A Study On Islamic Pawn Broking Awareness and Factor That Influencing The Scheme in SP

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INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2
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ICBER 2011) PROCEEDING
1459

A STUDY ON ISLAMIC PAWN BROKING AWARENESS
AND FACTORS INFLUENCING THE SCHEME IN SUNGAI PETANI, KEDAH

Santhi Appannan and Gaithry Doris
Faculty of Business Management
AIMST University
Email: santhi_appannan@yahoo.com
gaithry_doris@yahoo.com

ABSTRACT

This paper aims to identify the level of public awareness towards Islamic pawn broking Ar Rahnu Scheme and the
main factors that influence the public to pursue Islamic pawn broking in Sungai Petani, Kedah. Questionnaires were
used to collect the data and were analyzed via cross tabulation, mean score analysis and multiple regressions. The
findings indicate Sungai Petanis community is aware of the term Islamic pawn broking but the awareness is at a
different level among the races. The majority of Chinese and Malays were aware of this scheme. However the Indians
were not aware of the scheme. The findings also indicate that the majority of Islamic pawn broking consumers are in
a lower income group, mainly from the private sector with an income of RM1000 and below. It is also found that the
main factor influencing public to pursue Islamic pawn broking was its cheap cost of loan. The other factors that were
tested were confidential, customer service, locality and income level.
Keywords: Ar Rahnu Scheme, public awareness, cost of loan, confidential, customer service, locality and income
level.

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1. INTRODUCTION
The first Islamic pawn broking institution, Muassasah Gadaian Islam Terengganu (MGIT), was set up by the
Terengganu State Islamic Affairs and Malay Customs in January 1992.On 21 August 1993, the Minister of Finance
announced the introduction of a scheme, known as Ar-Rahnu scheme through the collaboration of three institutions
namely Bank Negara Malaysia (supply the expertise in financing field), Islamic Economic Development Foundation
Malaysia or YPEIM as the funder, and Bank Kerjasama Rakyat Malaysia Berhad which supply the infrastructures and
managing the transaction. Later, on 27 October 1993 the first phase of Ar-Rahnu scheme was launched at six
branches of Bank Kerjasama Rakyat Malaysia Berhad. Now, the Ar-Rahnu scheme is available at all Bank Kerjasama
Rakyat Malaysia Berhad branches throughout Malaysia. YPEIM had also taken the initiative to launch 17 counters of
Ar-Rahnu scheme through YPEIM co-operatives. Later in 1997, the Islamic pawn broking commenced in Bank Islam
followed by EON Bank (August 2002) and Bank Pertanian Malaysia in September 2002.

Generally, the operation for Islamic pawnshop transaction is quite similar with conventional. Only, the contract
(aqad) in the Islamic pawnshop is different from the conventional pawnshop. The loan granted is based on four
concepts, i.e. al-qardhul hassan (loan without interest), al-wadiah yad dhammanah (keeping valuable goods by
guarantee), al-ujrah (storage fees) and ar-rahn (collateral). The storage fee is based on the value of gold and not on the
amount of the loan, and charged differently by each Islamic pawn broker as in Table 1.

Table 1.0: The safekeeping fees charge in Islamic pawnshops
Safekeeping fee for every RM100.00 of gold value per month
Bank Rakyat Permodalan Kelantan
Berhad
Muassasah Gadaian Islam
Terengganu
RM0.65
(RM100.00-RM1,000.00)
RM 0.60
RM1.00 - RM 400.00
No Charge
(RM 1,000 and below)
RM0.75 (RM1,001.00 -
RM10,000,00)
RM 0.85
RM 401- RM2,000
RM0.50 (RM 1,001 sehingga RM
3,000)
RM 0.95
(RM 2001 and above
RM0.60 (RM 3,001 sehingga RM
5,000)
RM 0.70(RM 5,001 sehingga RM
10,000)
RM 0.75 (RM 10,001 ke atas)

In the Islamic-based pawnshop, gold is the only permitted item. Gold have several advantages as collateral over
other items (Skully, M.S, 2005). Firstly, gold is easily resold and so there is potentially auctioning the collateral
should the borrower not redeem the pledge. Secondly, golds purity can be easily determined and so the risk of
mispricing the collateral can be minimized. Thirdly, gold chains and rings typically require only a small flat envelop
for storage and so can be kept securely in the bank safe at little, if any, additional cost. Finally, women often receive
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gold chains and bracelets as wedding gifts and generally retain personal ownership of these items especially in
Malaysia. This practice is common across income levels and so provides a rich base of potential customers.

1.1Problem Statement

Lack of knowledge about mortgage tax system caused many community members, especially those who
desperately need money, deceived and damage hundreds of dollars. Despite the popularity of store mortgage tax as
'bank' to get money immediately had monopolized or illegal moneylender along, but it can survive and function
continue to be required until now. In fact, there is no exaggeration to claim mortgage tax shops as a temporary
rescue. Although Islamic mortgage tax scheme, Ar-Rahnu introduced in recent years in several leading banks
homeland, but many still choose to obtain service tax mortgage shops on the ground it is easier and faster (Daily
Metro, 2004). Therefore this research is conducted to identify whether public aware of Islamic pawn broking (Ar
Rahnu) scheme.

1.2Research Objectives

1. To identify the level of public awareness towards Islamic pawn broking scheme
2. To identify the factors that influence public to pursue Islamic pawn broking scheme
3. To identify the most important factor that influence people to pursue Islamic pawn broking scheme.

1.3 Research Question

1. What is level of public awareness towards Islamic pawn broking in Sungai Petani, Kedah?
2. What are the factors that influence public to pursue Islamic pawn broking?
3. Which is most important factor that influences public to pursue Islamic pawn broking scheme?

1.4 Significant of the Research

Results from the study findings are expected to provide additional information or knowledge to the general public
about the concept of Islamic pawn broking (Ar-Rahnu) and to take advantages of it. In addition to contributing to the
increase of knowledge, these findings also expected to contribute to the management of Islamic pawn broking (Ar-
Rahnu) to make further research to study the extent of public acceptance of Islamic financial products. Similarly, the
findings of this study can be expected starter so that it can be used to make planning for future to further develop the
Islamic financial system. Besides this research is also useful for the future business people who wanted to intend to
open Islamic based pawn shop.

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2. LITERATURE REVIEW

2.1 Micro Credit Program in Malaysia

Microcredit is the extension of small loans to entrepreneurs too poor to qualify for traditional bank loans. It has
proven an effective and popular measure in the ongoing struggle against poverty, enabling those without access to
lending institutions to borrow at bank rates, and start small business. The key implications of microcredit are in its
name itself: 'micro'. A number of issues come to mind when 'micro' is considered: The small size of the loans made,
small size of savings made, the smaller frequency of loans, shorter repayment periods and amounts, the micro/local
level of activities, the community-based immediacy of microcredit etc. Hence microcredit is not the solution, but is a
menu of options and enablement, that has to be put together, a la carte, based on local conditions and needs.

Microcredit has been used as an 'inducer' in many other community development activities, used as an entry point
in a community organizing programme and as an ingredient in larger education/training exercises (Hari Srinivas,
Coordinator).

2.1.2 Amanah Ikhtiar Malaysia

Amanah Ikhtiar Malaysia (AIM) was established in 1987 and one of the oldest microfinance institution in
Malaysia and also one of the largest Grameen Bank replication in Asia. AIM seems bear out Gibbons word that loan
portfolio equity, as the loans outstanding are a microfinance organizations most important asset. The target group for
AIM is the hardcore poor with household income below two-thirds of the poverty line, with the majority consists of
female borrowers. AIM has adopted best practices of microfinance lending methodology and to a certain extent has
performed within their objectives. AIM adopts group-based lending practices and charges administrative fee of 7% to
12% for its loans. It adopts close monitoring, granting small amount of loans, imposes high frequency repayments
(weekly basis) and compulsory savings of 1% of total loan per week on its borrower. In terms of funding, there are
still limited resources contributed by the savings of borrowers. (Selamah Binti Maamor and Abdul Ghafar Ismail,
2006).

In an impact study conducted in 2005 by AIM to assess the effectiveness of its microcredit schemes, the results
have been quite positive, where out of 1,497 sahabat who were beneficiaries of AIMs schemes for an average of
six years, 90% had succeeded in raising themselves out of the poverty level and 27% are now earning a stable income
of more than RM2,000 a month (SME annual report, 2006).

2.1.3 Bank Pertanian Malaysia

Bank Pertanian Malaysia has been given the responsibility to implement the Economic Stimulus Package in 2003.
One of the stimulus packages is the provision of RM500 million to finance small scale entrepreneurs to provide
working capital to entrepreneurs who undertake all agricultural activities involving production, processing and
distribution. Viable projects and financing is dependent upon project requirements and cash flow as basis of the
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financing. Finally the target group is entrepreneurs at all levels of agricultural activities including part time
entrepreneurs who are government or private sector employees (Selamah Binti Maamor and Abdul Ghafar Ismail,
2006).

In 2003, BPM was directed to allocate RM500 million of funds under the Micro Credit Scheme. The target group
is entrepreneurs at all level of agricultural activities including part time entrepreneurs who are government or private
sector employees. The mechanism employed by BPM to deliver its microfinance facilities is relatively simple. A
client has to complete an application form together with a business proposal. The client does not have to provide any
collateral to support the application (Bank Pertanian Malaysia ).

2.1.4 Co-operatives

The Department Of Co-operative Development was established in July 1992. The department is entrusted with
development and regulatory functions under of the Co-operative Societies Act, 1993 (Act 502) and the Co-operatives
Regulations, 1995. To ensure the co-operative movement plays an effectives role in the socio-economic development
of the country towards an equitable distribution of wealth (Selamah Binti Maamor and Abdul Ghafar Ismail, 2006).
2.1.5 Credit Guarantee Corporation (CGC)

Credit Guarantee Corporation Malaysia Berhad was incorporated in 1972 with Bank Negara and Financial
Institutions as its shareholders. As an agency under the purview of Ministry of Entrepreneur and Co-operative
Development (MECD), CGC acts as the only institution in Malaysia which provides guarantee on loans to Small and
Medium Industries (SMIs). The aim is to assist viable SMIs with inadequate collateral or without collateral or have no
track record to gain the much needed access to financing. Credit Guarantee Corporation has evolved from its primary
role as a credit supplementation institution to a more market-driven role to sustain Malaysian SMIs in the competitive
economy. The role as a Credit Enhancer is revealed in CGCs approach to position itself as the intermediary to
provide access to credit for all Malaysian SMIs (Selamah Binti Maamor and Abdul Ghafar Ismail, 2006). Since its
establishment in 1972, CGC has approved more than 385,000 applications amounting to RM34.5 billion under its
various schemes. In 2006, CGC approved 7,500 loan applications amounting to more than RM3 billion (SME Annual
Report, 2006).

2.1.6 Tabung Ekonomi Kumpulan Usaha Niaga (TEKUN)

TEKUN is specialized in the provision of small loans to micro enterprises of the native groups (Bumiputera).
Similar to AIM, the operation of TEKUN is financed mainly by funding from the Government. TEKUN adopts
simple loans processing without collateral requirement and charges administrative fee of 8% for its loans. Similar to
AIM, TEKUN adopts close monitoring, imposes high frequency repayment (every fortnight) and compulsory savings
(0.5% of loan amount per week) (Azila Abdul Razak, 2004).

TEKUN micro credit scheme per se is unsustainable. For example, in 2004, the non-performing loan of TEKUN
is estimated at RM84, 737,059 (inclusive of interest) or 18.9% of total loans outstanding, involving 41,046 clients or
40.1% of the total borrowers (Roslan Abdul Halim, Faudziah Zainal Abidin, Mohd Saifoul Zamzuri Noor and
Rahimah Majid, 2007).
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2.1.7 Bank Simpanan Nasional (National Saving Bank)

Bank Simpanan Nasional Malaysia was established on 1st December, 1974 under the Act of Parliament 146 -
Laws of Malaysia 1974. Savings mobilised from small savers by Bank Simpanan Nasional (BSN) or National Savings
Bank was launched in June 2003 as part of the Governments Economic Package. As at end-2003, a total of RM415.6
million had been extended under the micro credit scheme, accounting for 17% of total loans outstanding. BSN
received 102,432 loan applications under the scheme, of which 60,364 applications amounting to RM541.8 million
and RM430.8 million were approved and disbursed respectively. The micro credit borrowers were involved mainly in
food stall business, retail trading and business services. Meanwhile, more than 90% of the loans outstanding,
excluding micro credit, was extended to individuals mainly in the form of consumer loans and for purchase of
residential property. (Bank Negara Malaysia)

2.2 History of Islamic Pawnshop

To cater for the demand of non-interest bearing pawn-broking services by the lower income group, a few
Islamic pawn-broking institutions were established in the early 1990s. The first Islamic pawn-broking institution,
Mu'assasah Gadaian Islam Terengganu (MGIT), was set up by the Majlis Agama Islam dan Adat Istiadat Terengganu
in January 1992. In March 1992, Kedai Al-Rahn (KAR), a subsidiary of Permodalan Kelantan Berhad commenced its
operations. On 21 August 1993, the Minister of Finance announced the introduction of a scheme, known as Skim Al-
Rahnu (SAR) through the collaboration of three institutions namely Bank Negara Malaysia, Yayasan Pembangunan
Ekonomi Islam Malaysia and Bank Kerjasama Rakyat Malaysia Berhad. Later, on 27 October 1993 the first phase of
SAR was launched at six branches of Bank Rakyat (Selamah Binti Maamor and Abdul Ghafar Ismail, 2006).

In terms of legislation, the Islamic pawnbroking system is subject to certain laws but no specific acts. For
example, ar-rahnu scheme in Bank Kerjasama Rakyat Malaysia Berhad is subject to three different acts, which are the
Bank Kerjasama Rakyat (M) Berhad Act 1978, the Co-operative Societies Act (1993) and the Development Finance
Institutions Act 2002. In addition, Bank Kerjasama Rakyat Malaysia Berhad has introduced separately the ar-rahnu
manual guidelines(Bank Kerjasama Rakyat (M) Berhad (2000, 2002 dan 2003). Manual Pinjaman Pajakgadai Islam) .
Other relevant acts are the Occupational Safety and Health Act for workers who are exposed to acid for the gold test
and the Weight and Measurement Act, in which the gold weighing device has to be licensed every year (Sehan, M.
A.)

2.3 Level of public awareness towards Islamic pawn broking (Ar Rahnu)

Studies by Mustafa indicates that level of awareness was measured using few variables such as gender, age,
working status, race, education background, income level, number of dependent and type of marketing tools.
According to Mustafa (2006), 73.3 % of respondents aware of Islamic pawn broking and about 26.7% of respondents
were not aware of Islamic pawn broking. Studies by (Mohd Fazli Mohd Sam, Md Nor Hayati Tahir, Noor Khamisah
Abdul Latif, 2010) indicate that level of awareness was measure using variables such as education, and good
advertising such as promotion.
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The study by YPEIM indicates people know the existence of micro-credit scheme of the organizers of the scheme
YPEIM and implementing the scheme. However, given the information has not been a very effective implementation
scheme. YPEIM measure level of aware using variables such as race, income level, marketing tools and working
group (Religion news daily, 2008). The study by (Assoc. Prof. Dr. Zuriah Abdul Rahman, 2007) measure level of
awareness using variables such as race, marketing tools and education background. The study by (Mohamed Ishak Hj
Badarudin Rais, 2007) measure level of awareness using variables such as race, gender, working group and income
level. Hence the variables that are used in this research in order to measure the level of awareness are gender, age,
marketing tools, education background, income level, and working status.

2.3.1 Race

Mustafa (2006) indicate that majority of Malay respondents about 93.3% aware of Islamic pawn broking,
followed by about 3.30% of Chinese respondents aware of Islamic pawn broking and about 3.30% of Indian
respondents aware of Islamic pawn broking. He made a conclusion that majority of Malay respondents aware of
Islamic pawn broking and there was lack of awareness among Chinese and Indian respondents. YPEIM conduct
social behaviour on the use of Ar-Rahnu scheme (Islamic mortgages) involving a total of 1.321 respondents and the
results showed that the largest users of Ar-Rahnu scheme are Malays. But the study also found that the scheme based
on Islamic law began to get attention China and India. If the promotional efforts and explains the differences between
Ar-Rahnu scheme with the scheme of the conventional mortgages made to work, of course they chose this scheme
because the benefits of its own (Religion news daily, 2008)

The Study by Zuriah Abdul Rahman, (2007) indicate that majority, 88.6% of the respondents are aware of the
existence of Islamic financial products in Malaysia, among the respondents who are not aware, comprising of 11.4%
or133 respondents, they are mostly among the non-Muslims and the respondents from Sabah and Sarawak. For race,
in average the Malays reported the highest respondent that represent 78.95 %.Whereas for types of pawnshop, 91.18
% of the Islamic pawnshop customers are Malays, and 4.90 % and 3.92 % are Indian and Chinese respectively
(Mohamed Ishak Hj Badarudin Rais, 2007).

2.3.2 Gender

Level of awareness also was measure using gender. According to Mustafa (2006) about 53.3% of female respondents
aware of Islamic pawn broking and about 46.7% of male respondents indicate aware of Islamic pawn broking.

For the gender variable, 65.26 percent of respondents are female. Based on the value, 54.03 % prefer the Islamic
pawn broking service. On the other hand, from the total number of male respondents, 53.03 % of male customers
prefer the Islamic pawn broking service. In general, the percentage of respondent asking for the Islamic pawn
broking service is 53.68%. (Mohamed Ishak Hj Badarudin Rais, 2007)

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2.3.3 Age

Mustafa (2006) research also indicate that majority of Islamic pawn broking consumers which is about 45.0%
were age between 26 to 35 and all of them aware of Islamic pawn broking. This followed by about 31.7% of
respondents age between 36-45, about 10.0% of respondents age 18-25 and about 8.3% of respondents were age 46-
55 . The remaining respondents which are about 5.0 were fall in age between 55 above. The researcher concluded that
majority of Islamic pawn broking consumers fall in working group.

2.3.4 Working status
Islamic pawn broking consumers consist of those who work in public or private sector, the self-employed as
fortune-house, mechanics, farmers, rubber tapers, fishermen and tailors. (Religion news daily, 2008).The study by
(Mohamed Ishak Hj Badarudin Rais, 2007) 25% of the respondents are housewife, 15.26 percent are government
staff, 24.47 percent worked in the public sectors, 6.32 percent are farmer, 23.95 percent of the respondent involved in
business activities and 5 percent represent the non-productive unit such as the pensioner, unemployed and students.
Furthermore for the Islamic pawnshop customers, the highest distribution are reported for the public sectors employee
that represent 24.02 percent, follows by the government staff and housewife that represent 22.06 percent respectively
and for respondent that involved in business activities represent 21.57 percent.

2.3.5 Income level

Mustafa (2006) indicate that about 56.0% of respondents were income above RM1200 aware of Islamic pawn
broking, followed by about 25.0% of respondents income between RM801 to RM1200 indicate aware of Islamic
pawn broking and about 15.0 % of respondents income between RM501 to RM800 indicate aware of Islamic pawn
broking. The remaining about 3.30% of respondents income between RM200 to RM500 indicates aware of Islamic
pawn broking. The researcher concludes that majority of Islamic pawn broking consumers were with income above
RM1200.

Most of Islamic pawn broking consumers fall on middle and lower income groups which were about 21 per cent
earning less than RM500, less than RM1 ,000 (39.8 percent), less than RM1, 500 (22.7 percent), between RM1, 500
to RM2, 000 (8.3 percent) and the rest earn between RM2, 000 to RM4, 000 (Religion news daily, 2008).

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2.3.6 Marketing tools

The researcher concluded that majority of respondents aware of Islamic pawn broking through friends. Majority
of Islamic pawn broking consumers aware about Ar Rahnu scheme through various sources such as from friends,
relatives, posters, print and electronic media. (Religion news daily, 2008) In general, the public knows about Islamic
financial products (88.6%) but are not familiar on its operations, product attributes and many other factors of which
the relevant information have not been adequately disseminated to them (Assoc. Prof. Dr. Zuriah Abdul Rahman,
2007)

2.3.7 Education background

Mustafa (2006) research indicate that majority of respondents who completed secondary school which is about
50.0% of respondents aware of Islamic pawn broking, followed by about 21.7% of respondents who completed
diploma aware of Islamic pawn broking, about 18.0% of respondents who completed degree indicate aware of Islamic
pawn broking and about 10.0% of respondents who completed primary school education indicate aware of Islamic
pawn broking. The researcher concluded that majority of respondents who completed secondary school education
indicates of Islamic pawn broking.

The distribution for educational level, results shows 50 % of the respondents have completed the secondary
school, follows by completed primary school and uncompleted secondary school that represent 15.79 % and 13.68 %
respectively aware of Islamic pawn broking. (Mohamed Ishak Hj Badarudin Rais 2007).

The study by (Mohd Fazli Mohd Sam, Md Nor Hayati Tahir, Noor Khamisah Abdul Latif, 2010) indicate that
most of the respondents either they well educated or not well educated agree and totally agree that they were not
notice AgroBank Malalysia had Ar Rahnu scheme. The research result shows that about 113 of respondents were not
aware of Ar Rahnu scheme regardless of whether they were educated or not educated. Majority of respondents fall in
both educated and non educated background and indicate them unaware of Islamic pawn broking.

Low level of education is main reason people not aware of Islamic financial products. The analysis reflects that
potential respondents who were unaware of Islamic pawn broking due to still lack understanding on Islamic financial
products of it its objective and operations, therefore, respondents could not make an informed decision on whether to
participate in it by (Assoc. Prof. Dr. Zuriah Abdul Rahman, 2007)

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2.4.8 Promotion

Study by (Mohd Fazli Mohd Sam, Md Nor Hayati Tahir, Noor Khamisah Abdul Latif, 2010) measure level of
awareness using promotion. The researcher result of chi square indicates about (60.761) not aware of Islamic pawn
broking through promotion and about (67.133) indicate that respondents even not know there is Islamic pawn
broking. Besides that about (36.513) chi square result indicate that respondents aware of Islamic pawn broking
through promotion. The researcher made a conclusion that majority of respondents not aware Islamic pawn broking
due to lack of effective promotion.

2.5 Factors influencing public to pursue Islamic pawn broking (Ar Rahnu) scheme

According to Mohamed Ishak Hj Badarudin Rais (2007) factors that influence the demand for islamic pawn
broking were syariah, fast, confidentiality and mortgage. Whereas according to Hanudin Amina, Rosita Chonga,
Hazmi Dahlana, Rostinah Supinaha (2007) factors that influence the demand for Islamic pawn broking were syariah
view, pricing system, pledged asset, customer service and locality of Islamic pawn shop. According to Mustafa (2006)
those factors that affect customer demand were low income, fast, syariah view, confidential and interest rate. Hence
factors that be chosen for this research are pricing system, customer service, locality of Islamic pawn broking,
confidential and income.

2.5.1 Pricing System/ No Interest charged

Prior studies have examined the important of pricing associated with the pawnshop transactions (Mohammed, N.,
Daud, N.M.M., & Sanusi, N.A, 2005). In more specific, Mohammed, N., Daud, N.M.M., & Sanusi, N.A. (2005)
argued that the service charge imposed by Islamic-based pawnshop relatively cheaper than the traditional pawnshop
(imposed 2 percent) This means that the cost of getting quick cash in Islamic-based pawnshop is cheaper, thus, little
burden is borne by the customers. This statement is consistent to what analysed by Ismail, A.G., & Ahmad, N.Z.
(1997). They argued that the cost of getting quick cash from MGIT is cheaper than conventional-based pawnshop,
which is 2 percent for pawned items. On the basis of these findings, it is important to have Ar-Rahnu shop which is
offered competitive rate, to reflect the average pricing system in the market.

In March 1992, the Kelantan State Economic Development Corporation, thoughts subsidiary, Permodalan
Kelantan Berhad had set up Ar-Rahnu as the second Islamic pawnshop in Malaysia in order to fulfil the Syria needs.
It is part of the Kelantan governments effort to help those in need by giving out interest-free loans. The Ar-Rahnu
system in Kelantan collects a certain fee for safekeeping of pawned goods. According to the researcher M. S. and
Sanusi, N. A. (2007)

Ar-Rahnu is an Islamic-based pawn broking business which offers interest free loans, but a
minimum fee is charged for the safekeeping of the valuables, with a high mortgage value and a flexible pawn period.
Royal Prof Ungku Aziz, in a study, find shops that mortgage tax has been in operation decades, is an oppression of
the poor borrowers. Interest rate charged is high. Muslims also know that conventional mortgage activity tax practice
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usury and illegal. However, the fact, it remains a choice those who want to get small loans quickly (Ummatan
Wasatan, 2008).

2.5.2 Customer service

The important of service in the conventional-based pawnshop has been in details explained by Lao, J.J. (2005).
He suggested that Islamic pawnshops should offer a quick and convenient way to borrow money. Unlike banking
institutions, pawnshops are more convenience for consumers. Most consumers use pawnshops primarily because they
poor credit and would be denied loans from traditional institutions. The borrowed money is exchanged with pledged
assets to secure the loan itself.

According to Mohammed, N., Daud, N.M.M., & Sanusi, N.A. (2005), he mentioned the importance of service
factor. The Islamic-based pawnshop must maintain the record of customers, keep the record confidentially and treat
the customers fairly regardless of their race or religion. The Islamic-based pawnshop must stress the important of
customer service in order to strengthen the customer base, in addition to Shariah view concern. In order to become a
successful Islamic pawnshop, there is a need, therefore to strengthen the customer service. According to Hanudin
Amina, Rosita Chonga, Hazmi Dahlana, Rostinah Supinah (2007) the present study revealed that customer service is
significantly associated with acceptance. Indeed, this result offers points for local authority and businesses to consider.
First, the approval for the transaction must be efficient and fast. Second, the pawnshop must offer advice service or
merely consultation to facilitate the customers transaction. Third, the pawnshop must free from the issue of
discrimination.

According to Mustafa (2006) his research revealed that Islamic pawn shop offer convenient, fast and efficient
services for customer. From the good service for the customer satisfaction hoped that syariah pawn shop will be the
alternative company for the Moslem Community that doesnt want interact with the conventional economic system.
As the promotion tool syariah pawn shop use Halal, but with the development of age, that concept is no longer
relevant. Now people is very smart when choosing the right things for their, they prefer the good service, responsible
and always made Islamic ways as the number one (Arrifin, M.I, 2005). Pawn shop also gives flexible service to the
customer about giving back the loan. The customer cans longer their loan with only paid the interest, which service
will hard to do if we deal it with the bank. If customer cant pay their loan, pawn shop will do the auction for the
customers collateral. But if the price of auction is higher than the value from appraiser, the customer will get the
profit from that auction. Then if the result is lower than the value, it becomes the pawn shop risk. The company gets
the profit from the interest and the administration cost that coming from customer.

2.5.3 Locality of Islamic-based pawnshop

There exists scare information on the important of location factor for pawnshops. The two important studies have
been employed to generalize the idea into the present study analysis. The first study is by Mohammed, N., Daud,
N.M.M., & Sanusi, N.A (2005), argued that location is the significant factor for the pawnshops development. In more
details, Mohammed et al. (2005) also argued that, individuals tend to choose pawnshops that near to their houses. The
authors also still believe that if the local authority wishes to establish such business, a well-informed location must be
met at least where people know where is it. According to Hanudin Amina, Rosita Chonga, Hazmi Dahlana, Rostinah
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Supinah (2007)

if individuals want to open an Islamic-based pawnshop, they should open it in the place where it is
easy to access by the users.

2.5.4 Confidential

In acquiring pawnshop credit the customers need not reveal the reason for acquiring the loan. It is deemed that the
customer is in the best position to determine how the loan will be utilized. According to Selamah Binti Maamor and
Abdul Ghafar Ismail (2006) in acquiring pawnshop credit the customers need not reveal the reason for acquiring the
loan. Besides that, According to researcher Mustafa (2006), one of the factor consumer demands for Islamic pawn
shop is because of confidential. Customer doesnt have to tell the purpose of their borrowings.

2.5.5 Low Income

The important of helping the needy especially the poor has long been emphasized in much of Islamic faith.
Therefore, lending to the needy should be the main focus in Islamic finance. In this context, the Islamic pawnshop (Ar
Rahnu scheme) is the most appropriate mechanism as it provides a financial product for the lower-income group and
small businesses which usually have limited capital or have been excluded from the mainstream financial system.

According to Ismail, A.G., & Ahmad, N.Z. (1997) the high interest rates make it difficult for the consumers to
reclaim their goods or jewelers. As for those who need the loan as a business capital, they find that their capital is
rapidly diminishing. Before the implementation of the Islamic pawnshop system, the conventional pawnshops had
charged high interest rates on the loans given. The conventional Pawnshops were more motivated on making profit
from the needy individuals and this activity was only restricted by the laws in the Pawnbrokers Act 1972.

According to Azila Abdul Razak (2004) the conventional pawnshops had indeed oppressed and put a burden on
the lower-income group. Besides that, researcher Selamah Binti Maamor and Abdul Ghafar Ismail (2006) stated that
the other main factor is likely to be an increase in the number of people who do not use the formal financial
institutions because of poverty. According to researcher Mustafa (2006), he said the major factor that influences
people to demand for Islamic pawn broking is because of low income.

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3.0 METHODOLOGY
3.2 Study Design

The study design used in this research is more inclined towards descriptive type of research.

3.4 Study Scope

This research is only focus on Islamic pawn broking is Sungai Petani.

3.5 Sample Size

The sample method chosen for this study will be based on convenient sampling technique. The respondents of the
study derive from both conventional and Islamic pawn broking (Ar Rahn) at Jalan Ibrahim in Sungai Petani. Besides
that, respondents also derive from shops located near Islamic and conventional pawn broking shops at Jalan Ibrahim,
Sungai Petani, Kedah.

3.6 Survey Instrument

A specially designed self-administrated questionnaire was used as a tool to conduct this study, and respondents
were requested to complete this questionnaire.

The first section gathers demographic information such as gender, age, working status, race, level of education,
number of dependents and total monthly income. The second section gathers information on level of public awareness
toward Islamic pawn broking (Ar Rahnu ) scheme such as information on respondents whether they aware of Islamic
pawn broking , which marketing tools that create awareness about Islamic pawn broking among respondents,
duration of using Ar rahnu scheme and purpose of visiting Islamic pawn broking . The third section gathers
information on factors influence the public to pursue Islamic pawn broking such as low interest rate, confidential,
good customer service, locality of Islamic pawn broking and low income. Besides that, information such as factors
influence public choice for small cash loan are also included in third section in questionnaire in order to test
generally whether the same factor influence the public demand for Islamic pawn broking.

Participants were asked to express the level of their agreement with 12 attributes/factors identified earlier from
the literature. 7 attributes measure the level of awareness among respondents, while remaining 5 attributes covered the
factors that influencing the public to pursue Islamic pawn broking. In answering the questions, respondents were
assured of the confidentiality of their responses and their names were not included on the questionnaire. Multiple
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choice types of questions were used to measure all the statements in both first and second section in questionnaire.
Agreement scale was used to measure all the statements in third section in questionnaire (strongly agree, agree,
neutral, disagree and strongly disagree). Finally, data was analyzed via cross tabulation, mean score analysis and
multiple regression.

3.7 Research Framework
Figure 1.0 Research Framework

Independent variable Dependent variable

Level of public awareness
and factors influencing
public to pursue Islamic
pawn broking
Factors influencing public
to pursue Islamic pawn
broking
Low interest rate
Confidential
Good customer service
Locality of Islamic pawn
broking
Low income

Level of public awareness
towards Islamic pawn
broking
Gender
Age
Race
Education background
Working status
Income level
Marketing tools
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4. RESULT ANALYSIS
4.2 Result and Discussion
4.2.1 The Level of public awareness towards Islamic Pawn Broking (Ar Rahnu)

In total 150 people responded the questionnaire distributed. There were 42 male and 84 female respondents aware
of Islamic pawn (Ar Rahnu) scheme. It is also noted that majority of Islamic pawn broking consumers were female.
Based on Chart 1 below 82% of male respondents and about 85 % of female respondents aware of Islamic pawn
broking. Overall about 84% of respondents aware of Islamic pawn broking as indicated in Chart 3. From both chart 1
and 2 it is strongly indicates that level of awareness among respondents is not based on gender as only small
difference between male and female respondents.
Chart 1 Chart 2

Chart 3

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The results also indicated that the all the Malay, which is 67% of respondents are aware of Islamic pawn broking.
This is followed by Chinese and Indian , which is about 17% and 16% respectively aware of Islamic pawn broking.
The chart 4 strongly indicates that 46% of Indian respondents were not aware of Islamic pawn broking. Only 22 % of
Chinese respondents were not aware of Islamic pawn broking as shown chart 5.
Chart 4 Chart 5

Chart 6

The findings in chart 7 shows 21% of Malay respondents completed primary school education, followed by 36%
of Malay respondents completed secondary school education, about 32% Malay respondents completed diploma
studies and about 11% of Malay respondents were completed degree studies indicate aware of Islamic pawn broking.
Chart 8 and Chart 9 shows the education level of the Chinese and Indian respondents.

The result of research indicates that about Indians respondents were not aware of Islamic pawn broking not due to
lack of education. This can be proven from chart 10 in which about 33% of Indian respondents who were completed
diploma studies also unaware of Islamic pawn broking. This statement can be supported by comparing the percentage
of Indian respondents who were completed primary school education and indicate aware of Islamic pawn broking.
Data from chart 9 strongly shows that about 28% of Indians respondents who have completed primary school
education were fully aware of Islamic pawn broking. This indicate that lack of awareness among Indian respondents
is due to insufficient knowledge about Islamic pawn broking (Ar Rahnu scheme) and inefficiency of Islamic pawn
broking strategy in reaching their new consumer and not because of low level of education among Indian respondents.
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Besides that it is also due to lack of or ineffective advertisement about Ar Rahnu scheme. Therefore the level of
respondents awareness towards Islamic pawn broking was not based on education background.

Chart 7 Chart 8

Chart 9 Chart 10

Majority of Islamic pawn broking consumers were from working group and earning a income. From the chart
11, 28% of respondents employed by private sector and income level below RM1000, followed by about 25% of
respondents employed by private sector and income level between RM1000 toRM1500, about 17% of respondents
employed by private sector and income level between RM1501 to RM2000.

Mean while about 8% of respondents employed by government sector and income level between RM1000 to
RM1500 and about 8 % of respondents employed by government sector and income level between RM1501 to
RM2000. This followed by about 5% of respondents retired and income level between RM1000 to RM1500, about
3% of respondents retired and income level between RM1501 to RM2000, about 3% of respondents retired and
income level above RM2000. While the remaining 3% of respondents employed by government and income level
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below RM1000. From these result, research shows that the majority of Islamic pawn broking consumers were
employed by private sector and income below RM 1000.

The result is consistent with what studied by Amin, Chong, Dahlan & Supinah (2007) who claimed those
(<RM501-RM1000) considers the users for the Ar Rahnu scheme but contradicts with Mustafa (2006) who claimed
that majority of Islamic pawn broking consumers were from income level above RM1200. Since the economy of
Malaysia is in instability, the poor get poorer and the lower income group has suffered more pinch than the higher
income group. As an alternative therefore lower income group go for Islamic pawn broking to borrow fund as no
interest impose on them thus they able to borrow with minimum cost such as only safe keeping fees impose on them.

Chart 11

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The respond on how respondent know about Islamic pawn broking, shows that about 52% of respondents aware
of this Ar Rahnu scheme through saw the store or sign board. This followed by 21% of respondents aware through
friends or relative while 17% respondents aware through newspaper and about 5% of respondents aware through radio
and the remaining were aware through others such as TV ads (advertisement).

Results indicate that the main mode of marketing tool which is effective in distributing information to
respondents about Ar Rahnu was through saw store or sign board. The data also shows that respondents awareness of
Islamic pawn broking through radio and other marketing channel such as television was very low. The result from
chart 12 strongly indicates that advertisement through radio and others such as television ads were not adequate
enough in reaching the public and to create awareness among them.

Chart 13 strongly indicates that many Indian respondents unaware of Islamic pawn broking due to insufficient
advertisement through radio and other marketing channel such as television advertisement as none of Indian
respondents indicate they aware of Ar Rahnu scheme through radio or televisions. Therefore findings from the chart
13 clearly shows that many Indian respondents unaware of Islamic pawn broking because of lack of knowledge about
Islamic pawn broking and also because of Islamic pawn broking were not focus on other media channel such as Radio
and television to advertise about Ar Rahnu scheme.

Chart 13

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Chart 14 shows the profile of the age of the respondents. Majority of Islamic pawn broking consumers fall in
working age. Chart 14

Table 4.8

Respondent purpose of borrowing in Islamic pawn broking
(Ar Rahnu) Total

Medical
expenses
Pressing
bills
Personal
expenses Debt Others
Respondent's awareness
of Islamic pawn
broking(Ar Rahnu)
Yes
2 5 25 9 1 42
Total
2 5 25 9 1 42

Findings shows that about of 60% of respondents borrow fund due to personal expenses.. There is a large gap
between percentage of respondents borrow for the purpose of personal expenses and other types of expenses such as
debt this is because many respondents obtain fund in Islamic pawn broking mainly to cover their personal expenses as
it is very fast to obtain instant cash and does not require to fill up any forms or approval for the loan. Only minority of
respondents utilize Islamic pawn broking mainly to cover other types of expense such as pressing bills and paying
debt.

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4.2.2 The most important factor influence public choice for small cash loan

Table 4.10

Factors N Mean
Cheap cost of loan
50 4.50
Confidential
50 3.66
50 3.68
Located in convenient
place and nearer to home
50 3.10
Low income
50 4.34
Valid N (listwise)
50

The result shows that cheap cost of loan was the highest mean score (4.50).

4.2.3 The most important factor influence public to pursue Islamic pawn broking (Regression)

Coefficients (a)

Model
Unstandardized
Coefficients
Standardized
Coefficients t Sig.
B Std. Error Beta B Std. Error
1 (Constant)
2.984 1.410 2.116 .044
Cheap cost of loan in
Islamic pawn broking (Ar
Rahnu)
.085 .126 .127 .678 .504
High level of confidential
in Islamic pawn
broking(Ar Rahnu)
-.003 .150 -.003 -.017 .987
Good customer service in
Rahnu)
-.161 .189 -.187 -.851 .403
Islamic pajak gadai (Ar
Rahnu) shop located at
convenient place and
nearer to home
.032 .172 .044 .185 .854
low level of income
-.404 .233 -.356 -1.735 .095

Table 4.11

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Out of five variables included, it is found that variable of low interest rate are significant t=0.678, p<0.504. Thus
the result clearly shows that majority of customers borrow in Islamic pawn broking because of cheap cost of loan.
This statement can be strongly supported based on table 4.10 in which about 4.50 average mean score indicate that
majority of respondents agree that interest rate was the main factor influence their choice for small cash loan.
Therefore the findings conclude that the most important factor influence the respondents for Islamic pawn broking
was low interest rate.

5. CONCLUSION AND RECOMMENDATION

5.1 Conclusion
The findings of the study have important implications for research to make further research to study of the extend
of public acceptance of Islamic financial products. Besides that the study results can be used as a platform for
relevant parties such as management of Ar rahnu and banks who involve in providing Ar Rahnu scheme to find a new
strategy that can attract public to subscribe Ar-Rahnu scheme.

In the first process of analysis, level of awareness measure using attributes such as gender, age, race, education
background, working status, income level and marketing tools. Result shows that majority of Indian respondents were
not aware of Islamic pawn broking and mean while majority of Chinese and Malay respondents indicate they aware of
Islamic pawn broking. Majority of Islamic pawn broking consumers were employed by private and income level
below RM1000.

Result also shows that majority of respondents which consist of Malay, Chinese and Indian respondents indicate
they aware of Islamic pawn broking through saw sign board and friends or relatives. On the other hand, only small
percentage of respondents indicates they aware of Islamic pawn broking through radio and others tool of marketing
such as television. Besides that, majority of Indian respondents aware of Islamic pawn broking through friends or
relatives. More over, none of Indian respondents indicate that they aware of Islamic pawn broking through radio and
television. Hence the findings conclude that majority of Indian respondents were not aware of Islamic pawn broking.
On the other hand, most of Malay and Chinese respondents indicate them aware of Islamic pawn broking. Only small
percentage of Chinese respondents indicates that they were not aware of Islamic pawn broking.

At a further level of analysis, factors such as cheap cost of loan, confidential, good customer service, locality of
Islamic pawn broking and low income were used as parameters to identify the most important factor influence the
public to pursue Islamic pawn broking. These factors were tested using multiple regression and findings conclude that
the most important factor influence the public to pursue Islamic pawn broking was cheap cost of loan. While factors
such as confidential, low income and good customer service were appear to be less important factors influencing
public to pursue Islamic pawn broking. Besides that the same five factors were tested generally using mean score
analysis to identify the most important factor influence public choice for small cash loan and the result shows that
majority of respondents borrow small cash loan because of cheap cost of loan too. Hence the findings can be
concluded that cheap cost of loan was the most important factor influence public to pursue Islamic pawn broking.
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5.3 Recommendation

As a result indentified that most of Indian respondents were not aware of Islamic pawn therefore it is
recommended that Islamic pawn broking may be advertised and promoted for other races such as Chinese and
Indians in Malaysia as we are living in a multiracial country. In order to improve the awareness for other races,
information in the advertisement may be advertised in multi language such as Malay, Chinese and also Tamil. Since
majority of Indian respondents indicate they are aware of Islamic pawn broking through friends and relatives, it is
recommended that Islamic pawn broking may distribute more brochures and pamphlets about Ar Rahnu scheme in
Tamil language so that public able to distribute and share the brochures with their relations and this in turn able to
create awareness among Indian community.

Besides that, it is recommended that Islamic pawn broking may increase their advertisement in both radio and
television as none of Indian respondents indicate them aware of Islamic pawn broking through these marketing tools.
The findings clearly show that Islamic pawn broking was lack of advertisement in both radio and television in order
to create awareness among public. Therefore Islamic pawn broking may increase their advertisement about Ar Rahnu
scheme in both radio and television. In addition, it is recommended that Islamic pawn broking may advertise about Ar
Rahnu scheme in Tamil news and in Tamil radio station. Similarly Islamic pawn broking may advertise in Chinese
news and Chinese radio station in order to create awareness among Chinese community. By doing this, Islamic pawn
broking may able to create awareness among all races and leave no room for feeling of discrimination. It is also
recommended that Islamic pawn broking may increase their advertisement through sign board especially in rural and
remote areas in order to create awareness among public.

More over it is also recommended that Islamic pawn broking to include the difference of interest rate offer by
Islamic pawn broking, conventional pawn broking shops and other financial institution in newspapers. For example
applying loan for RM2000 in May Bank and the interest rate charged by May bank was RM 190 for 12 months, which
is equals to RMRM2280 the repayment loan amount (Mabank source). Meanwhile in conventional pawn shop the
interest rate is 2% per month, and the repayment amount will be RM2480 (RM2000 plus RM 480) for 12 months.
Whereas in Islamic pawn broking, no interest is apply but only fees for safe keeping charges such as RM0.65 per
month and the repayment amount will be RM2156(Ar Rahnu org.com) for 12 months. The details of interest rate may
make public aware of the low charges provided by Islamic pawn broking compared to other pawn broking shops and
financial institutions.

Internet has been an effective method to deliver message easily to the public. It is recommended that Islamic
pawn broking may advertise about Ar Rahnu scheme in the websites so that it can easily reach to the public. Internet
access has been an important factor to establish a global network among companies and also individuals for collecting
information and other purposes.

Besides that, it is recommended that the government may embark with campaigns to encourage those who are
in desperate need for fast cash to approach Islamic pawn brokers rather than resort to illegal money lenders (Ah
longs) who charge exorbitant interest rates and unfair recovery practices. In the budget 2010 speech, YAB Dato' Sri
Haji Mohd Najib bin Tun Haji Abdul Razak Prime Minister and Minister of Finance has mentioned that the
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Government will encourage all syariah-compliant financial and banking institutions, such as Bank Muamalat and
Bank Islam to offer this scheme. Therefore it is recommended that YPEIM (Islamic Economic Development
Foundation Malaysia) may collaborate with other financial institutions such as conventional banks to offers Ar Rahnu
scheme. This will be able to create awareness among public and thus lower income group able to be benefited.
Besides that, the local authority may create a policy to encourage the existing traditional-based pawnshops to
introduce window for Ar -Rahnu transactions. As a result it provides an alternative for Muslim or non-Muslim to
obtain a source of fund gradually migrates the existing customers of conventional-based pawnshop to use Islamic-
based pawnshop. It is hoped that, an Islamic-based pawnshop introduction able to eliminate loan shark or Along,
and able to reduce people tendency to conventional-based pawnshop.

Most of pawn broking customers are individuals who do not have access to a formal financial system, hence
there is a requirement to the pawn broking institutions not to impose storage charge as practised by Muasassah
Gadaian Islam Terengganu especially pawnshop owned by the state government and banking institution. Compared
to the conventional pawn broking institution, storage charge imposed by the Islamic pawn broking institution is by far
very low. Nevertheless, consideration should be given to low income customers or a husband who is a sole
breadwinner. For instance, a different branch of the banking institution in each state will not impose storage charge to
customers. The selection of this branch that refrain from imposing storage charge depended on the social economic
factor of the locals (Mohamed Ishak Hj Badarudin Rais ,2007). Besides that, Minister in the Prime Ministers
Department Datuk Seri Jamil Khir Baharom said the hardcore poor registered with E-Kasih were charged only 10
cent interest as compared with 75 cent and 95 cent for ordinary customers. (New Sabah Times, 2010). Micro
financing offered in Malaysia under the existing banking system is conducted in a regulated environment, which
facilitates the practice of fair pricing, full disclosure and ethical debt recovery processes. Non-profit organizations
such as AIM and TEKUN are monitored by Board Members, which comprise of representatives from Government
Ministries to ensure that the organizations stay focused on their respective mandates in poverty reduction and practice
ethical lending behavior.Therefore it is recommended that Islamic pawn broking may not impose storage charge as
practiced by Muasassah Gadaian Islam Terengganu. This is because majority of Islamic pawn broking consumers
were having income below RM1000 and this indicate majority of Islamic pawn broking consumers came from poor
background. Since cheap cost of loan rate is most important factor influence public to pursue Islamic pawn broking
and majority of Islamic pawn broking consumers were belong to lower income group therefore Islamic pawn broking
may not impose storage fees on their customers especially to lower income group.

It has become a necessity to diversification items that can be accepted by pawn broking institution as mortgage
items. For example, in Indonesia, vehicles are accepted as mortgage item, in fact, livestock can also be accepted as
mortgage items. The practice in Malaysia, only valuables such as gold only accepted as pledged asset. (Mohamed
Ishak Hj Badarudin Rais 2007). YPEIM Director-General Dr Abdul Malek Awang Kechil said that apart from gold,
studies are being conducted to accept diamonds as a pawn item (New Sabah Times, 2010). Pledged asset is also
important as it affect acceptance of Islamic pawn broking therefore it is recommended that Islamic pawn broking
may accept other diversify assets such as Silver, Rolex watch ,diamond and other homes items as pledged asset.

Conducting studies with convenience sampling is suggested to offer a clearer picture of respondents background
and to gather more representative information of the population. The study suffers from two limitations. The first
limitation is related to the location of the study. The study is only conducted in the Sungai Petani somewhat limits the
generalization of the study results. The future study may include the respondents from the other cities in Malaysia in
order to ensure the future study would be more generalizable. Second limitation is because other possible factors
influencing the demand for Islamic pawn broking are not included in this research. Consequently, there is a need to
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search for additional variables that feasible to predict acceptance of Islamic pawnshops more accurately. It would be
reasonable to add other social factors and the advertisement factors to the research to further expanding the results of
the study.

REFERENCES

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Agrobank.

Arrifin, M.I. (2005), Towards the expediency and leniency of Islamic finance through Islamic micro credit
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Kewangan Islam, 29-30 Ogos, Esset-Bangi, Selangor Darul Ehsan, 221-240.

Azila Abdul Razak.(2004), Malaysia Practice of Ar Rahnu scheme, International Islamic Conference

Assoc. Prof. Dr. Zuriah Abdul Rahman. (2007), The role of Islamic financial Institutions in wealth accumulation,
ownership& protection by the Ummah: Conceptual and implementation Challenges

Bank Kerjasama Rakyat (M) Berhad. (2000, 2002dan2003), Manual Pinjaman Pajak gadai Islam. Not published

Budget speech.(2010), Introducing supply bill in the Dewan Rakyat .http://www.bnm.gov.my

Daily Metro. (2004), 8 Feb

General Report Rahnu ar-Regional. (2004)

Hanudin Amina, Rosita Chonga, Hazmi Dahlana, Rostinah Supinah. (2007), An Ar-rahnu Shop Acceptance
Model (ARSAM). Labuan e-Journal of Muamalat and Society, 1, 88 101.

Hari Srinivas, Coordinator, Virtual Library on Microcredit

http://ams2.neofission.com/websites/bnmdemo.gov.my/index.php?ch=32&pg=95&pg=95&ac5

http://maidam.terengganu.gov.my/unit_pembangunan.php
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http://maidam.terengganu.gov.my/mgit.php

Ismail, A.G., & Ahmad, N.Z. (1997), Pawnshop as an instrument of microenterprise credit in Malaysia. International
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Ismail, A.G. (2004), Skim ar-Rahnu pengukuhan kerjasama serantau: Pengalaman Malaysia. Prosiding Konvensyen
ar-Rahnu Serantau, 12-14 Oktober, Hotel Renaissance, Kuala Lumpur

Johari, M. S. and Sanusi, N. A. (2007), Prestasi perkhidmatan ar-Rahnu: Kajian kes MGIT.
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Lao, J.J. (2005), Unexplained pawn pricing behavior: A study of Las Vegas pawnshops. MIT Undergraduate
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Mohamed Ishak Hj Badarudin Rais.(2007), The Demand of Pawnbroking Services: Evidence from Malaysia.
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Mohammed, N., Daud, N.M.M., & Sanusi, N.A. (2005), Analisis skim ar-Rahnu: Satu kajian perbandingan dengan
pajak gadai konvensional. Prosiding Seminar Kewangan dan Ekonomi Islam: Pengukuhan dan Transformasi
Ekonomi dan Kewangan Islam, 29-30 Ogos, Esset-Bangi, Selangor Darul Ehsan, 211-220

Mohd Fazli Mohd Sam, Md Nor Hayati Tahir, Noor Khamisah Abdul Latif. (2010), The awareness and the
acceptance of Islamic pawn broking

Mustafa (2006), Persepsi masyarakat terhadap system pajak gadai Islam (Ar-Rahnu)

Payal Bhatt and Jothee Sinnakkannu. (2008), Ar-Rahnu (Islamic Pawning Broking) Opportunities and Challenges in
Malaysia. 6th International Islamic Finance Conference 2008 Peer Reviewed Paper

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Roslan Abdul Halim,Faudziah Zainal Abidin, Mohd Saifoul Zamzuri Noor,and Rahimah Majid(2007),
Microfinance Service for Micro-Enterprise: Good Practices and Performance of Selected Microfinance Institutions
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Rugayah, M. (1986), The rate of pawnbrokers as non-institutional creditors in Malaysia. Kajian Ekonomi Malaysia,
22(2), 30-39

Religious daily news. (2008), Joint YPEIM: Ar Rahnu scheme pikat non muslims , Wednesday, January 9

Selamah Binti Maamor and Abdul Ghafar Islmail.(2006), Micro-Credit Program: Pawnshop vs Ar-Rahn. Paper
presented at Seminar Kebangsaan Pengurusan Harta dalam Islam, Kolej Islam Pahang, Kuantan 8-9 Ogos 2006

Sehan, M. A. (2004), Isu-isu dalam Perlaksanaan Pajak Gadai Islam di Negara Serantau. Paper
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Skully, M. S. (2005), Islamic Pawnbroking: The Malaysian Experience". Paper presented at the 3
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Appendices

Output from SPSS

The Level of public awareness towards Islamic Pawn Broking (Ar Rahnu)

Table 4.1

Respondent's gender
Male Female Total
Respondent's awareness of Islamic
pawn broking(Ar Rahnu)
Yes Count
42 84 126
% within Respondent's awareness of Islamic
33.3% 66.7% 100.0%
% within Respondent's gender
82.4% 84.8% 84.0%
% of Total
28.0% 56.0% 84.0%
No Count
9 15 24
37.5% 62.5% 100.0%
17.6% 15.2% 16.0%
% of Total
6.0% 10.0% 16.0%
Total Count
51 99 150
34.0% 66.0% 100.0%
100.0% 100.0% 100.0%
% of Total
34.0% 66.0% 100.0%

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Table 4.2
Respondent's awareness of
Islamic pawn broking(Ar
Rahnu)
Respondent's
gender
Male Female Total
Yes respondent's
race
Malay Count
24 60 84
% within
respondent's race
28.6% 71.4% 100.0%
% within
Respondent's
gender
57.1% 71.4% 66.7%
% of Total 19.0% 47.6% 66.7%
Chinese Count
15 6 21
% within
respondent's race
71.4% 28.6% 100.0%
% within
Respondent's
gender
35.7% 7.1% 16.7%
% of Total
11.9% 4.8% 16.7%
Indian Count
3 18 21
% within
respondent's race
14.3% 85.7% 100.0%
% within
Respondent's
gender
7.1% 21.4% 16.7%
% of Total
2.4% 14.3% 16.7%
Total Count
42 84 126
% within
respondent's race
33.3% 66.7% 100.0%
% within
Respondent's
gender
100.0% 100.0% 100.0%
% of Total
33.3% 66.7% 100.0%
No respondent's
race
Chinese Count 3 3 6
% within
respondent's race
50.0% 50.0% 100.0%
% within
Respondent's
gender
33.3% 20.0% 25.0%
% of Total 12.5% 12.5% 25.0%
Indian Count
6 12 18
% within
respondent's race
33.3% 66.7% 100.0%
% within
Respondent's
gender
66.7% 80.0% 75.0%
% of Total
25.0% 50.0% 75.0%
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Total Count
9 15 24
% within
respondent's race
37.5% 62.5% 100.0%
% within
Respondent's
gender
100.0% 100.0% 100.0%
% of Total
37.5% 62.5% 100.0%
Respondent's education
respondent's
race
Table 4.3

Respondent's
gender
Male Female Total
Primary School Malay Respondent's awareness
of Islamic pawn
broking(Ar Rahnu)
Yes
6 12 18
Total 6 12 18
Chinese Respondent's awareness
of Islamic pawn
broking(Ar Rahnu)
Yes
3 3
Total
3 3
Indian Respondent's awareness
of Islamic pawn
broking(Ar Rahnu)
Yes
6 6
Total
6 6
Secondary school Malay Respondent's awareness
of Islamic pawn
broking(Ar Rahnu)
Yes
3 27 30
Total 3 27 30
of Islamic pawn
broking(Ar Rahnu)
Yes
3 3
Total
3 3
of Islamic pawn
broking(Ar Rahnu)
Yes 0 3 3
No
6 6 12
Total
6 9 15
Diploma Malay Respondent's awareness
of Islamic pawn
broking(Ar Rahnu)
Yes
12 15 27
Total
12 15 27
of Islamic pawn
broking(Ar Rahnu)
Yes
3 3 6
No
3 3 6
Total
6 6 12
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of Islamic pawn
broking(Ar Rahnu)
Yes
3 3 6
No 0 6 6
Total
3 9 12
Degree Malay Respondent's awareness
of Islamic pawn
broking(Ar Rahnu)
Yes
3 6 9
Total
3 6 9
of Islamic pawn
broking(Ar Rahnu)
Yes
9 9
Total
9 9
of Islamic pawn
broking(Ar Rahnu)
Yes
6 6
Total
6 6

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1490

Table 4.4
Respondent's total
montly income
Respondent
working status
respondent's race
Malay Chinese Indian Total
Below RM1000 Employed by
Government
Islamic pawn broking(Ar Rahnu)
Yes
3 3
Total 3 3
Employed by
private
Yes
21 6 3 30
No
0 3 3 6
Total
21 9 6 36
RM1000 to RM 1500 Employed by
Government
Yes
9 9
Total 9 9
Employed by
private
Yes 18 6 3 27
No 0 3 3 6
Total
18 9 6 33
Retired Respondent's awareness of
Yes 3 3 0 6
No
0 0 6 6
Total
3 3 6 12
RM1501- RM 2000 Employed by
Government
Yes
3 3 3 9
Total
3 3 3 9
Employed by
private
Yes
12 3 3 18
Total
12 3 3 18
Retired Respondent's awareness of
Yes
3 3
Total
3 3
Above RM2000 Retired Respondent's awareness of
Yes
3 3
Total
3 3

2
nd
nd
1491

Table 4.5

How did respondent know about Islamic
respondent's race
Malay Chinese Indian Total
Saw store / sign Respondent's awareness of Islamic pawn
broking(Ar Rahnu)
Yes
48 12 6 66
Total
48 12 6 66
Radio ad Respondent's awareness of Islamic pawn
broking(Ar Rahnu)
Yes
3 3 6
Total
3 3 6
Friend or Relative Respondent's awareness of Islamic pawn
broking(Ar Rahnu)
Yes
15 3 9 27
Total
15 3 9 27
Newspaper Respondent's awareness of Islamic pawn
broking(Ar Rahnu)
Yes
12 3 6 21
Total
12 3 6 21
Others Respondent's awareness of Islamic pawn
broking(Ar Rahnu)
Yes
6 6
Total
6 6

2
nd
nd
1492

Table 4.6

Respondent's age
18-25 26-35 36-45 46-55 55 above Total
Rahnu)
Yes
9 30 45 30 12 126
No
0 6 6 6 6 24
Total
9 36 51 36 18 150

Table 4.7

Respondent's
age
Respondent working status
Employed by
Government
Employed
by private
Home
maker unemployed Retired Total
18-25 Respondent's
awareness of
Islamic pawn
broking(Ar
Rahnu)
Yes
9 9
Total 9 9
26-35 Respondent's
awareness of
Islamic pawn
broking(Ar
Rahnu)
Yes
9 18 3 30
No
0 6 0 6
Total
9 24 3 36
36-45 Respondent's
awareness of
Islamic pawn
broking(Ar
Rahnu)
Yes
6 27 9 3 45
No
0 3 3 0 6
Total
6 30 12 3 51
46-55 Respondent's
awareness of
Islamic pawn
broking(Ar
Rahnu)
Yes 6 18 0 3 3 30
No
0 3 3 0 0 6
Total
6 21 3 3 3 36
55 above Respondent's
awareness of
Islamic pawn
broking(Ar
Rahnu)
Yes
3 9 12
No
0 6 6
Total
3 15 18
2
nd
nd
1493

Table 4.8

Respondent purpose of borrowing in Islamic pawn broking (Ar
Rahnu)
Medical
expenses
Pressing
bills
Personal
expenses Debt Others Total
Respondent's awareness of Islamic pawn
broking(Ar Rahnu)
Yes
6 15 75 27 3 126
Total
6 15 75 27 3 126

Table 4.9

How long respondent using this form of loan

Within
last year 1-2 years 2
3-4
years Total
Respondent's awareness of Islamic
Yes
18 51 18 6 93
Total
18 51 18 6 93

Table 4.10
N Mean
Cheap cost of loan
150 4.50
Confidential
150 3.66
150 3.68
located in convenient place and nearer to home
150 3.10
Low income
150 4.34
Valid N (listwise)
150

2
nd
nd
1494

The most important factor influence public to pursue Islamic pawn broking (Regression)

Table 4.11
Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate
1
.435(a) .189 .142 .738

ANOVA (b)

Model Sum of Squares df Mean Square F Sig.
1 Regression
11.041 5 2.208 4.052 .002(a)
Residual
47.411 87 .545
Total
58.452 92

Coefficients (a)
Table 4.12

Model
Unstandardized
Coefficients
Standardized
Coefficients t Sig.
B Std. Error Beta B Std. Error
1 (Constant)
2.984 .756 3.948 .000
Low interest rate in Islamic
pawn broking (Ar Rahnu)
.085 .067 .127 1.264 .210
High level of confidential in
Rahnu)
-.003 .080 -.003 -.032 .975
Good customer service in
Rahnu)
-.161 .101 -.187 -1.588 .116
Islamic pajak gadai (Ar
Rahnu) shop located at
convenient place and nearer to
home
.032 .092 .044 .346 .730
low level of income
-.404 .125 -.356 -3.237 .002

2
nd
nd
1495

faster to get loan and does not require to fill up any
forms
Disagree Neutral Agree Strongly Agree Total
Respondent's awareness of Islamic pawn broking(Ar
Rahnu)
Yes
12 18 63 33 126
Total
12 18 63 33 126

Table 4.13

special room is provided in islamic pawn broking (Ar Rahnu) to borrow
loan
Strongly
Disagree Disagree Neutral Agree
Strongly
Agree Total
Rahnu)
Yes
9 9 18 48 42 126
Total 9 9 18 48 42 126

A Study On Islamic Pawn Broking Awareness and Factor That Influencing The Scheme in SP

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