Why these terms matter
Islamic commercial law is built on a few prohibitions. The best known is riba (interest), covered on our page Riba explained. The other two that come up most in trading are gharar and maysir. Together they shape how scholars judge futures, options, margin trading, forex and CFDs (contracts for difference, where you settle the price change of an asset without owning it).
For the wider framework, see Islamic finance principles.
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Gharar meaning
Gharar is an Arabic word meaning uncertainty, risk or deception. In Islamic law it refers to excessive uncertainty in a contract about something essential, such as:
- whether the item exists or can be delivered
- the quantity, quality or specification of the item
- the price or the delivery date
- whether the contract will be completed at all
The classical examples come from hadith. They include selling fish still in the water, birds in the air, the unborn calf of an animal, or fruit before it is ready.
Jurists separate excessive gharar, which makes a contract invalid, from minor gharar, which is tolerated because almost no trade is free of uncertainty. Ordinary business risk, such as whether a shop will make a profit, is not gharar. Gharar refers to uncertainty built into the terms of the contract itself.
Maysir meaning
Maysir (also qimar) means gambling. The Quran forbids it together with intoxicants. In finance, maysir describes any arrangement where:
- one party's gain is the other party's loss
- the outcome depends mainly on chance
- money is staked on an event with no real exchange of goods or services
Gambling in Islamic finance
Many scholars treat maysir as an extreme form of gharar. Gharar is uncertainty inside a sale. Maysir is a contract whose whole purpose is to win or lose on an uncertain outcome. A lottery ticket, a bet on a match, or a side wager on a price move would all be classed as maysir.
Islamic banks and takaful (Islamic insurance) operators design their products to avoid both. See Takaful and Islamic finance contracts.
Application to derivatives
A derivative is a contract whose value depends on another asset, such as a currency, a commodity or an index. Scholars test each type against gharar, maysir and riba.
| Instrument | Main concern raised by scholars |
|---|---|
| Forward and futures contracts | Both price and delivery are deferred. Most contracts are closed before delivery, which some see as speculation on price alone |
| Options | A premium is paid for a right, not for an asset. Many scholars say this is not a valid object of sale |
| Margin trading | Borrowed funds often carry interest, and positions are closed by price difference |
| Spot forex | Currency exchange must be hand-to-hand, so delayed settlement and overnight interest are questioned |
| CFDs | No ownership of the asset, settlement by price difference, and overnight financing charges |
Islamic finance has its own tools for some of these needs. Salam is a forward sale with full payment in advance, mainly for commodities. Istisna is used for manufacturing. Wa'd is a unilateral promise used in some Islamic hedging structures.
What standards and fatwa bodies say
- AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) issues Shariah standards that many Islamic banks follow. Its standard on trading in currencies requires exchange on the spot, with possession by both parties. Its standards treat conventional futures and options as impermissible. They also reject margin trading that relies on interest-bearing loans.
- The International Islamic Fiqh Academy of the OIC has issued resolutions holding that conventional options and futures, as traded on exchanges, are not permissible.
- National bodies, including Shariah boards linked to central banks and fatwa councils in several Muslim countries, generally follow similar lines for conventional derivatives. In Pakistan, the State Bank's Shariah framework for Islamic banks draws on AAOIFI standards. For local context, see Payments, tax, Islamic banking.
Read the current text of a standard or resolution directly from the issuing body. This page summarises positions and is not a substitute for the source.
Where views differ
Scholars do not all agree:
- Restrictive view. Futures, options and leveraged forex or CFD trading contain gharar and maysir. Swap-free arrangements do not change this, because settlement by price difference remains.
- Conditional view. Some contemporary scholars, such as Mohammad Hashim Kamali, argue that certain futures can be acceptable. Their conditions are regulated exchanges, real underlying assets, and use for hedging rather than pure speculation.
- Spot-forex view. Some scholars allow spot currency exchange through a broker if settlement counts as immediate, no interest is charged, and no hidden fees replace interest. Others say retail margin forex fails these tests.
Our pages Is forex halal? and Swap-free accounts cover these debates in more detail. We do not issue rulings. If you need one for your own situation, ask a qualified mufti or Shariah scholar.
Legal and risk points in Pakistan
The religious question is separate from the legal one. On the legal side, per the SBP, the purchase of offshore forex/margin/CFD products by Pakistani residents violates section 4(1) of FERA 1947. Also, per the SECP, offshore platforms have no Pakistani licence or oversight and offer no legal protection or recourse. See Law and regulators.
Whatever the religious view, leveraged forex and CFD trading can lose money fast, and losses can exceed what you expected to risk. See Risk management.
Frequently asked questions
What is the gharar meaning in simple words?
Gharar is excessive uncertainty in the essential terms of a contract, such as what is sold, its price or whether it can be delivered.
What is the maysir meaning?
Maysir means gambling: staking money on an outcome that depends mainly on chance, where one side's gain is the other's loss.
Is all risk gharar in Islam?
No. Ordinary business risk and minor uncertainty are accepted. Only excessive uncertainty in the contract terms is prohibited.
Does a swap-free account remove gharar and maysir?
It addresses interest. Whether gharar and maysir remain depends on the scholar's view of leverage and settlement by price difference.
Are futures always haram?
AAOIFI and the International Islamic Fiqh Academy treat conventional futures as impermissible. Some scholars accept certain forms under strict conditions.
Does this page give a fatwa?
No. It summarises positions. For a ruling, consult a qualified scholar.