Academic journal article Academy of Entrepreneurship Journal

Factors Influence the Acceptance of Al-Rahn among Entrepreneurs

Academic journal article Academy of Entrepreneurship Journal

Factors Influence the Acceptance of Al-Rahn among Entrepreneurs

Article excerpt

INTRODUCTION

The main purpose of al-rahn is to help low-income earners who are not eligible to get funding from financial institutions. Another purpose is to help small entrepreneurs to obtain funding for entrepreneurship (Rasmin & Markom, 2014). Although the goal of al-rahn's establishment is to provide capital funding for small entrepreneurship activities, but there is still lack of knowledge and awareness regarding al-rahn among small entrepreneurs.

Al-rahn is more commonly known for consumerism activities (personal purposes such as daily necessities, paying debts, medical, education, traveling or buying vehicles), rather than productive activities such as entrepreneurial activities (Sulaiman et al., 2014 & Azman et al., 2016). Thus, it should be asked whether the low response comes from issues related to the acceptance of al-rahn? What are the real factors that determine the acceptance of small entrepreneurs towards al-rahn? Therefore, the purpose of this article is to analyze the intrinsic factors affecting al-rahn's acceptance by Muslim small entrepreneurs in Kelantan. The discussions in this article include introduction, literature review, research methodology, discussions and conclusions.

LITERATURE REVIEW

The low response to al-rahn is probably related to issues of public awareness and understanding. It could be due to the lack of awareness and understanding of the community towards al-rahn (Sam et al., 2010). This shows that conventional mortgage is still a consumer choice rather than al-rahn due to misunderstanding of al-rahn. Similarly, Hsni (2009) considered that the lack of knowledge of local community regarding al-rahn has become one of the factors that hinder the development of al-rahn. Therefore, Amin (2011) and Marimuthu et al., (2009) emphasize the importance of promotion factor in promoting the understanding and knowledge of the people towards al-rahn.

Issues related to halal and haram, such as riba and sharia compliance, are often the issues that raise the misconceptions of people towards al-rahn (Azman et al., 2016). A study by Hashim et al., (2013) considered that religious viewpoints cannot influence the society to accept al-rahn due to various religions background. According to Hsni (2009), the main factor that contributes to the use of al-rahn among Muslim users is caused by their awareness on the implications of usury. In addition, Amin et al., (2007) and Bhatt & Sinnakkannu (2008) argued that the sharia-compliant al-rahn operations could attract the Muslim community to pledge valuable items for cash.

This article finds that previous studies also focus on discussing the extrinsic factors (external stimuli) rather than intrinsic factors (internal stimuli). Hence, this article intends to provide new research scope when it comes to highlighting the influence of intrinsic factors. The intrinsic factor, according to Hendriyanto (2012), is derived from inner-self, while extrinsic motivation comes from outer-self. However, this article attempts to see the influence of intrinsic factors that have a direct relationship with religion such as factors of benefit return and preferential use that have been highlighted by Adnan (2010).

From this scenario, there is a question on the acceptance of small entrepreneurs towards al-rahn. What are the real factors that determine the acceptance of small entrepreneurs towards al-rahn? Is it possibly due to intrinsic factors (individual internal stimulus which include halal and haram considerations, understanding, benefit returns and preferential use) Hence, a survey should be conducted on small entrepreneurs to know their acceptance of al-rahn which will influence their tendency to deal with al-rahn. This study has been able to fill in the gap in the literatures.

RESEARCH METHODOLOGY

This article applies design of descriptive study using inferential statistical analysis (multiple regression). Quantitative method were applied in this study. …

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