UITM CAWANGAN SELANGOR, KAMPUS PUNCAK ALAM

PRINCPLES AND PRACTICES OF AR-RAHNU

(ISB511)

GROUP ASSIGNMENT: ROLE AS ACONSULTANT

(COMPARATIVE STUDY OF RAHNU OPERATORS IN MALAYSIA)

PREPARED BY:
BIL MEMBER’S NAME MATRIC NO
2022930893
1. ALVIN AZZIEROL BIN ROS
2022498294
2. FARAH ZULAIKHA BINTI ABDUL HADI
2020498682
3. FATIN NUR ATIKAH BINTI IKHSAN
2020813532
4. NOR SUHADA BINTI ARIFIN
SARA NUR ALYA BINTI SUHAIZIR 2021477346
5.
MAZLAN

PREPARED FOR:
SIR HEIZAL HEZRY BIN OMAR

DATE OF SUBMISSION:
22nd DECEMBER 2022
ACKNOWLEDGEMENT

In name of Allah, the Most Gracious and the Most Merciful.

First and foremost, we want to thank and praise God for providing us the strength to
complete our group assignment report. With His help and blessings, we were able to do so.
We never would have gotten through this without His gratitude. We must put in all of our
effort, devotion, and responsibility to finish this group assignment.

Since our group assignment could not have been completed in such a way without the
guidance of our respectful lecturer, Sir Heizal Hezry bin Omar, we would want to express our
gratitude to him. He constantly offers encouragement and direction on how to do this
assignment so that we can get successful outcomes. He also gave me a lot of motivation to
work on this project. We want to convey my gratefulness to him for teaching me about this
subject.

Finally, we want to appreciate Universiti Teknologi Mara (UiTM), Puncak Alam

branch, for giving me the chance to complete this group assignment. Our deepest gratitude
also to all of our friends, family members for their encouragement to complete this
assignment. It would not be possible to complete this assignment without the support from
them.

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 TABLE OF CONTENTS

ACKNOWLEDGEMENT ..................................................................................................... 2
1.0 INTRODUCTION ...................................................................................................... 4
2.0 DEFINITION OF AR-RAHNU .................................................................................. 6
3.0 MAIN AR-RAHNU OPERATORS IN MALAYSIA .................................................. 7
3.1 Ar-Rahnu Bank Islam (Bank Islam Personal Financing-i)..................................... 7
3.2 Ar-Rahnu Bank Rakyat (Bank Rakyat Pawn Broking-i) ....................................... 7
3.3 Ar-Rahnu Bank Muamalat (Islamic Pawnbroking Muamalat Ar-Rahnu) ............ 7
3.4 Ar-Rahnu RHB Islamic Bank (Ar-Rahnu Facility-i) .............................................. 8
3.5 Ar-Rahnu Coop Bank Pertama ............................................................................... 8
3.6 Ar-Rahnu Agro Bank (Agro Madani) ..................................................................... 8
3.7 Ar-Rahnu TEKUN Niaga ......................................................................................... 8
3.8 Pos Malaysia Berhad ................................................................................................ 9
4.0 ASPECTS OF AR-RAHNU OPERATORS .............................................................. 10
4.1 Ar-Rahnu Bank Islam (Bank Islam Personal Financing-i)................................... 10
4.2 Ar-Rahnu Bank Rakyat (Bank Rakyat Pawn Broking-i) ..................................... 10
4.3 Ar-Rahnu Bank Muamalat (Islamic Pawnbroking Muamalat Ar-Rahnu) .......... 11
4.4 Ar-Rahnu RHB Islamic Bank (Ar-Rahnu Facility-i) ............................................ 12
4.5 Ar-Rahnu Coop Bank Pertama ............................................................................. 13
4.6 Ar-Rahnu Agro Bank (Agro Madani) ................................................................... 13
4.7 Ar-Rahnu TEKUN Niaga ....................................................................................... 14
4.8 Pos Malaysia Berhad .............................................................................................. 15
5.0 PROPOSE THE BEST OPERATOR ........................................................................ 16
6.0 CALCULATION...................................................................................................... 18
7.0 CONCLUSION ........................................................................................................ 22
REFERENCES ................................................................................................................... 23

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1.0 INTRODUCTION

Ar-Rahnu, also known as Ar-Rahn, is Islamic pawn broking for short-term

collateralized borrowing. The development of Ar-Rahnu in Malaysia provides an alternative
pawn broking service for borrowers, which is in accordance to Shariah principles. pawn
broking is a form of secured money lending provided by pawn shops that representing the
simplest and fastest source of short-term cash borrowings. Prior to its introduction, a vast
majority of Muslims in Malaysia and around the world had limited alternatives for low-cost
interest-free cash advances. Presently, the situation has improved with the introduction of a
pawn broking system based on the Maqasid al-Shariah, known as Ar-Rahnu which is a source
of interest-free microcredit. The dual existence of conventional and Islamic pawn broking
services has increased the level of competition in this industry, giving clients a greater variety
of choices in obtaining faster and simpler access to funding as opposed to conventional
sources of funds from banks and other financial institutions. The word Ar-Rahn, in its most
literal sense, means a pledge or security for a loan. Under the Ar-Rahnu concept the borrower
or Ar-Rahin is required to pledge or produce redeemable collateral or Ar-Rahnu in the form
of gold or silver as an instrument of guarantee that the loan will be repaid (collateral
redeemed) at the maturity of agreement. If the borrowed sum is not repaid at maturity, then
the lender (Al- Murtahin) has the right to sell the collateral to recover the loan.

Looking back at the history background of Rahnu system in Malaysia, this system has
actually been established since the immigration of Hakka Chinese trader to Malaya and
continually growing until today. Rahnu operators were actively contributing to the Malaysia
market as a lender of last resort to borrow money and less stringent as compared to borrow
fund from banking institutions as among states which have the most conventional pawn
broking shops are Perak, Selangor, Johor, Kedah and Penang.

In Malaysia, Ar-Rahnu is a relatively new micro credit instrument. Only gold and
jewelry made of gold can be pawned. It is available to both locals and foreigners, Muslims
and Non-Muslims alike, Loan tenures range from 1-6 months. Borrowers have a choice either
to repay either via lump sum or by monthly instalments. Generally, the margin of finance is
from a minimum of RM100 up to 60-70% of the value of the gold and this system is free
from any riba and gharar element. Borrowers only need pay the principal plus a safekeeping
fee as agreed in the agreement during the maturity date. To give an instance, Ar-Rahnu Bank

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Islam offers individual aggregate financing up to RM250, 000 with a competitive annual
effective profit rate.

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2.0 DEFINITION OF AR-RAHNU
Rahn is an Arabic noun derived from the word Rahana which means either constancy
and continuity, or holding and binding. Rahn which is also termed as pawning mortgage,
collateral, lien, and pledge refers to taking a property as a security against a debt, whereby the
secured property can be utilized to repay the debt in the case on non-payment. Rahn means to
detention a thing. Legally, it is the detention of a corporeal property on account of a claim
such as a debt which may be satisfied out of that property. Rahn is a charitable contract as it
does not require any financial obligation on the part of Murtahin (creditor) when the Rahin
(debtor) gives the pawned object. Ar-Rahnu defined in the Islamic jurisprudence as
possessions offered as security for a debt so that the debt will be taken from it in case the
debtor failed to pay back the due money. Paw broking system besed on the Maqasid al-
Shariah, known as Ar-Rahnu which is a source of interest-free microcredit.

Ar-Rahnu, also renowned as Ar-Rahn, is an Islamic pawnbroker that specialises in

short-term collateralized borrowed money. The innovation of Ar Rahnu in Malaysia does
provide applicants with an unconventional pawnbroking facility that adheres to Shari'ah
principles. Ar Rahnu is based on the following Islamic ideas which are Qardhul Hasan - the
borrower must pay only the money borrowed, Ar Rahnu and Al-Wadi'ah - the borrower must
place a valued property as collateral to obtain a loan and guarantee reimbursement (similar to
a mortgage housing loan), and Al-Ujrah - the borrower may charge extra for safe custody of
the pawned goods.

Ar-Rahnu is a comparatively recent microfinance services tool in Malaysia. Just gold

and gold jewellery can be pawned. Loan terms range from 1 to 6 months and thus are
accessible including both domestic and foreign tourists, Muslims and non-Muslims. Lenders
can choose to reimburse in a lump sum or in repayments. In particular, the financial services
profit ranges from RM100 to 60-70% of the gold's value. If the lender is unable to pay back
the loan, extensions of up to three months may be conferred. If the lenders remain unable to
pay back the loan, the pawned item will be put up for auction off, with any surplus brought
back to the lender less than the remaining balance and charges. Ar Rahnu is devoid of all riba
and gharar elements. Lenders must only reimburse the principal and as well as a safe custody
fee accepted upon during the maturity date. Furthermore, there are many operators of Ar-
Rahnu in Malaysia such as Bank Islam, Bank Rakyat, Bank Muamalat, RHB Islamic Bank,
Coop Bank Pertama, Agro Bank, TEKUN, Pos Malaysia Berhad.

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3.0 MAIN AR-RAHNU OPERATORS IN MALAYSIA

3.1 Ar-Rahnu Bank Islam (Bank Islam Personal Financing-i)

Based on the Bank Islam’s product disclosure sheet, Ar-Rahnu is defined as a short-
term loan product where a customer will pledge assets such as gold or other accepted
securities as collateral for the loan given. Bank Islam Personal Financing-i is a secured or
unsecured term loan for personal financial requirements that is measured on a floating rate.
Tawarruq, a Shariah principle, is used in this financing. A Tawarruq is made up of two
contracts which are one for sale and one for purchase. The first requires a seller selling an
asset to a buyer on a deferred payment basis. Following that, the first sale's buyer will sell the
same asset to a third party for cash and on the spot.

3.2 Ar-Rahnu Bank Rakyat (Bank Rakyat Pawn Broking-i)

This product provides financing by pawning clients' gold jewelry or gold items
("Marhun"). Marhun of 18 to 24 karat quality is approved, subject to the Bank's terms and
conditions. Marhun in the form of religious statues and/or animated creatures are not
permitted and will be rejected. The financing facility is based on the Shariah principle of
Murabahah (by utilizing Tawarruq practise), in which the bank will buy goods and services
from the resource supplier at market cost, and then sell the good or service to the customer
based on the Murabahah contract at Sale Price (resource cost plus profit) on a deferred basis.
The Bank acts as a purchase agent (representing customers) to purchase such commodities
from the Bank under the Wakalah contract. Following that, the Bank acts as a sales agent for
the customer in order to sell commodities to third parties in cash. Cash collected from third-
party buyers will be credited to the account or given to customers in cash.

3.3 Ar-Rahnu Bank Muamalat (Islamic Pawnbroking Muamalat Ar-Rahnu)

Islamic Pawnbroking (Muamalat Ar-Rahnu) is a pawnbroking scheme based on
Islam. The competent client must apply to the Bank for financing for a jointly agreed amount
by collateralizing an agreed-upon amount of gold or gold item. The client is the legal owner
of the gold items under this product and agrees to pawn the customer's gold items
acknowledged by the Bank as collateral for the financing obtained from the Bank.

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3.4 Ar-Rahnu RHB Islamic Bank (Ar-Rahnu Facility-i)
Ar-Rahnu Facility-i is an Islamic pawnbroker that accepts gold jewelry as a surety
against credit. The bank will make a loan to the client, keep the gold jewelry as collateral, and
charge a fee for safekeeping services. The gold jewelry will be valued at the current market
rate. Nevertheless, the loans will be decided by either a ratio decided by the bank and the
category of gold. All sides have predefined as well as accepted on such safekeeping period
and fees (Bank and Customer). At the end of the period, the loan must be repaid to the bank,
along with any outstanding safekeeping fees, and the gold jewelry must be returned by the
customer. There will not be any interest charged; however, if the loan is not repaid within the
agreed-upon period, the Bank reserves the right to seize and auction off the gold jewelry
pledged as collateral.

3.5 Ar-Rahnu Coop Bank Pertama

Ar-Rahnu earns money by pledging gold. Borrowers are not weighed down as much if
they are incapable of paying back the financing simply because it is secured with gold.
Depending on Shariah Tawarruq principles, Ar-Rahnu Coop Bank Pertama provides
immediate cash financial support up to RM350,000 with a low margin rate and flexible
lending period.

3.6 Ar-Rahnu Agro Bank (Agro Madani)

Agrobank has launched this program specifically for the bank's clients to offer
financial protection in the event of death caused by natural causes or unexpected losses at any
time and from any location in the world. Unexpected losses are financial reward for injuries,
disability, or death entirely caused by violent, unintentional, external, and visible events.
Subject to the exclusions, the tragedy must have been entirely caused by an unfortunate
incident. This is a one-year Group Takaful product with three plan options that provides
coverage under Group Term Takaful (GTT) and Group Personal Accident (GPA).

3.7 Ar-Rahnu TEKUN Niaga

TEKUN Niaga is a Tawarruq based financing facility with two separate sales
contracts. The first contract is one in which TEKUN sells commodities to the entrepreneur at
a predetermined price that includes the financing amount plus profit to be paid on a deferred
payment basis. The second deal is when the business owner decides to sell bought goods and

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services to a third party at a rate similar to the financing amount on a cash basis (conducted
by TEKUN as sales agent). Ar-Rahnu TEKUN is a short-term Sharia compliant mortgage
financing product (Qardh) in which the customer pledges gold products or jewelry according
to the types of gold accepted (refer to Gold Acceptance List) as collateral for the financing
given. This facility is based on the Sharia contract, namely Qardh, Rahn, and Wadiah Yad
Dhamanah, and is managed by Ar-Rahnu TEKUN's Product Department and controlled by
the Sharia Department of TEKUN Nasional.

3.8 Pos Malaysia Berhad

Pos Ar-Rahnu Sdn. Bhd. provides an Islamic pawnbroking scheme called Ar-Rahnu
@ POS, which is in line with its syariah compliance business and offers up to 75% financing.
It did not only target Muslims, but it also decided to offer to all Malaysians and foreigners
with a valid passport. The main goal of this scheme is to help small businesses, low-income
families, and civil servants find sources of easy credit in a quick, simple, and secure
environment. As it expects to be a major player in the short term, it provides everyone with
interest-free financing.

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4.0 ASPECTS OF AR-RAHNU OPERATORS

4.1 Ar-Rahnu Bank Islam (Bank Islam Personal Financing-i)

ASPECTS BANK ISLAM OPERATOR
a. Types of items acceptable for Must be gold or gold jewellery for example bracelet,
pledge necklace, bar and so on as long is gold and wholly owned
by the customer

b. Margin of financing Margin of up to 80% from Pawning Asset Value

c. Financing limit i. Minimum amount is RM100

ii. Maximum amount is RM250,000
d. Safe keeping fees 9.6 % per every RM100 Marhun or appraised value

e. Cumulative financing limit RM250,000

f. Specific terms and condition Individuals aged 18 and above as follows:

i. Malaysian or
i. Permanent resident status; or
iii. Foreigners/ non-permanent residents who have a work
permit
• Must have an Identity Card/ Passport
• Must have a phone number and local address to
contact
• Not a bankrupt

Pledged assets
 Must be in the form of gold/jewellery such as bars,
bracelets, necklaces and so on
 Must be fully owned by the customer

g. Duration of pledge Minimum period: 6 months

Extension period: 3 – 9 months

4.2 Ar-Rahnu Bank Rakyat (Bank Rakyat Pawn Broking-i)

ASPECTS BANK RAKYAT OPERATOR
a. Types of items acceptable for i. Any type of jewellery or gold EXCLUDING
pledge marhun item that in the form of religious statue
and/ or animate beings
ii. Gemstone jewellery
iii. Gold bar, wafer, coin or gold nuggets (MUST
include purchase receipts or certificate of
authenticity)
iv.

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b. Margin of financing Margin of up to 80%

c. Financing limit Ar-Rahnu

i. Minimum RM100
ii. Per day RM10,000
iii. Accumulative RM50,000
Az-Zahab
i. Minimum RM 10,001
ii. Per day/Accumulative RM100,000

d. Safe keeping fees RM0.85 per every RM100 Marhun or appraised value

e. Cumulative financing limit RM50,000

f. Specific terms and condition  All jewellery/gold EXCEPT pawn items in the
form of religious statues or living creatures
 Stone jewellery (that has stones)
 Gold bars, wafers, coins or nuggets with the
CONDITION of having a Purchase Receipt or
Certificate of Authenticity
 Gold items are gifted by the employer to
employees in service with the following conditions:

- Employees submit a Certificate of

Appreciation document
- The quality of gold is between 22 and 24
carats
- Weight does not exceed 300 grams

g. Duration of pledge Minimum period: 6 months

Extension period: Not exceeding 18 months from pawn
date

4.3 Ar-Rahnu Bank Muamalat (Islamic Pawnbroking Muamalat Ar-Rahnu)

ASPECTS BANK MUAMALAT OPERATOR
a. Types of items acceptable for i. Gold/jewellery (without precious stone) of
pledge standards 750, 835, 875, 916, 950 and 999
ii. Accept all types of gold bars/bars/coins/ wafers of
standards 916, 950 and 999 from all goldsmiths,
institutions, authorized distributors except those
blacklisted by Bank Negara Malaysia (BNM)

b. Margin of financing Margin financing of up to 80% of the pledged gold value

c. Financing limit i. Maximum financing amount of RM1,000,000

(RM500,000 for gold jewellery, gold coin, dinar

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 gold bar
ii. RM500,000 for physical Muamalat Gold-i (Perth
Mint) Gold Bar and Muamalat Gold-i account)

d. Safe keeping fees RM0.65 per RM100 value of gold

e. Cumulative financing limit RM1,000,000

f. Specific terms and condition  Open to all Malaysian citizens and Permanent
Residents, aged 18 and above
 Not declared a bankrupt

g. Duration of pledge Minimum period: 6 months

Extension period: 6 months + 3 months + 3 months
(subjected to terms and conditions)

4.4 Ar-Rahnu RHB Islamic Bank (Ar-Rahnu Facility-i)

ASPECTS RHB BANK OPERATOR
a. Types of items acceptable for i. Gold jewellery
pledge ii. The types of gold accepted by the Bank are the
999, 950, 916, 875, 835 and 750

b. Margin of financing Margin up to 75% of the jewellery value to be pledged

c. Financing limit i. Minimum limit of financing for Ar Rahnu is

RM100
ii. Daily limit of RM10,000 per customer per day
iii. Maximum limit for this facility per customer is
RM50,000

d. Safe keeping fees RM0.80 per every RM100 Marhun or appraised value

e. Cumulative financing limit RM50,000

f. Specific terms and condition  Eligibility criteria: Individuals aged 18 to 70 years old
 Type of jewellery: Gold 999, 950, 916, 875, 835, and
750 (without any precious stone)
 Margin: Minimum: RM100 Maximum: 75% of the
current market value of the gold jewellery

 Tenure: 6 months. Extension period will be given for

another 6 months subject to settlement of the
safekeeping fee for the previous 6 months tenure
(“previous tenure”). Customer must pay the

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 safekeeping fees for the previous tenure at least ONE
(1) day before the maturity of the Tenure if the
Customer wishes to request for a loan extension. No
extension will be allowed after the expiry of total 12
months tenure calculated from the first day of
safekeeping
 Payment method: Customer can pay the loan and
safekeeping fee gradually within the 6 months period
or reclaim the gold jewellery by paying lump sum
before or on maturity date

g. Duration of pledge Minimum period: 6 months

Extension period: 6 months (subjected to terms and
conditions)

4.5 Ar-Rahnu Coop Bank Pertama

ASPECTS CIMB BANK OPERATOR
a. Types of items acceptable for i. Solid and hollow gold jewellery from fineness of
pledge 750, 835, 875, 916, 950 and 999
ii. Gold coins / gold wafers / gold pieces with a
certificate of authentication

b. Margin of financing The amount of financing offered is 75% of the Marhun

Value
c. Financing limit i. Maximum Daily Financing Limit is RM50,000.00
ii. Total accumulated financing is up to
RM350,000.00 per customer

d. Safe keeping fees RM0.075 per every RM100 Marhun or appraised value

e. Cumulative financing limit RM50,000

f. Specific terms and condition  Open to all Malaysian citizens and Permanent
Residents, aged 18 and above
 Not declared a bankrupt

g. Duration of pledge Minimum period: 6 months

Extension period: 12 months

4.6 Ar-Rahnu Agro Bank (Agro Madani)

ASPECTS AGRO BANK OPERATOR
a. Types of items acceptable for Accepting gold items as collateral
pledge

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b. Margin of financing Margin up to 75% of the current Market Value of the
collateralized Gold
c. Financing limit i. Minimum Limit per Financing Account: RM100
ii. Maximum Daily Limit per customer: RM100,000
iii. Maximum Financing Aggregate per customer:
RM150,000

d. Safe keeping fees RM0.80 per every RM100 Marhun or appraised value

e. Cumulative financing limit RM150,000

f. Specific terms and condition  Acceptance of Marhun as Collateral to guarantee this

Financing Facility consists of goods gold jewellery,
gold coins ("gold coins") and gold wafers ("gold
wafers") according to quality, characteristics and
grades can be used as Collateral and determined by the
Bank from time to time
 Acceptance of gold coins and gold pieces accepted by
the Bank to guarantee this facility is the issued by
Kijang Emas and Distributors authorized by the Bank
 By applying for a Financing Facility, the Applicant
agrees to pledge Marhun to The Bank to guarantee the
Applicant's indebtedness obligations
 The Bank will carry out an authenticity test gold to
determine the quality and grade of Marhun as a
prerequisite for the approval of the Financing Facility

g. Duration of pledge Minimum period: 6 months

Extension period: 6 months

4.7 Ar-Rahnu TEKUN Niaga

ASPECTS AFFIN BANK OPERATOR
a. Types of items acceptable for Pledge gold products or jewellery based on the types of
pledge gold accepted as collateral for the financing granted

b. Margin of financing Margin up to 75% of the Marhun value

c. Financing limit i. The minimum amount is RM100.00

ii. The maximum mortgage financing for an
individual is up to RM300,000.00

d. Safe keeping fees Storage fee (Ujrah) RM0.75 for each RM100.00 marhun
value
e. Cumulative financing limit RM300,000.00

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f. Specific terms and condition  Aged 18 years and above
 Sane and reasonable
 Malaysian
 Non-citizen (Having supporting documents such as: a
valid and unexpired travel passport, having a valid
visa/permit/pass and having a residential address and
telephone number in Malaysia)
g. Duration of pledge Minimum period: 6 months
Extension period: 6 months + 6 months

4.8 Pos Malaysia Berhad

ASPECTS POS MALAYSIA BERHAD OPERATOR
a. Types of items acceptable for All types of gold jewellery including Public Gold and
pledge Pamp Suisse
b. Margin of financing Margin up to 80% of the jewellery value to be pledged

c. Financing limit Payment limits up to RM20,000 per day and exceeding

RM50,000 per person

d. Safe keeping fees RM0. 80 per every RM100 Marhun or appraised value

e. Cumulative financing limit RM50,000

f. Specific terms and condition  Gold only

 Malaysian
 Aged 18 years and above
 Additional loans can be made if the mortgagor does
not take the maximum value of the mortgage allowed
which is RM100,000.00
 The mortgagor has to pay the wages charged for the
mortgage made before
 Representatives are not allowed to make additional
loans

g. Duration of pledge Minimum period: 6 months

Extension period: 3 months + 3 months

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5.0 PROPOSE THE BEST OPERATOR

Based on the research and findings on various outlet of bank operators that have Ar-
Rahnu services in Malaysia, we can conclude that Bank Rakyat is the preferred Ar-Rahnu
operator to use. This is because since the specific terms and conditions that provided by the
bank itself is suitable for the client. This is because based of terms and conditions that being
set by the bank itself is quite open for any person such as Muslim and interesting part is the
non-Muslim also can use this Ar-Rahnu operator. Not to forget that, the non-Malaysian such
as permanent resident or nonresident that have working permit also can apply to use this Ar-
Rahnu operator to pledge their jewelries or their own gold on this Ar-Rahnu operators. But,
the important part to ensure application approved to apply thisAar-Rahnu operators is the
applicants must be declared not bankrupt to apply this Ar-Rahnu operators.

Other aspects that make Ar-Rahnu Bank Rakyat is preferred Ar-Rahnu operators for
our clients is the type of items acceptable for pledge. For type of items that can be acceptable
to be pledge on this Ar-Rahnu operators is gold or gold jewelry. One of the examples is
bracelet, necklace, bar and etc. that related to the gold or gold jewelry. Since the clients want
to pledge the gold bracelet, so the items might be approved by the Ar-Rahnu operators to be
pledge since it match with terms and conditions that make by the Ar-Rahnu operators itself.
Type of gold that approved to be pledge in this Ar-Rahnu operators is 999 (24 carats), 950
(23 carats), 916 (22 carats), 875 (21 carats), 835 (20 carats), and also 750 (18 carats). Based
on terms and conditions on type of items that acceptable for pledge the clients will not face
any problem to pledge the gold bracelet.

Another characteristics and policies that make Ar-Rahnu Bank Rakyat is preferred
Ar-Rahnu operators for our clients is the margin of financing that charged. Compared to the
other bank operators, Bank Islam charged quite high which is 80% compared to other bank
operators which commonly charged 75% of the value of the mortgaged asset. So, compared
to the other bank operators, this Ar-Rahnu operators slightly give benefit to the users. With
that the clients will get slightly higher amount of total profit based on the duration of the
pledge itself.

Another aspects and terms and condition that make Ar-Rahnu Bank Rakyat is the
preferred Ar-Rahnu operators for our clients is the financing limit that charged to the
customer. This is because with minimum value of Rm 100 until Rm 30 000 is the amount that
imposed to their customer is suitable for our clients. So that means the gold or gold jewelries

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that owned by the customers that worth RM 100 until RM 30 000 can be pledged to their Ar-
Rahnu operators. So, with that the client’s application to pledged the gold bracelet that worth
RM 30 000 on this Ar-Rahnu operators will ends up in a success transaction because the
terms and condition were quite suitable with the condition of the clients itself.

Another aspects and terms and condition that make Ar-Rahnu Bank Rakyat is the
preferred Ar-Rahnu operators for our clients is the feedback of the customer itself towards
this Ar-Rahnu operators. This is because mostly majority of the respondents of the customer
of this Ar-Rahnu operators is highly satisfied with the services that provided by Ar-Rahnu
operators itself. This is because this Ar-Rahnu operators offered conducive places to ensure
the customers feel pleasant with the environment that provided by the Ar-Rahnu operators.
Other major causes that make customer highly satisfied with this Ar-Rahnu operators is the
customer service that provided by the operators itself. This is because majority of the
respondents feel satisfied with the customer service because the treatment was received from
the staff were really impressive and the customers really guided very well about the terms
and policy of the Ar-Rahnu.

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6.0 CALCULATION

As a start, we should use her RM 30,000 worth of gold bracelet as a basis. We have to
calculate the cost involved and demonstrate which particular Rahnu operators would give her
the best possible offer she can get if she is going to pledge that RM 30,000 bracelet.

Marhun Value (MV) = RM 30,000

TOTAL
LOAN VALUE (LV) SAFEKEEPING VALUE (SV) PAYBACK
(TP)
Ar-Rahnu LV = MV x LM SV = MV x MR x D TP = LV +
Bank Islam = RM 30,000 x = RM 30,000 x 9.6% x SV
(Bank Islam 80% 183/365 = RM
Personal = RM24,000 = RM 1,443.95 24,000 +
Financing-i) RM
(Loan 1,443.95
Margin: 80%) = RM
(Margin Rates 25,443.95
per RM 100
assets value:
9.6% p.a.)
Ar-Rahnu LV = MV x LM SV = MV x MR/100 x D TP = LV +
Bank Rakyat = RM 30,000 x = RM 30,000 x (RM SV
(Bank 80% 0.85/100) x (183/365) = RM
Rakyat Pawn = RM24,000 = RM 127.85 24,000 +
Broking-i) RM 127.85
(Loan = RM
Margin: 80%) 24,127.85
(Margin Rates
per RM 100
assets value:
RM 0.85)

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 Ar-Rahnu LV = MV x LM SV = MV x MR x D TP = LV +
Bank = RM 30,000 x = RM 30,000 x (RM SV
Muamalat 80% 0.65/100) x 6 = RM
(Islamic = RM24,000 = RM 1,170.00 24,000 +
Pawnbrokin RM
g Muamalat 1,170.00
Ar-Rahnu) = RM
(Loan 25,170.00
Margin: 80%)
(Margin Rates
per RM 100
assets value:
RM 0.65)
Ar-Rahnu LV = MV x LM SV = MV x MR/100 x D TP = LV +
RHB Islamic = RM 30,000 x = RM 30,000 x (RM SV
Bank (Ar- 75% 0.80/100) x 6 months = RM
Rahnu = RM22,500 = RM 1,440 22,500 +
Facility-i) RM 1,440
(Loan = RM
Margin: 75%) 23,940
(Margin Rates
per RM 100
assets value:
RM 0.80)
Ar-Rahnu LV = MV x LM SV = MV x MR/100 x D TP = LV +
Agro Bank = RM 30,000 x = RM 30,000 x (RM SV
(Agro 75% 0.80/100) x 6 months = RM
Madani) = RM22,500 = RM 1,440 22,500 +
(Loan RM 1,440
Margin: 75%) = RM
(Margin Rates 23,940
per RM 100
assets value:

19 | P a g e
 RM 0.80)

Pos Malaysia LV = MV x LM SV = MV x MR/100 x D TP = LV +

Berhad = RM 30,000 x = RM 30,000 x (RM SV
(Loan 80% 0.80/100) x 6 months = RM
Margin: 80%) = RM24,000 = RM 1,440 24,000 +
(Margin Rates RM 1,440
per RM 100 = RM
assets value: 25,440
RM 0.80)
Ar-Rahnu LV = MV x LM RM 1,088 TP = LV +
Coop Bank = RM 30,000 x SV
Pertama 75% *Using the Ar-Rahnu Co-op Bank = RM
(Loan = RM22,500 calculator. 22,500 +
Margin: 75%) RM 1,088
(Margin Rates = RM
per RM 100 23,588
assets value:
0.075%)
Ar-Rahnu LV = MV x LM SV = MV x MR/100 x D x 12 TP = LV +
TEKUN = RM 30,000 x = RM 30,000 x (RM SV
Niaga 75% 0.75/100) x (183/365) x 12 = RM
Loan Margin: = RM22,500 = RM 1,353.70 22,500 +
75%) RM
(Margin Rates 1,353.70
per RM 100 = RM
assets value: 23,853.70
RM 0.75)

As a consultant, I would encourage my client to pledge her RM 30,000 worth of gold

bracelet at Bank Rakyat. It is because Bank Rakyat provides a higher loan value (RM 24,000)
with a lower safekeeping value which is RM 127.85 in order to earn money quickly for
business use. compared to other operators. In addition, the client can choose from a variety of
products through the Ar-Rahnu scheme offered by Bank Rakyat. For instance, they provide

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Pajak Gadai-i Az-Zahab for corporate financing with a loan rate greater than RM350,000 and
Pajak Gadai-i Ar-Rahnu for personal finance also with a loan rate up to RM350,000. Other
than that, they also provide Pajak Gadai-i Ar-Rahnu Genius deals with funding for education.
The amount of the immediate cash loan is up to RM50,000. This Pajak Gadai-I Az-Zahab has
the benefit of a three-year maximum repayment duration. In order to lessen the burden of
loan repayment by the clients to the bank, it is the bank’s social duty to the community as a
member of the business sector. On the other hand, if we want to compare with other
operators, for example, Pakej Perniagaan Ar-Rahnu by Bank Islam offered a loan rate of RM
500,000 maximum with an 18-month repayment duration. Besides, Ar-Rahnu Biz by Tekun
Nasional offered a loan rate of RM 300,000 maximum also with an 18-month maximum
repayment duration. As we can see, the Ar-Rahnu scheme provided by Bank Rakyat is the
best I can recommend my client to choose because it can ease her burden in the repayment
process.

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7.0 CONCLUSION

As a consultant I believe that in order to move forward for further growth of Ar-
Rahnu operators in Malaysia, it is necessary for the operators to take aggressive measures
especially in view of creating awareness among prospective customers. To minimize the
borrowing rate of Malaysians from money lenders called loan sharks or Ah Long in Malaysia
that provide ready cash advances to small income individuals, petty traders as well as for
illicit purposes, their loans often come at very high interest rates, some as high as 20% per
month on top of other charges such as agreement fees and stamp duties. The operators
(banks) should take initiatives to disseminate the information about its operations, principles,
and schemes through media, brochures and online FAQs. Malaysia has great opportunities
and expertise to develop Islamic pawn broking business in this region. The government
should encourage those who are in dire need for fast cash to approach Islamic pawn brokers
rather than resort to illegal money lenders who charge exorbitant interest rates and unfair
recovery practices. More Islamic pawnshops should be opened in rural and over populated
areas to avoid monopolization and control by a few pawn brokers. For that reason, it is
recommended that more variables ought to be incorporated and an advance model is to be
produced in the future to precisely anticipate the clients’ expectation to utilize Ar-Rahnu in
Malaysia.

The Islamic pawn broking in Malaysia certainly needs one form of comprehensive
regulatory mechanism in the form of legislation in order to ensure the stability, consistency,
effective management and public trust in the pawn broking industry. Nevertheless, there are
four (4) main regulators involved in this industry, each of these regulators shall provide its
respective guidelines and legal provisions in relation to the establishment of a legal
framework in the pawn broking industry in Malaysia. The consumers need to be aware of
their rights at all times and understand how this type of transaction works as well. This is to
avoid any conflict or problems between the borrower and lender which may occur in future.
By making a reference to the case Sri Ram a/l Muniandy lwn Bank Pertanian Malaysia
Berhad, the court emphasised that all potential customers who intend to subscribe to the Ar-
Rahnu products to have a clear comprehension and idea on the nature of the products prior to
agreeing to execute any Ar-Rahnu agreement or documentation.

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REFERENCES

Admin. (22 Dec, 2022). Ar Rahnu, Islamic Pawn Broking (Tawarruq). Retrieved from Bank
Muamalat : [Link]
islamic-pawn-broking-tawarruq/

Admin. (2022). Ar-Rahnu. Retrieved from Coopbank Pertama:

[Link]

Admin. (2022). Compare Personal Loans by Bank Islam Malaysia. Retrieved from Compare

Hero: [Link]

Admin. (2022). Pawn Broking-i. Retrieved from Bank Rakyat:

[Link]

Admin. (n.d.). Product Disclosure Sheet. RHB Islamic Bank. Retrieved from
[Link]
services/personal/islamic/ar-rahnu-i/[Link]

Admin. (n.d.). Lembaran Maklumat Produk. Agro Bank. Retrieved from

[Link]
[Link]

Admin. (n.d.). Lembaran Maklumat Produk. Bank Islam. Retrieved from

[Link]
[Link]

Admin. (n.d.). Produk Peribadi > Pembiayaan-I > Pajak Gadai-i. Bank Rakyat. Retrieved
from
[Link]

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Admin. (n.d.). Ar-Rahnu Marketing Brochures. Bank Muamalat. Retrieved from
[Link]
[Link]

Admin. (n.d.). AR-RAHNU TEKUN. Tekun Nasional. Retrieved from

[Link]

Admin. (n.d.). AR-RAHNU. Co-op Bank Pertma. Retrieved from

[Link]

Loanstreet, T. (19 November, 2019). Ar Rahnu - Islamic Pawnbroking in Malaysia. Retrieved

from

[Link]

S. M. Salim Sharif. (2021, Sept 15). Ar Rahnu Di Pejabat Pos Malaysia. Nota Poket
[Link]. Retrieved from
[Link]

TEKUN. (09 June, 2022). PRODUCT FEATURES. Retrieved from TEKUN NASIONAL:
[Link]

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