University Malaysia Sabah
Labuan School of International Business and Finance
GE31703 Islamic Asset Management
Analysis on Ar-Rahnu collateral security structure: Can it really help the small business proprietor? Semester 1-2012/2013
Prepared For: - Dr Rosita Chong
| Matrix No.
| GE SHUANG
| NOR PADILAH BT ARMAN
| NUR IZZATI BT MOHAMAD NORZILAN
| NURUL HIDAYAH MAZLAN
Table of Contents
The mechanism of Islamic pawn broking
The performance of Ar-Rahnu
Analysis on Ar-Rahnu collateral security structure
Can it really help the small business proprietor?
An issue related to Ar-Rahnu
This study aims at analyzing the collateral security structure of Ar-Rahnu, to find out whether it can really help the small business proprietor. This research will be conduct by conceptually analyzing other paper works and researches. Documentary analysis will be used to facilitate the research. Based on the previous studies, by learning the performance of Ar-Rahnu, the operation model of Islamic pawn broking institutions in Malaysia and analyzing on the collateral security structure of Ar-Rahnu, this paper found that Ar-Rahnu can really help the small business proprietors by lending money to them for their short term financing or in case of emergency with little charging of storage fees. For the purpose of deep study, an issue related with Ar-Rahnu is also discussed in this paper, in order to enhance the stability of Ar-Rahnu industry in Malaysia. Key terms of the research
1. Ar-Rahnu 2. Islamic pawn broking 3. Collateral 4. Small business 5. Gold dinar
Islamic pawn broking is usually noted as Ar-Rahnu which is defined as a method of providing short term financing to people who are poor or need money by pledging their gold or jewelry to pawnbroker as a security (Amin and Chong, 2011). Ar- Rahnu is one of the products that have been introduced by Islamic bank to help people especially the needy and poor. In that point, Islamic pawnshop is the most appropriate mechanism to provide a financial product for the lower-income group and small business proprietor which usually they have very limited capital or have been excluding from the mainstream financial system. Ar-Rahnu is a product that uses to help people and it was differ from the conventional pawn broking system where the latter imposes high interest rates (two percent per month or 24 percent per annum) and other unfair practices on the borrower. This view has been supported in the work of (Bhat and Sinnakkannu, 2008, p.2).
The establishment of Islamic pawn broking institution in Malaysia was started since January 1992, when the Muassasah Gadaian Islam Terengganu (MGIT), was set up by the Terengganu State Islamic Affairs and Malay Customs (Bhatt and Sinnakkannu,2008; Amin and Chong, 2011). Then in March 1992, the first Kedai Ar-Rahnu has being established in Kelantan by Permodalan Kelantan Berhad to operate in the pawn broking business. On 21 August 1993, The Malaysian Minister of Finance has announced of Ar-Rahnu scheme. This is the first cooperation of the Islamic pawn broking in Malaysia between Bank Negara Malaysia Islamic Economic Development Foundation Malaysia (YPEIM) and Bank Kerjasama Rakyat Malaysia Berhad. In this collaboration, each parties has their own roles to ensure the successful of the scheme, Bank Negara Malaysia was supply the expertise in financing field. While, the Islamic Economic Development Foundation Malaysia or YPEIM act as the funder of and Bank Kerjasama Rakyat Malaysia Berhad supply the infrastructures and managing the transaction. Then, On 27 October 1993, Bank Kerjasama Rakyat Malaysia Berhad has launched six branches of first phase of Ar-Rahnu scheme. Now, the...
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