Norms Relating to Riba, Gharar, Tawun

Ijara the lessor who is entitled to receive the

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Ijara - the lessor, who is entitled to receive the rentals, must bear the losses arising out of destruction of the asset. A party in a financial contract is entitled to returns, only if it bears risk 23 Islamic Banking
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Norms relating to Riba: Risk & Return "Al-Kharaj bid Daman” - “revenue goes with liability” The Islamic system leaves the issue of parity to be handled under externally imposed constraints such as abolition of monopolistic tendencies in a market. For example, murabaha transactions, though permissible, may contain an element of exploitation. The mark-up rate in some cases is seen to be quite high as compared to the minimal risk borne by the financiers. Islamic markets are competitive markets and competition would ensure parity between risk and return. 24 Islamic Banking
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Norms Relating to Gharar Gharar means risk, uncertainty, and hazard. Unlike riba, gharar is not precisely defined. Gharar is also considered to be of lesser significance than riba. While the prohibition of riba is absolute, some degree of gharar or uncertainty is acceptable in the Islamic framework. Only conditions of excessive gharar need be avoided. 25 Islamic Banking
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Norms relating to Gharar: Gharar - Fairly Broad Concept First, gharar implies uncertainty . Second, it implies deceit . Quran has clearly forbidden all business transactions, which cause injustice in any form to any of the parties. It may be in the form of hazard or peril leading to uncertainty in any business, or deceit or fraud or undue advantage. Hanafi jurist al-Sarakhsi : as any bargain in which the result of it is hidden. Ibn Juzay, Maliki jurist defined 10 conditions of Forbidden Gharar. 26 Islamic Banking
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Norms relating to Gharar: Settlement Risk: Sale of fish in water A typical example is a “sale without taking possession”. Ibn Abbas reported Allah’s Messenger (PBUH) as saying: “He who buys food grain should not sell it until he has taken possession of it.” The reason for the prohibition of gharar is the risk or uncertainty, which casts a shadow on the delivery of subject-matter and settlement of the contract, irrespective of the fact whether the item exists or not. Sale of fish in water Sale of bird in air Sale of catch by a game catcher 27 Islamic Banking
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Norms relating to Gharar: Inadequacy or Inaccuracy of Information Uncertainty may be caused by lack of adequate value-relevant information jahl . Two types of transactions had been forbidden by Prophet (PBUH); al-mulamasah and al-munabadhah. Mulamasah transaction is that when a man can feel a garment but is not allowed to unfold it or examine what is in it, or he buys by night and does not know what is in it. Munabadhah is that a man throws his garment to another and the other throws his garments without either or them making any inspection.
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  • Fall '11
  • GARYMILLER
  • Finance, Qur'an, Sharia, riba

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