Academic journal article Asian Social Science

A Demographic Analysis on Customer Acceptance towards Islamic Pawn Broking in Malaysia

Academic journal article Asian Social Science

A Demographic Analysis on Customer Acceptance towards Islamic Pawn Broking in Malaysia

Article excerpt


This paper attempts to explore the demographic factors towards one of the dominant pawn brokers in Malaysia named Ar-Rahnu that has led the growth of Islamic pawn broking system comprehensively. Specifically, this study examines the demographic elements in capturing the customer acceptance towards Islamic pawn broking offered by Maidam in the state of Terengganu. A total of 330 self-administered questionnaire instrument, were distributed to the customer within the district of Dungun that had received financial assistance at Ar-Rahnu Maidam. The sample was selected through quota samping and further executed by means of convenience technique from the total customer of Ar-Rahnu Maidam Dungun. The result of the investigation demonstrated that out of the eight selected demographic indicators, two of them which are marital status and occupational sector demonstrated that there were significance differences among the group while the remaining six were not significant. The evidence from the survey is expected to provide a limelight about the importance of Islamic pawn broking in strengthening the industry.

Keywords: Ar-Rahnu, Maidam, pawn broking, demographic profile

1. Introduction

The main idea of the Islamic Pawn brooking set up is to provide the customer the option to obtain cash to fulfil immediate financial needs through personal surety or pledge. With the understanding that Malaysia is known to be one of the popular Islamic banking hub, the government continuously initiate several form of Islamic financial instrument that are believed to be more competitive than the conventional financial instrument. As one of the instrument been initiated by Malaysian Government, the establishment of Islamic Pawn Broking (Ar-Rahnu) was made available to the Muslim public. For those who meet the requirement, it means that they were given a backup financial assistance when needed. But in getting the assistance one need to pay for its services. Thus it is the main objective of Ar Rahnu to help people who face financial difficulties and ensuring them to be free from "riba" (Haron, 1996). For some institutions the amount would be reasonable but for some others it would be much higher. From the view of Islam as a way of life, they need to help others as one of the responsibilities that need to be address collectively.

Under the Syariah principle, by definition of Al-rahnu it possesses a guarantee. The Quran refers to the idea of mortgage as 'mortgage with possession' (rihanun maqbudha). Quran also supports the idea of furnishing a pledge against a debt. It is through the initiative of Ar-Rahnu concept this institution developed its niche area of offering a more flexible and convenience approach of giving financial assistance to the needy. As to the believed whether it is allowable to the Islamic principle, the argument is very straight forward as explained by Khan and Nisar (2004) where any valuable asset can be pledge as collateral for a debt.

The services provided through Ar-Rahnu scheme by MAIDAM is a societal marketing concept, purposely designed for giving alternative to the Muslim especially during their hardship by giving them the debt with collaterals (Mohd & Hashim, 1995). The important of helping the needy especially the poor has long been emphasized in much of Islamic faith. Through the concept of Ar-Rahnu, the institution offers a more flexible and convenience form of credit financing as governed by "Syariah" rules without having the element of interest in the transaction. With the improving of religious belief, there is an increase trend that more Muslim communities are not in favor of using the conventional pawn broking service as it is closely attached with the element of interest or riba that will be imposed in return for disbursement of credit. Thus the main idea of providing Ar-Rahnu as an alternative financial instrument is to ease the life of the needy. This is much better as the scheme offers a reasonable fee charges. …

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