The implementation of Ar Rahnu practices as a micro financing facility : a study of banking and non-banking institution
Ar-Rahnu, or Islamic pawn broking, is an alternative to conventional pawn broking based on Islamic principles. It provides a form of micro financing that adheres to ethical conduct, ensuring that no interest is charged. Through Ar Rahnu, individuals can access quick liquidity by pledging collateral....
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| Format: | Thesis |
| Language: | English English |
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2025
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| Online Access: | https://etd.uum.edu.my/11783/1/depositpermission.pdf https://etd.uum.edu.my/11783/2/s833545_01.pdf |
| Summary: | Ar-Rahnu, or Islamic pawn broking, is an alternative to conventional pawn broking based on Islamic principles. It provides a form of micro financing that adheres to ethical conduct, ensuring that no interest is charged. Through Ar Rahnu, individuals can access quick liquidity by pledging collateral. In a modern economy, there is no doubt that banks are a key contributor to the financial and economic prosperity. People, communities, and organizations depend on banks for the fulfillment of their financial resources and financial needs. Now, Ar Rahnu has been recognized and integrated to complement Islamic financial product offered by banking institutions. Simply put, Ar Rahnu is offered by banking institutions, in addition to Ar Rahnu institutions. Commonly, people access financing from banks. However, when it comes to accessing micro financing through Ar Rahnu, people tend to choose Ar Rahnu institutions over banks, even though the banks also offer Ar Rahnu services. This paper aims to critically review the current Ar Rahnu practices, the challenges faced by Ar Rahnu, and the solutions to Ar Rahnu challenges provided by both banking and non-banking institutions in the northern states of Perlis and Kedah. The study employed a qualitative approach by conducting in-depth interviews, and was restricted to a sample of only four different Ar-Rahnu providers. The data were analyzed using thematic analysis. The results show that the tawarruq concept is currently practiced and utilized among Ar Rahnu providers. All informants interviewed revealed different challenges, such as gold price volatility, fake gold pledged, and competition. Based on the results, several recommendations are made regarding the best practices for sustaining Ar Rahnu in the future. |
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