Topics: Debt, Sharia, Loan Pages: 5 (3242 words) Published: October 21, 2014
Middle-East Journal of Scientific Research 13 (Research in Contemporary Islamic Finance and Wealth Management): 98-102, 2013; ISSN 1990-9233
© IDOSI Publications, 2013
DOI: 10.5829/idosi.mejsr.2013.13.1888

The Concept and Challenges of Islamic Pawn Broking (Ar-Rahnu) 1

S. Hisham, 1S. Abdul Shukor, 1A.B. Ummi Salwa and 2Kamaruzaman Jusoff

Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, 71800 Bandar Baru Nilai, Negeri Sembilan, Malaysia
Department of Forest Production, Faculty of Forestry, Universiti Putra Malaysia, 43400 UPM Serdang, Selangor, Malaysia

Abstract: The introduction of Islamic pawn broking (Ar-Rahnu) in Malaysia is seen as a new micro credit instrument. This paper aims to provide a review on Ar-Rahnu’s concept and challenges faced by Islamic pawn shops in Malaysia. The study employs library and archive research to achieve the objectives of the paper. Islamic pawn broking consists of four basic concepts namely Qardhul Hasan, Ar-Rahnu, Al-Wadi'ah and Al-Ujrah. The Islamic pawn broking have several advantages over conventional pawn broking because it provides a cheaper way to obtain financing and is free from interest. In addition, assets pawned are guaranteed to be kept safely and there is a fair practice in auctioning and bidding. In addition, Ar-Rahnu also helps finance educational needs and provides capital to small businesses and entrepreneurs. It implies that this instrument will help the community to increase economic capability of their families. Future research should study effective ways in managing challenges faced by Islamic pawn shops.

Key words: Islamic pawn broking


Micro credit instrument


borrower may pay extra to the lender), Ar-Rahnu
(the borrower is required to place a valuable asset for the
loan extended by the lender and it may be utilized as
payment if the debt is not repaid within the agreed
period), Al-Wadi’ah (The borrower is required to produce
a valuable asset (usually gold) as collateral to ensure
repayment of the loan. The lender is responsible to take
the necessary precaution to ensure the security of the
asset placed by the borrower; however, the lender is not
required to replace the item if it is not due to the lender’s negligence) and Al-Ujrah (the lender is allowed to charge
a reasonable fee for keeping the pawned items safe and in
good condition).
The introduction of Islamic pawn broking (Ar-Rahnu)
in Malaysia is seen as a new micro credit instrument [3] as
it provides a financial product for the lower income group
and small businesses which usually have limited capital or
have been excluded from the mainstream financial system
[4]. It also offers investment opportunities besides
preventing illegal or unlicensed financing activities [5].
This paper aims to provide a review on the Islamic pawn
broking (Ar-Rahnu) concept and challenges faced by
Islamic pawn shops in Malaysia.

The first Islamic pawn shop in Malaysia was
established by the Terengganu State Government and
known as Muassasah Gadaian Islam Terengganu (MGIT)
in 1992. The establishment of MGIT is to provide
immediate financing to assist individual in overcoming
cash flow needs through methods which are considered
halal by the Shariah regulation [1]. Ever since the
introduction of Islamic pawn broking, the demand for it
increases continuously [2]. Ar-Rahnu scheme is now
offered by several banks including Bank Rakyat, EON
Bank and Bank Pertanian Malaysia.
From the Islamic perspective, the pawning contract is
a voluntary charitable contract (tabarru’), whereby
the pawned object is given without any financial
compensation. It is also one of the contracts involving
non-fungibles, which are not considered totally
binding until the object of contract being delivered [8].
Shariah based pawn broking or known as Ar-Rahnu
consists of four basic concepts, namely Qardhul Hasan
(the borrower is only required to pay the...

References: Bhatt, P. and J. Sinnakkannu, 2008. Ar-Rahnu
(Islamic pawn
Mohd Ali, B., 2005. A new era in microfinance in
[Accessed on 8 Mac 2012]
Abdul Razak, A., 2004
Agrobank, 2012. Ar-Rahnu Agrobank. Available
Kharofa, A.E., 1997. Transaction in Islamic Law,
Ali al-Syawkaniyy, M., 1999. Nail awtar min Ahadith
Sayyid Li Akhyar Syarh Muntaqa al-akhbar
Al-Zuhailiyy, W., 2003. Islamic jurisprudence and it 's
Angkasa, 2005. Skim pajak gadai Islam Ar-Rahnu:
konsep dan perlaksanaannya
10. Al-Bugha, M. and A. Al-Syarbiniyy, 2000.
11. Al-Shirbini, K.., 1997. Mughni al-muhtaj ila ma 'rifat
al-ma 'ani alfaz sharh al-Minhaj
12. Farush Khan, F.F., 2006. Gadaian tanpa bunga.
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