Assignment no 1

Name: Zarish Akram

Registration ID: 10731
Course: Islamic Banking and Applied Finance
Examples Of Riba And Gharar

Riba Al Nasiah:
Riba Al-Nasi'ah is derived from the Arabic root "nasa'a," which meaning "to postpone" or "to delay." There are
two types of Riba in this category: Interest is charged on a loan given to a debtor. During the pre-Islamic era,
this category was widely used.

Examples:
 If someone is lends a person 500 rupees and after sometime they asks for 1000 rupees
instead of the actual amount they lend, It’s the interest which is Riba Al Nasiah.
 3 kilograms of chicken are similar to 1 kilogram of mutton in terms of price. The
difference in weight in this situation is 3 kilos on one hand and only 1 kilograms on the
other. This is similar to Riba, but it is economically equivalent in Allah's eyes.
 Credit cards have a set minimum payment with interest rate until someone pays their debt no matter if
it’s lower rate or higher , it is still Riba Al Nasiah as the bank takes benefit on providing the loans
 The fact that conventional insurance involves interest-based interactions is what makes it illegal. The
monies received in the form of insurance premiums are often invested in interest-bearing accounts or
interest-bearing securities by the insurance company. Interest is expressly forbidden under the Sharia
and is considered a very serious offence. In traditional insurance, all investments and operations are
based on debt and equity, with debt being interest-based.
 When both sides agree to trade ten kilograms of gold for two kilograms of silver. As a result, the former
will be supplied right away, while the latter will take two weeks after the contract has been signed.

Riba Al Fadl:
Six substances are vulnerable to Riba Al-Fad, according to Prophetic Hadith: gold, silver, wheat, barley,
dates, and salt. Interest cannot be charged on transactions in which any of the aforementioned items are
exchanged for objects of the same sort. The same is true when two items with the same common reason of
prohibition are exchanged. It is, for example, forbidden to swap a kilo of low-quality gold for half a kilo of
high-quality gold. The same holds true whether trading a good type of silver, wheat, barley, dates, or salt for
a bad variety.
  Rib-al-fadl is the exchange of low-quality gold for superior-quality gold in exchange for a fee or a
difference in weight.
 For every 1,200 kilos of wheat purchased, if two people purchase 1,000 kg. When the deal is
completed, the two will swap, and an additional 200 kg of wheat will be added and supplied free of
charge.
 Regardless of the purity of the gold, riba al-fadl is defined as a transaction in which one part with
110 Grams of gold now in exchange for 115 grams of gold to be received presently.
 A trader may say that a kilograms of one type of wheat is comparable to three kilos of another type
due to its superior quality and swap it with this reasoning, which is known as riba-al-fadl. Because
the trade is not done in the same quantity.
 Substitute a 2kg date for a 1kg date. In actuality, this form of river is so far removed from the barter
economy that it is no longer relevant in today's world.

Minor Gharar:
Due to the nature of the contract's subject matter, a tiny quantity of gharar (also gharar qalil or gharar yasir/
gharar yaseer) cannot be avoided (aqd). This level of gharar does not result in significant losses or damage to
any of the counterparties. Minor is uncontrollable.
 When there is a risk in business profits as there is uncertainty it can be called as minor Gharar.
 There is a little uncertainty in marriages too as people don’t know if the marriage will last long or not.
 There is Gharar in trading business as well as there is uncertainty of the products are going to be of fine
quality or not
 It is impossible to know whether a sack of nuts which are offered for sale have edible quality or not.
 An ijarah contract  in which ujrah is quoted and paid on a monthly basis; the number of days in a month
varies (30 and 31 days across almost all the months of the year and at times 28 or 29 days for February).

Excessive Gharar:
An excessive amount of gharar makes a contract or transaction invalid in the eyes of the Shari'a. In addition
to risk and ambiguity as to the subject of a distributive contract, Gharar reflects some type of unequal or
incomplete information and/or dishonesty . Gharar must influence two fundamental parts of a contract in
order to invalidate it: the fundamental price and the item of exchange.
 You sell your dress but don't give it to the buyer, and you put a condition on it that if someone gives
you a new one for your birthday, he gets the possession.
 If someone sells jewelry that is not in their possession but they still promised the buyer and took the
amount before selling them the goods.
 Making a contract conditional on an uncertain occurrence, such as I'll sell someone my firm if it
generates more than $1 million in revenue by the end of the year.
 Selling mystery boxes by falsely claiming that they contain gadgets when, in fact, they are filled of
plastic toys.
 Gharar as a result of contract complexity - this occurs when two or more contracts are merged and
become dependent on one another.