gambling
• Gharar is divided into three namely:
1) Gharar yasir, i.e. minor or slight gharar,
and
2) Gharar fahish, i.e. major or excessive
gharar
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Types Of Gharar
• 1) Gharar yasir-Minor Gharar
• Minor gharar or minor uncertainty is forgiven.
• Contracts involving minor gharar are permissible
and valid.
• In contracts involving minor gharar, the gharar is
taken into consideration in arriving at the price.
• 2) Gharar fahish-Major Gharar
• In general terms, major gharar is:
• An uncertainty which is so great that is becomes
unacceptable, or
• It is so vague that there is no means of
quantifying it.
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The Avoidance Of Gharar
• More specifically major gharar arises out of one of
the following:
• 1) Relating to buyer or seller
• Buyer or seller is not capable of taking
responsibility
• Not majority age, or
• Drunk
• Buyer or seller is prohibited from disposing of his
property:
• Declared bankrupt,or
• Declared prodigal/wasteful
• Buyer or seller is coerced/force.
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The Avoidance Of Gharar (4)
• 2) Relating to asset:
• Asset or property does not exist
• Asset or property is not free from
encumbrances or
• Asset or property is not specific or not
according to its specifications.
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The Avoidance Of Gharar (5)
•
•
•
•
3) Relating to price:
Price not mentioned in absolute amount,
Two prices in one contract, or
Mention of ibraa’ in absolute amount or
percentage of selling price
• 4) Relating to contract:
• Contract is conditioned (in sale)
• Contract is not expressed in an absolute
and decisive language (with ‘shall’. ‘will’ or
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‘agree to’)
Prohibition of Gharar in Islam
• There are numerous Hadith forbidding Gharar sales,
and specific instances thereof. One commonly cited
Hadith was narrated by Muslim, Ahmad, Abu
Dawud, Tirmidhi, al-Nasa’I, al-Darimi and Ibn Majah
on the authority of Abu Hurayrah that: ‘‘The Prophet
(s.a.w) prohibited the pebble sale and the
uncertainty sale’’.
• The jurists argue that the rationale for the prohibition
of Gharar is to ensure full consent and satisfaction
of the parties in the contract. Without full consent, a
contract may not be valid. Full consent can only be
achieved through certainty, full knowledge, full
disclosure and transparency.
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Cont’d
• There are a number of other Sunnahs
which forbid Gharar, either by name, or by
specifying one or more of its instance
(e.g.selling ‘‘the birds in the sky or the fish
in the water’’, ‘‘the catch of the diver’’,
‘‘unborn calf in its mother’s womb’’, ‘‘the
sperm and/or unfertilized eggs of
camels’’,etc).
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Cont’d (2)
• Al-Baji al-Andalusi states:
• ‘‘His Prophet’s prohibition of the sale of Gharar
render such a sale defective. The meaning of
sale of Gharar refers to sale in which Gharar
was the major component until the sale in which
Gharar was the major component until the sale
is justifiably describes as sale of Gharar. This is
the type of sale which is unanimously forbidden.
On the other hand, minor Gharar does not
render a sale contract defective, since no
contract can be entirely free of Gharar’’.
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Example of Gharar
• 1) Gharar in terms of the contract: This is the
kind of contract concluded in words that imply
Gharar and includes the following:
• a) Two sales in one: It means that a single
contract relates to two sales whether in the form
that one of them is concluded by the seller
saying ‘‘I sold you this item at Ringgit Malaysia
One Hundred (RM100.000 in cash today and at
Ringgit Malaysia One Hundred and Ten
(RM110.00) a month hence and the buyer
saying I accept without specifying at which price
he buys the item.
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Cont’d
• The element of Gharar exists here, as the
sale price is not really specified, i.e.
whether the sale price is actually Ringgit
Malaysia One Hundred (RM100.00) or
Ringgit Malaysia One Hundred and Ten
(RM110.00).
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Cont’d (2)
• b) Suspended (Mu’allaq) Sale: The suspended
sale is that the conclusion of which is made
conditional upon another uncertain event through
the use of a conditional clause.
• One example of suspended sale is when a person
says to another person, I will sell you this house of
mine at a price of Ringgit Malaysia One Hundred
Thousand (RM 100,000.00) if Mr. A sells me his
house at a price of Ringgit Malaysia One Hundred
Thousand (RM 100,000.00) and the latter says, ‘‘I
accept’’. In this example, the contract is considered
null and void by majority of jurists.
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Cont’d (3)
• Future Sale: In this kind of sale, the offer (to sell
something) is shifted from the present to a future
date. One instance of future sale is when one
person says to the other , ‘‘I sell you this house of
mine at the price of Ringgit Malaysia One Hundred
Thousand (RM 100,000.00) next year and the latter
says, ‘‘I accept’’. In this instance, the contract is
rendered null and void by the majority of jurists.
• This kind of sale is however to be differentiated from
a Wa’d (promise) to sell something at a certain price
in the future with the actual sale not taking place
now but in the future.
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Cont’d (4)
• b) Gharar in the object of the contract:
Gharar in the object of the contract covers the
items exchanged (in sale contract, the item sold
and the price) and includes the following:
• (i) Uncertainty of ownership and possession:
Gharar in the object of the contract exists in the
following situations and circumstances:
• A- sale of item that may not exists or it is not in
the possession of one of the parties and there is
ucertainty about its future possession, such as
the sale of birds in flight, fish not yet caught,
stray (runaway) animal, or the unborn whether
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the mother is not part of the sale.
Cont’d (5)
• B-sale of item when there is no ownership
or incomplete ownership such as selling
something owned by another person
without authority.
• In the above situations and circumstances,
the reason for the prohibition of Gharar is
the risk or uncertainty, which casts doubts
on the delivery of the item (subject matter
of the contract) and settlement of the
contract.
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Cont’d (6)
• (ii) Inadequacy and Inaccuracy of information:
• Information is central to the Islamic system of
contracting. All parties to the contract must make
accurate and adequate disclosure of all relevant
information enough to make reasonable estimates of
the outcomes.
• Absence of adequate and accurate information (Jahl)
is a source of Gharar. The absence of information of
either party may be due to deliberate action of the
counter-party, or it may also be due to contracting
under a situation of uncertainty with mutual consent.
• In both cases, the contract becomes susceptible to
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prohibition.
Cont’d (7)
• Lack of knowledge (Jahl) could be with regard to
the price or the item, the characteristics of the
price or of the item, the quantum of the price or
the quantity of the item or the date of future
performance.
• Islam emphasizes the need to protect the party
which lacks information.
• Several Hadith illustrate this concern of
protecting the weaker party.
• Other Hadith stress that the party which lacks
information gets an option to rescind the contract
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subsequent to the signing of a contract.
What is Maysir in Islam?
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Definition of Maysir
• Maysir is defined as betting or charging
something that will be forfeited if one fails
to obtain the greater gain that one hopes
for. A contract that involves element of
Maysir (gambling) is batil (void).
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Maysir in Islam
• Maysir refers to easily available wealth or
acquisition of wealth by chance, whether or not it
deprives the other’s right.
• The Quran used the word maysir for prohibition of
gambling and wagering.
• Gambling is a form of gharar because the gambler
is ignorant of the result of the gamble.
• A person puts his money at stake wherein the
amount being risked might bring huge sums of
money or might be lost or damaged.
• Present-day lotteries are also a kind of gambling.
Prohibition of Maysir in Islam
• Qur’an clearly prohibits gambling as
illustrated by the following verses relating
to games of chance or gambling, referred
to in Arabic as Maysir.
• Allah the Exalted says: ‘‘They ask you
concering wine and gambling. Say: In
them is great sin, and some profit, for
men; but the sin is greater than the profit’’
(Al-Baqarah: 219)
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Cont’d
• Allah the Exalted further says: ‘‘O you
who believe! Intoxicants and gambling,
(dedication of) stones, and (divination by)
arrows, are an abomination – of Satan’s
handiwork; eschew such (abomination),
that you may prosper.’’
(Al-Mai’dah: 90)
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Cont’d (2)
• Prophet Muhammad (s.a.w) also forbade
us from gambling as illustrated in the
following Sunnah: ‘‘From Abu Hurairah,
that he said: The Messenger of Allah
forbade the ‘sale of the pebble’ [hasah]
[sale of an object chosen or determined by
the throwing of a pebble], and the sale of
al-Gharar’’ (Reported by Muslim)
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Money & Banking
In Islam
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Money & Banking In Islam
ISLAM
AQIDAH
SHARIAH
IBADAH
POLITICAL
AKHLAQ
MUAMALAT
ECONOMIC
BANKING AND
FINANCE
SOCIAL
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Money & Banking In Islam
• Money is the most strategic factor in the
functioning of any financial system.
• The status, value, role and functions of
money in Islamic finance are different
from those in conventional finance.
• In the conventional system, money is
considered a commodity that can be
sold/bought and rented against profit or
rent that one party has to pay,
irrespective of the use or role of the lent
money in the hands of the borrower.
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Money & Banking In Islam (2)
• As this is not the case in Islamic finance, the
philosophy, principles and operation of Islamic
finance differ to a large extent from the principles
and operation of conventional finance.
• Experts in Islamic economics concede the
advantages of money as a medium of exchange,
• The Prophet Muhammad SAW himself favoured the
use of money in place of exchanging goods with
goods.
• The prohibition of riba al-fadhl in Islam is a step
towards the transition to a money economy and is
also a measure directed at making barter
transactions rational and free from the elements of
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injustice and exploitation.
THANK YOU
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