Islamic Law on Trading

What is Islamic Law on Trading ?

The Qur'an disallow gambling (games of chance involving money). The hadith, in addition to ban gambling (games of chance), also restrict bayu al-gharar (trading in risk, where the Arabic word gharar is taken to mean "risk").

The concept for these efforts is to avoid interest, at least in form. Essentially, interest is the cost of using future money now and paying later.

A need or desire is fulfilled now, for payment later. The lender postpones gratification for a price. When the risk rises, so does the interest rate. This explanation does not take into consideration government activity to raise or lower interest rates in order to control the national growth rate and the level of employment, but the basic fact remains: interest is the cost of getting a lender to postpone gratification.

Interest is an important element in upkeeping a modern Islamic economy. In some degree, the form may be changed, but the substance is inevitable, regardless of camouflage. At best, it is possible to limit the extent of interest to prohibit usury.