A study of Islamic practice in Ar-Rahnu at financial institution

Abstract

The introduction of Islamic pawn broking (al-Rahnu) in Malaysia has seen as a new micro credit instrument in providing cash borrowing facility to lower income communities. The Muslims individuals’ especially needy people are reliant on this institution as their financial resources and necessities fulfillment. Al-Rahnu as well as reflected to Islamic business operation are must conducted according to Shari’ah principles whereas the process transaction are must show transparent and free of ambiguity and element of riba. Thus, it is important to have a study of al-Rahnu practice in Islamic finance industry as the Muslim communities have put trusted to the system institution, in fact, the number of demand in al-Rahnu has shown increased by over the years until present. In an attempt to fulfill the aims of the research study, the interview will be conducted to selected institution cooperatives. This study will be given a focus to describe an overview of Islamic pawn broking (al-Rahnu) concepts and analyze its actual modus operation implemented by cooperatives. The research conducted into three different entities cooperative, Koperasi Ukhwah Malaysia Berhad, Koperasi Pegawai-Pegawai Kerajaan Negeri Kedah and Permodalan Kelantan Berhad. The study employ field research to achieve the objective of the study. In Islamic law contracts, al-Rahnu systems applied based the concepts of Qard al-Hassan, al-Rahnu, al-Wadi’ah Yad Dhamanah and Ujrah. Nevertheless, by conduct a study of al-Rahnu scheme according Shari’ah framework theory and the challenges, perhaps we might get a clear clarification of al-Rahnu practice in cooperative and be useful for the businesses and government in considering the future development related to al-Rahnu pawnshops