ONCEPT AND PRINCIPLES OF AR-RAHNU

Islamic pawn broking system is also known as Ar-Rahnu scheme, is one of the islamic product that introducing in islamic finance institution in Malaysia as one of alternative to get fund quickly and easily based on shariah principles. To begin with, the pawn broking had been operating since 19th century in Malaysia. In 2002, there were 276 brokers registered, in order to make them more accessible, and their objective is to maximizing profit. The private pawn broking is fast and efficient, flexible in term of valuation and loan approval and exercise simple producer. However they charge interest to customer to get high profit, it opposite to islamic perspective where the interest assummed as Riba, and its prohibited in islam.

Ar-Rahnu was introduced by The Malaysian Islamic Economic Development Foundation ( YPEIM). In 1992, the first Ar-Rahnu was established by Kelantan State government, and in 1993 it was cooperative with Bank Rakyat. In 2004, Ar-Rahnu pawn broking has been growing into 125 center troughtout the country where 22 cooperative involved in the business. Furthermore, Ar-Rahnu also giving the larger contribution to community’s development in Malaysia, where the scheme can be one of the source to get capital to start small and medium business. According to Abdul Ghafar and Nur Azura ( 2005), islamic pawn broking become popular among middle class people who have some difficulties to obtain the fund from formal financial institutions for emergencies uses. In Ar-Rahnu, the contracts are free from any interest, and it ensure there is no riba or gharar involved. Normally, the customers just pay the safe keeping of the collateral ( gold), based on the current value not the amount of the loan.

The Islamic pawn broking scheme in Malaysia underlying the principle of Islamic Shariah and combining the source of al-Rahnu collected into other transaction in Muamalat Islamic such as al-Wadiah yad Damanah, Al-Ujrah and Al-Qard-hasan are necessary to made of Islamic pown broking products.as stated by Hisham, S. et. al (2013).

However, Appannan and Doris (2011) their study show awareness of people living in Kedah State in Malaysia particularly in Sungai Patani resident the finding show is mindful of the duration of Islamic pown broking while the alert of variety races in the city are different level. The Bumiputra and Chinese were inform ar-Rahnu sheme and the most foctor affecting the communict to remained Islamic pawn broking was better the cost of loan of pawn broking conventional and cheaper its cost.