FINANCIAL RISKS IN (GHARAR) AND (RIBA) TRANSACTIONS

Abstract

This study critically examines the impact of financial risks arising from excessive gharar (uncertainty) and riba (usury) in financial transactions, emphasizing the distinction between permissible and prohibited risk under Islamic law. Through a comprehensive literature review of classical jurisprudence and contemporary Islamic finance scholarship, the study analyzes the destructive consequences of riba, the regulatory boundaries of gharar, and their implications for financial stability and economic development. Furthermore, the paper explores the dual nature of inflationary finance, which combines the risks of gharar and riba, demonstrating its incompatibility with Shariah principles. The findings underscore the importance of promoting justice, fairness, and transparency in financial practices while managing risks within acceptable ethical and legal frameworks.