Developing a customers’ oriented Ar-Rahnu (Islamic Pawn Broking) model for cooperatives in microfinancing in Malaysia

Using Ar-Rahnu as a means for a micro credit financing practices is nothing new in Malaysia. At present various Ar-Rahnu providers throughout the country haveserved micro, small and medium enterprises as alternatives to financial institutions. Some entrepreneurs prefer to use the service as they can pawn their gold to get instant cash with less risk. The aim of this study is to develop the best model of Ar-Rahnu services for cooperatives pertaining to Malaysia scenario. Altogether a total of 109 respondents from three Ar-Rahnu’s groups: group 1 (YAPEIM, Bank Rakyat and Agrobank), group 2 (MAIDAM, PKB) and group 3 (Co, Co Franchisee) were approached. The analyses were based on questionnaires obtained from self-administered interviews with the respondents. Based on the findingsan Ar-Rahnu model is developed based on variables such as operations, gold type, conditions and charges, internal controls and security to see the performance of the Ar-Rahnu based on criteria established market reach, the number of branches, modus operandi and the size of the capital. The offered model is expected to satisfy both providers and entrepreneurs and other customers who use this service.