Riba’ and Gharar

Prohibition of Riba Generally Riba means that prohibition on any interest. In Moslem Finance system, investors and lenders ar strictly disallowed to charge or receive interest. In the Shariah, riba technically refers to the premium that mustiness be paid by the borrower to the lender along with the principal amount as a fix for the bring or for an extension in its maturity. According to Chapra (2006), term of riba is used in the Shariah in twain senses. The first is riba al-nasiah and the second is riba al-fadl..The term 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 equivalent to the interest charged on loans While, prohibition of riba al-nasiah implies that the fixing in advance of a positive rate of return on a loan as a reward for waiting and no difference whether the rate of return is modest or big, or a f ixed or variable per cent of the principal.It is important to note that, harmonize to the Shariah, the waiting involved in the repayment of a loan does not by itself justify a positive reward. Gharar is known as unaccepted risk taking which is another fundamental principle of Islamic finance central to the structuring transactions. It also 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, speculative trading and transactions meeting exceeding limitations.According to Tabari (2011) gharar may climb up from unacceptable 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 knowledge or there is a fountainable doubt about the control of all party to the cont ract over the completion of the exchange. The best example 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 egress or time of delivery, must be determined when concluding the corresponding agreement. The main reason riba is veto because it prevents people from undertaking real economic activities. For example when a person having money is allowed to earn to a greater extent money on the basis of interest, either in spot or deferred transactions, it becomes easy for him to earn without bothering himself to seduce 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, manufacture and construction. It support by Siddiqi (2004), Riba corrupts society and ultimate effect is negative growth. It must be a reason why Islam prohibits gharar, according to Gurulkan (2010), in a general context, the unanimous view of the jurists held that, in any transaction, by failing or neglecting to define any of the essential pillars of contract relating to the consideration or measure of the object, the parties foreshorten a risk which is not indispensable for them.This kind of risk was deemed unacceptable and tantamount to speculation because of its natural uncertainty. Speculative transactions with these characteristics are therefore prohibited. In conclusion, riba and gharar will cause negative in hearty economics and that is a main reason, Islam prohibit these elements in business transaction. Even though, the debate still draw out but prohibit it will save economics.