Economic and Religious Significance of the Islamic and Conventional Pawnbroking in Malaysia: Behavioural and Perception Analysis

Operating alongside with the formal financial sector, there has been less recognition about the important role played by informal finance through their complementary role in providing credit to the society. Among informal finance, pawnshop has grown in importance over the past few years especially during the tough economic climate. In Malaysia for instance, the pawnbroking business has served people in need of small instant cash since the 19th century in various forms. Due to the excessive interest rate and other malpractices imposed by the conventional pawnshops, Malaysian government initiated the first Islamic pawnbroking in 1992 which was set up by the Terengganu Islamic Religious and Malay Customs Council namely as the Muassasah Gadaian Islam Terengganu, which has experienced an overwhelming success in terms of expanding in the informal economy. In 2010, there were 329 of institutions offering Islamic pawnbroking operating side by side with 259 licensed conventional pawnshops which shows a remarkable increase in the Islamic pawnbroking. Given this background, the research aim is to explore and analyse the socio-economic consequences of pawnshops crediting in Malaysia through the perceptions of the participants. In doing so, this study will examine the factors determining people’s preferences for pawnshop and also exploring the perceptions and opinions of the customers and the participating pawnbrokers in Malaysia on various aspects and consequences of pawnbroking. Importantly, it will analyse specifically the impact of Islamic pawnbroking on the socio-economy of the Malaysian society. In an attempt to fulfill the aims of the research study, first, the questionnaires survey were administered to both customers and pawnbrokers of the conventional and Islamic pawnshops in order to distinguish the processes of lending, factors determining pawnshops’ selection, and also the perceptions of Malaysian customers and pawnbrokers regarding the role of pawnshop institution in social development hence in economic development related issues. Second, a semi-structured interview were subsequently conducted with the leading individuals of the Islamic pawnbrokers in order to develop in-depth ideas and understanding about the underlying principle of Islamic pawnbroking and other issues related. Furthermore, a SWOT analysis is employed to analyse the prospect of Islamic pawnbroking in future with possible recommendations that could be considered by the government, pawnbrokers, and the customers as well. The findings from the surveys analysis demonstrate that the customers of Islamic pawnshops attest the positive role of pawnshop in both economic and social aspects of their lives especially in the case of low-income groups as compared to the conventional pawnshops. On the other hand, the results from the pawnbrokers’ analysis revealed that Islamic pawnbrokers demonstrated a promising prospect of the pawnshops’ business as compared to the conventional pawnbrokers as the latter operates with profit maximization and neglect the social welfare of the customer. Importantly, while the findings of the study renders valuable information in terms of behavioural dimension and customer preferences in pawnbroking, the findings are also useful for the businesses and government in considering the future development related to ar-rahn shops

The Adoption of Ar-Rahnu and Financial Wellbeing of Microentrepreneurs in Malaysia

There is an urgent call for a potential justification on how and to what extent customers (microentrepreneurs) of Ar-Rahnu institutions in Malaysia are successfully driven their living standards from B10 (hardcore poverty) to B40 (low income). This study classified Ar-Rahnu’s adoption factors into three categories, namely, Shari’ah governance, uniqueness of Ar-Rahnu, and efficiency. 150 questionnaires were distributed to micro-entrepreneurs that used Ar-Rahnu and analysed using SmartPLS 3.0. Based on the results, it shows that Shari’ah governance has a low correlation and insignificant relationship towards Ar-Rahnu adoption. Stated differently, it means that customers find Shari’ah-compliance requirements not as important and it does not get in their way of getting instant cash from Ar-Rahnu. The other two constructs, namely as uniqueness and efficiency, have positive relationships with Ar-Rahnu adoption. It shows a significant and positive relationship with the Ar- Rahnu financing output. Unlike previous studies within the body of knowledge that mainly focuses on the adoption factors of Ar-Rahnu, this study went a step further by addressing the after-effect or impact of Ar-Rahnu adoption towards customers’ wellbeing, especially in terms of financial wellbeing and have found positive results

Analysing ar-rahnu in the context of informal credit market theory: Evidence from women micro-entrepreneurs in Malaysia

Purpose - This study aims to offer a new area of discourse by investigating the factors determining the usage of the Islamic non-bank financing product ar-rahnu (Islamic pawnbroking) among women micro-entrepreneurs in Malaysia within the framework of the informal credit market theory. Design/methodology/approach - The study is based on primary data obtained by using self-administered questionnaires distributed in three states in Malaysia: Kedah, Kelantan and Terengganu. The questionnaires were distributed to a total of 750 participants, with each state contributing 250 respondents. Total number of respondents valid for data analysis was however 600. Findings - Based on descriptive and inferential statistics by using the IBM statistical package for the social sciences and structural equation modelling analysis of moment structures, the results show that the main factor influencing women micro-entrepreneurs to use ar-rahnu is the service charge. Research limitations/implications - This study only covers three states in Malaysia and is limited to examining the use of ar-rahnu by women micro-entrepreneurs in those states. Practical implications - As micro-entrepreneur s often face constraints to obtaining financial access in the formal credit market, ar-rahnu provides an alternative mode of obtaining business financing to female micro-entrepreneurs, so they can sustain their operations and even expand their businesses. The significance of such factors like service fee, as revealed in this study, indicates that managers should focus on this element when offering Islamic financial products, especially to women micro-entrepreneurs. Originality/value - The informal credit market theory is frequently used in conventional studies. This paper adds Sharīʿah compliance in the context of this theory as a new area to be considered when discussing Islamic financial products

Availability of literature on social entreprenureship for sustainable wealth creation in internet

Social entrepreneurship has been the key discussed issue for the last few decades. This paper examines relative availability of materials related to social entreprenureship for sustainable wealth creation in order to develop hands-on, professional, ethical, which is promoted by the various organizations around the world. The main objective of this study was to examine the relative frequency of social entreprenureship and sustainable wealth creation by the organizations and other related concepts that are available in the Internet search engines. The study attempted to assess the availability of materials on social entreprenureship for sustainable wealth creation on the Internet. The Internet was accessed on 03 April 2012 from 11:05 a.m. – 13:05 p.m.; 2.30 p.m. – 4:30 pm. Duration: 240 minutes, [Gombak Time] and 04 April 2012 from 9:30 a.m. – 11:00 a.m.; 11:30 p.m. – 1:00 p.m. Duration: 180 minutes [Hulu Langat Time]. Ratios are expected to reflect more statistically meaningful indices. The study is very significant for theoretical development of social entreprenureship in sustainable wealth creation for companies in Malaysia. The Internet search engine provides instant information on social entreprenureship for sustainable wealth creation that can developed further