Riba’ and Gharar

Prohibition of Riba Generally Riba means that prohibition on each interest. In Islamic Finance system, investors and lenders are strictly disallowed to charge or receive interest. In the Shariah, riba technically refers to the premium that must be stipendiary by the borrower to the lender along with the principal amount as a condition for the contribute or for an extension in its maturity. According to Chapra (2006), call of riba is used in the Shariah in two senses. The first is riba al-nasiah and the second is riba al-fadl..The bourn nasiah comes from the root nasaa which means to postpone, defer, or wait, and refers to the time that is allowed to the borrower to repay the loan in return for the addition or the premium. Hence riba al-nasiah is same to the interest charged on loans While, prohibition of riba al-nasiah implies that the fixing in pass around of a positive array of return on a loan as a reward for waiting and no difference whether the rate of return is small o r big, or a fixed or variable per cent of the principal.It is important to note that, agree to the Shariah, the waiting tortuous in the repayment of a loan does not by itself disembarrass a positive reward. Gharar is known as unimaginable risk taking which is another fundamental principle of Islamic finance central to the structuring transactions. It to a fault can be considered some level of risk remains a fundamental aspect of commercial life and risk allocation a necessary component of Islamic finance only disproportionate risk, imaginary trading and transactions meeting exceeding limitations.According to Tabari (2011) gharar may rise from unimaginable levels of settlement risk, inadequate or inaccurate information and complex contracts where multiple transactions are not identifiable with multiple independent contracts. Besides, according to Iqbal (1999) Gharar in a contract arises where there is a lack of noesis or there is a reasonable doubt about the keep in line of either party to the contract over the completion of the exchange. The best physical exertion of gharar is gambling which have kind of unacceptable risk and gambling is disallowed in Islam.As a consequence, the major terms and conditions, such as the price, subject depicted object or time of delivery, must be determined when concluding the check agreement. The main reason riba is prohibited because it prevents people from undertaking reliable scotch activities. For example when a person having currency is allowed to earn more money on the basis of interest, either in spot or deferred transactions, it becomes aristocratical for him to earn without bothering himself to take pains in real economic activities.This leads to hampering the real interests of humanity, because the interests of humanity cannot be safeguarded without real trade skills, industry and construction. It support by Siddiqi (2004), Riba corrupts society and ultimate effect is negative growth. It must be a reaso n why Islam prohibits gharar, according to Gurulkan (2010), in a general context, the satisfying view of the jurists held that, in any transaction, by failing or neglecting to set up any of the essential pillars of contract relating to the consideration or measure of the object, the parties strive a risk which is not indispensable for them.This kind of risk was deemed unacceptable and tantamount to speculation because of its inherent uncertainty. Speculative transactions with these characteristics are hence prohibited. In conclusion, riba and gharar will cause negative in social political economy and that is a main reason, Islam prohibit these elements in business transaction. Even though, the fight still continue but prohibit it will save economics.