Name: NORNAZRIN AIMAN BIN SUHAIDI
ID: 2022812618
Ar-rahnu and pawnbroking are two different methods of obtaining financial assistance through
collateral. While both involve the provision of a valuable asset as security, there are significant
differences between the two.
Category Ar-rahnu
Conceptual a pledgor (rahin) pledges a valuable asset,
basis such as gold items, as collateral (marhun)
to a pledgee (murtahin) to fulfill a debt
liability or financial obligation (marhun
bih) in the event of default
Purpose of Ar-Rahnu primarily serves as a means of
Transaction obtaining short-term financing for
personal or business needs while adhering
to Islamic principles.
Ownership of the ownership of the collateral remains
collateral with the pledgor (rahin) throughout the
duration of the contract. The pledgee
(murtahin) only holds the collateral as
security.
Redemption a longer redemption period, allowing the
period pledgor to repay the debt and retrieve the
pledged item within a specified timeframe
Interest does not involve interest charges as it is
Charge based on the concept of collateral and not
a loan transaction
Pawnbroking
where a person pledges a valuable item
as collateral to a pawnbroker in
exchange for a loan.
Pawnbroking is often used as a way to
secure quick cash for immediate
financial needs, regardless of religious
considerations.
the pawnbroker takes possession of the
pledged item until the loan is repaid.
The ownership of the collateral
transfers to the pawnbroker during this
period.
has a shorter redemption period, and if
the loan is not repaid within the agreed
time, the pawnbroker can sell the
collateral to recover the loan amount.
involve interest charges on the loan
amount, which the borrower needs to
pay in addition to the principal amount.