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Principles of Islamic Finance: Prohibition of Riba, Gharar and Maysir

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  • Uddin, Md Akther

Abstract

Islamic finance, a complete rule based financial system, fundamentals of which are originated from revealed verses of the Holy Quran considered direct ordinance from the God and the practices of Prophet Muhammad (PBUH) commonly known as ahadith. Although the concept of Islamic finance is as old as the religion itself but in the Middle Ages Muslims diverted from the original teachings of Islam, only recently Islamic finance has started to reemerge. Therefore, it is necessary to understand the fundamental rules that make Islamic finance different from its counterpart. In this paper an attempt has been made to discuss briefly fundamental principles of Islamic finance namely prohibition of Riba (interest), Gharar(uncertainty) and Maysir (gambling). It is found in the study that these principles are based on the fundamental sources and early Islamic jurists, scholars and contemporary researchers uphold them in carrying out financial transactions. In order to run financial system according to the Islamic principles these concepts must be understood clearly and all transactions must be free from them.

Suggested Citation

  • Uddin, Md Akther, 2015. "Principles of Islamic Finance: Prohibition of Riba, Gharar and Maysir," MPRA Paper 67711, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:67711
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    References listed on IDEAS

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    1. Mohammed Obaidullah, 2005. "The Islamic Financial Services الخدمات المالية الإسلامية," Books published by the Islamic Economics Institute, KAAU., King Abdulaziz University, Islamic Economics Institute., edition 1, number 40, July.
    2. Seif El- Din I . Taj El-Din, 2002. "Towards an Islamic Model of Stock Market نحو نموذج إسلامي لسوق الأسهم," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 14(1), pages 3-29, January.
    3. Chong, Beng Soon & Liu, Ming-Hua, 2009. "Islamic banking: Interest-free or interest-based?," Pacific-Basin Finance Journal, Elsevier, vol. 17(1), pages 125-144, January.
    4. Hearn, Bruce & Piesse, Jenifer & Strange, Roger, 2012. "Islamic finance and market segmentation: Implications for the cost of capital," International Business Review, Elsevier, vol. 21(1), pages 102-113.
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    More about this item

    Keywords

    Islamic finance; Riba; Gharar; Maysir;
    All these keywords.

    JEL classification:

    • A1 - General Economics and Teaching - - General Economics
    • A2 - General Economics and Teaching - - Economic Education and Teaching of Economics
    • B0 - Schools of Economic Thought and Methodology - - General
    • P0 - Political Economy and Comparative Economic Systems - - General

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