gharar

Gharar refer to an arabic terms of (الغرر ) which is mean unknown, risk, uncertainty or hazard that might lead to destruction or loss.

something which its consequence is undetermined.
Hanafi scholars

anything that the end result is hidden or the risk is equally uncommon, whether it exists or not.
Al-Sarakshi

it refers to any transaction of probable items whose existence or characteristics are not certain, due to lack of information, ignorance of essential elements in the transaction to either party.

Due to the uncertainty and risk involved, it makes a transaction similar to gambling. which is the main reason behind the prohibition of gharar.

The rationale of prohibition of gharar is to ensure full consent and satisfaction of the parties in a contract. Without full consent, a contract may not be valid.
Full consent can only be achieved through certainty, full knowledge, full disclosure and transparency.

There are two types of Gharar:

Gharar Yasir (light or minor uncertainty)
Gharar Fahish (excessive or major uncertainty).

Both forms of gharar are not haram. Gharar Fahish is the haram kind of Gharar. Gharar Yasir is under the halal class of Gharar.

Islamic finance is the concept of practicing the financial activities according to Sharia (the islamic law) . though that the original concepts of the islamic finance can be tracked to beginning of the islam back 1400 years ago, the formal islamic finance occurred only in the 20th with launching the islamic banks in Saudi Arabia and united Arab Emirates .Islamic finance grows very fast with range of 15%-25$ per year, increasing the value of the asset which is managed according to the islamic finance rules from $200 Billion in 2003 to oversee over $2 trillion.

According to the Sharia islamic law, which is considered the principles source of the Islamic finance,
Some actives are strictly prohibited :
1-Interest Charging.
2-Investing in business activates which are prohibited in Islam.
3-Speculation – gambling (maisir)
4-Uncertainty and risk (gharar)

In additional to two principles of :
1- Transactions must be based on assets and legitimate trade.
2- Risks and benefits should be shared.

Gharar

Islamic Finance