The Awareness of AlRahn

NURUL FATIMAH BINTI MAMAT

G1325682
BIDAHSARI BINTI PARMAN G1326850
UMMU HANI BINTI ABDULLAH
G1321438
NURSYAHIIRAH BINTI MOHAMAD ARIFFIN G1421266
NUR ZALIKHA BINTI JOHAR G1421646

Outline
s
1. Introduction
i - Pawnbroking
ii- Ar rahn

2. Literature review
3. Problem
Statement
4. Research
Objective

5.

Research

Questions
6.

Methodology

7.

Conclusion

Payal Bhatt,
Monash
University
Sunway
Campus, 2008

Ar-Rahnu system has

the capacity and
capability to fill the gap
in short-term credit
structure
Ar-Rahnu is not a
competition to the
conventional pawn
broking, but it is in
rising demand

AZILA ABDUL
RAZAK,
DURHAM
UNIVERSITY,
2011

- Pawnshops are the most preferable source to

obtain instant cash.
- Muslim awareness towards pawn broking is
arising. However, there are still many Muslim
- go for conventional pawn broking due to some
reasons.
- From her study, it is shown that;
- MAIDAM Non-Muslims are aware about
Ar-Rahnu but it still in low demand from them
- YaPEIM & Bank Rakyat Non-Muslims are
aware &
their demand are quite promising
- Generally, community agreed that pawn
broking give positive impacts to them. But there
is no significant difference between conventional
and Islamic pawn broking which are 98.5% and
98.3% respectively.

High cost living

Many applying for personal loan
However, the qualification is tight
People choose conventional
pawnbroking
Really high interest

 To investigate the issue on the

need for Ar-Rahn compared to
conventional pawnbroking
To find out the perception on ArRahn among community, muslim
and non-muslim
To recommend solutions to the
issues pertaining Ar-Rahn

 What is issue on the need for

Ar-Rahn compared to
conventional pawnbroking
What is the perception on ArRahn among community,
muslim and non-muslim
What is the best solutions to
the issues pertaining Ar-Rahn

Every soul will be held in pledge for its deeds. (74:38)

The author wrote that legally it refers to holding an item in lieu of a legal right
that may be satisfied from that item. Fiqh schools of thought defined Rahn
differently as follows but with similarities on the context; property
surrendered as insurance on debt claimant.

 Shafie: Taking a non-fungible property as insurance

against a fungible debt, whereby the debt may be
extracted from the held property if it is not repaid.
Hanbali: A pawned object is a property used as insurance
for a debt, so that the debt may be extracted from the
property if it is not possible to recollect from the debtor.
Maliki: It is the act of taking a valued property from its
owner, as a means of insuring a loan that has matured or
is about to mature.

2:283

 The practice of Rahn is legalized through the

authorities of Quran, Sunnah as well as the
consensus regards it as permissible. From
Quran; 2:283 - If you are on a journey and
cannot find a scribe, then use the receipt of
pawned objects. Sunnah - narrated by AlBukhari on the authority of Aishah that The
Prophet (pbuh) bought some food from a Jew,
and he pawned his iron shield with him.

 Pawn broking business was introduced in Malaysian early 19 th

century
The conventional pawn broking system is popular for quick cash
borrowings. Mostly by low income earners in rural areas.
The downside of conventional pawn broking service-high interest
charges and unfair practices
To help the society, an alternative pawning system or Ar-rahn was
introduced and received encouraging response.

Al-Rahnu (Islamic pawn broking)

1.

2.
3.

4.

Provide immediate financing to assist individual in overcoming

cash flow needs through methods which are considered halal by
the Shariah regulation.
Pawning contract is voluntary charitable contract (Tabarru)
Parties in contract:

Pledger (rahin), pawn broker (murtahin), pledged asset

(rahn)
If pledger does not repay qard hasan loan within agreed period,
pawn broker can auction off pledged asset

ISLAMIC CONTRACT AND CONCEPT

AR-RAHN - possessions offered as security for a debt so that the debt will be taken
from it in case
the debtor failed to pay back the due money.
AL-WADIAH
- customers will deposit money in the bank for safekeeping
purposes and the bank
guarantees the refund of the money. The bank may
reward the customers in the form of
hibah (gift).
AL-UJRAH - Ujrah can be defined as financial payment for the utilization of
services or usufruct, it
can be in the form of salary, wage, allowance,
commission and the like.
QARDH HASAN

- the borrower only to pay the amount borrowed.

Mechanisms of AlRahn
2. Qard hasan
loan
Customer

1. Pledge
asset
3. Custodial fee
under wadi'ah
yad-amanah
Repay qard hasan
loan
Return pledged
asset

Islamic
pawn
broker

LEGAL DOCUMENTATION AND

ISSUES
Event of Repayment
Event of Redemption
Event of Default
Event of Recovery
Event of Auction

GUIDELINES
1. Pawnbrokers Act 1972 which regulates the pawnbroking
activity in Malaysia;
2. Goods and Services Tax (GST) guidelines which provide
guidelines on items that subject into taxation;
3. Development Financial Institution Act 2002 which specify
provisions for the regulation and supervision of development
financial institutions and for matters connected therewith;
and
4. Cooperatives societies act 1993 which outline the regulations
on cooperatives.

Advantages

It provides a cheaper way to obtain financing and is free

from interest
Assets pawned are guaranteed to be kept safely
There is a fair practice in auctioning and bidding
Helps finance educational needs and provides capital to
small businesses and entrepreneurs
Help the community to increase economic capability of
their families

DIFFERENCES BETWEEN AR RAHN AND

PAWNBROKING
PRINCIPLES

AR RAHN

PAWNBROKING

OWNERSHIP

- Must provide proof of ownership either

through the letter of purchase/receipt or
-letter of undertaking

-not required to provide proof

of ownership

- If it belongs to someone else, a letter of

consent approval from the owner is required
Pawning value

Default

- Up to 60% - 70% of the value of pawned

gold

- Valuation is must lower

than market value

- Valuation based in the current market

value

- Average 30.5%

- Pledged item will be auction publicly

Not transparent

Transparent and notice will be sent

Balance after
auction

- The balance after the auction will be

returned back by the company to the
pledger

- The balance after auction

will not be returned back buy
the company to the pledger

PRINCIPLE AR RAHN
S

PAWNBROKING

Operator

- Institutions base eg: banks, co-orperatives,

YAPIEM, state government agencies.

- Sole proprietor based

- Monthly safekeeping charges

- Interest is charged

- No interest charge

- More expensive rate

Charges

- Individual based

- Cheaper
Insurance

- Takaful coverage

- Not covered
- If the pledged items are lost,
only a 25% compensation is
offered

Items

- Only pure gold accepted

- Ornamented gemstones on gold item will
not be valued
- Gold plated items are nor acceptable
- Pound gold and white gold not accepted

- Any valuable items

Example: Ar-Rahn certificate

 The method of collecting the data was by

distributing the questionnaires randomly
to the respondents and interview.
By using the Statistical Package for Social
Science (SPSS) v.19 the questionnaires
will be collected
There are five factors to be examines
which namely as muslim and non muslim,
level of awareness, income, job scope and
solution.