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ISB511 - GA1 - Ar-Rahnu Muamalat and Ar-Rahnu Agrobank
ISB511 - GA1 - Ar-Rahnu Muamalat and Ar-Rahnu Agrobank
ISB511
PRINCIPLES AND PRACTICES OF AR RAHNU
GROUP ASSIGNMENT 1:
AR- RAHNU MUAMALAT & AR- RAHNU AGROBANK
SUBMISSION DATE:
1ST DECEMBER 2022
PREPARED FOR:
DR. MUHAMMAD RIDZUAN BIN ABDUL AZIZ
PREPARED BY:
4.1 SIMILARITIES..............................................................................................................11
4.2 DIFFERENCES..............................................................................................................12
6.0 CONCLUSION..................................................................................................................14
7.0 REFERENCES...................................................................................................................15
1.0 OVERVIEW OF AR-RAHNU
In addition, Ar-Rahnu is quite popular because of its speedy service and approval,
affordable service fees, and straightforward procedures. Furthermore, issues in obtaining cash
from official and commercial financial institutions have been cited as one of the primary
reasons for people choosing this method. These issues are mostly due to the excessive
bureaucracy of funding agencies and formal financial institutions, which take longer that is,
up to six months to release loans with numerous documents (Nik Hadiyan Nik Azman, 2020).
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2.0 HISTORY AND BACKGROUND OF THE AR-RAHNU PROVIDERS
The foundation of the Bank Muamalat logo and brand is a dynamic line that moves
continuously. The single line reflects the primary goals of efficiency and dynamism. The
single line represents an effective, precise, and narrowly focused vision. This demonstrates
the close bond between the Bank and its clients.
As one of the pioneers of Islamic banking, the Bank is strongly supported by Shariah
scholars who are highly qualified and experienced in Islamic jurisprudence, advising not only
on Shariah products and services but also on parties planning to raise Islamic Capital Issues
or other new innovative products.
Islamic pawn broking, also known as Muamalat Ar-Rahnu, a form of pawn broking.
The qualifying client must submit a request to the Bank for financing for a sum that has been
mutually agreed upon and provide the Bank with agreed-upon gold or gold-related items as
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collateral. The customer is the rightful owner of the gold items under the terms of this
product and consents to pawn this/her/gold customer's items (gold items) recognized by the
Bank) as collateral for the financing obtained from the Bank (Bank Muamalat, 2022).
The bank is a member of the Global Alliance for Banking Values (GABV), an
independent network of banks and banking cooperatives working on the "Principles of
Sustainable Banking" throughout the world. GABV focuses on real-economy returns and
serves as a financial intermediary to assist social and environmental consequences. Bank
Muamalat Malaysia Berhad is the organization's first Islamic bank member (Bank Muamalat
Malaysia berhad, 2022).
Area of services that Bank Muamalat provides for its customers are:
The CEO of Bank Muamalat's consumer banking section, Zury Rahimee Zainal,
stated that as a fully Islamic bank, Ar-Rahnu helps Muslims avoid depending on traditional
pawn broking, which contains a usury (riba) aspect, for quick cash. He claimed that "our
service is more transparent and has a low safekeeping value" (New Straits Times, 2019)
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2.2 AR-RAHNU AGROBANK
First and foremost, the Agrobank logo has a triangle symbol with a circle symbol
underneath it. The floor's central circle emblem represents the power of the bank by
emphasizing the demands of its clients as partners in business.
The triangle emblem represents a broad viewpoint, which is the strength of the bank's
reliance on overly strong alliances and business partners. The triangle is a representation of
stability and dependability. As one of the guiding principles for the bank's success in the
future, bank stability is focused particularly on its financial status and its reputation.
While the color red on the emblem represents vigor, strength, enthusiasm, and
determination in carrying out our nation's responsibility as a top agriculture bank. For
application clarity, the term AGROBANK is written in the color black. The typeface being
utilized is Frutiger, whereby the neat and legible characters make it ideal for printing and
signage (Agrobank, 2020).
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Gold jewelry can be used as a security against credit under the Ar-Rahnu plan of
Agrobank, which is an Islamic form of pawn broking. The gold jewelry will be kept by the
Bank as collateral, and storage costs will be applied. The amount of the loan that the Bank
will provide the customer will be determined by the current market value of the gold jewelry.
However, depending on the loan margin (%) set by the bank and the type of gold, the loan
amount will be less than the value of the gold jewelry. Both parties have already decided and
agreed upon the safeguarding period and costs (bank and customer) (Agrobank, 2020).
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3.0 PRODUCT FEATURES AND MODUS OPERANDI/MECHANISM
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(RM500,000 for gold jewellery, gold coin, dinar gold
bar, as well as another RM500,000 for physical
Muamalat Gold-i (Perth Mint) Gold Bar) and Muamalat
Gold-i account.
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Modus Operandi of Ar-Rahnu Muamalat Bank
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3.2 AR-RAHNU AGROBANK
Shariah Concept Finance for Ar-Rahnu Shariah contracts underpin the Tawarruq
(Commodity Murabahah) and Rahn (Collateral) concepts, which
offer competitive profit rates to customers subject to minimum
eligibility requirements for the purpose of personal consumption,
business working capital, or any other agricultural or non-
agricultural activities aimed at improving the community's
socioeconomic status.
Eligibility Malaysian citizens and/or permanent residents aged eighteen (18)
to seventy (70) years old on the date of application are eligible to
apply.
Financing limit Minimum Limit per Financing Account: RM100
Maximum Daily Limit per customer: RM100,000
Maximum Financing Aggregate per customer: RM150,000
Margin of financing Up to 75% of the current Market Value of the collateralized Gold.
Financing Tenure Contracted Financing Tenure is 36 months.
Acceptable Gold Gold Jewellery
Collateral (Marhun) 999, 950, 916, 875, 835, 750
Gold Coin (999)
1 troy ounce, ¼, ½
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3.2.2 MODUS OPERANDI OF AR-RAHNU AGROBANK
1. T h e c u s t o m e r p
Agrobank under the terms of the loan collateral (al-rahn). Agrobank will evaluate the
gold's purity and quality. Agrobank will determine the loan that the customer is
eligible for based on the evaluation. For example, 80% of the value of the gold is
pledged.
2. After signing the pledge letter, the loan (qard) will be given to the customer shortly.
3. Agrobank oversees keeping and guaranteeing (wadi'ah yad dhamanah) the pledged
goods to ensure their safety and security.
4. According to the terms of the agreement, the customer will pay the loan and wages
(ujrah) charged on the security guarantee and storage of the pledged goods.
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4.0 COMPARISON BETWEEN THE TWO AR-RAHNU PROVIDERS
4.1 SIMILARITIES
Moreover, these two banks accept the grades of Gold like 999, 916, 875, 835,
and 750. In addition to this, these two banks accept all types of gold, including gold
wafers, bars, coins, and nuggets produced by all goldsmiths, gold institutions, and
gold producers except for companies blacklisted by Bank Negara Malaysia, The
Securities Commission Malaysia (SC) Security Alert, Fraud Alert, Consumer Alert.
Pledgor gold collateral is insured through takaful by these two banks, Ar-
Rahnu Muamalat Bank and Ar-Rahnu Agrobank. Pledged gold items are subject to
the Takaful policy, which is funded by the bank. Both banks will compensate the
collateral at the same rate as the original value if it is damaged or lost while in their
own custody.
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4.2 DIFFERENCES
There are a few differences between both banks in terms of pawn Islamic
broking. One of them is the amount of financing. For Ar-Rahnu Muamalat Bank, their
minimum financing amount is RM250 for Muamalat Gold-i (MG-i Account), 10
grams, and in multiples of 10 grams, such as 10 grams, 20 grams, 30 grams, and so
on. Meanwhile, the total maximum financing is RM1,000,000, RM500,000 for gold
jewelry, gold coins, and dinar gold bars, plus another RM500,000 for physical
Muamalat Gold-i (Perth Mint) Gold Bar and Muamalat Gold-i account. For Ar-Rahnu
Agrobank, they have an RM100 minimum limit for each funding account and an
RM100,000 daily maximum limit for each customer. We can see here, there are huge
differences between both banks in terms of the financing amount.
The margin in lending is the difference between the amount borrowed and the
value of the collateral used to secure the loan. For these two banks, there is little
difference in their financing margin. Ar-Rahnu Muamalat Bank provides up to 80%
financing margin based on the current value of gold items, also known as marhun
value, which means collateral. Following that, Ar-Rahnu Agrobank has a margin of
up to 75% of the current market value of the pledged gold. The margin difference
between the two banks is only 5%.
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5.0 SUGGESTIONS TO THE AR- RAHNU PROVIDERS TO IMPROVE THEIR
BUSINESSES AND OPERATIONS
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6.0 CONCLUSION
Ar-Rahnu is one of the unofficial forms of credit that, by offering fast cash as opposed
to the financing provided by established institutions, can meet the specific financing needs of
female microentrepreneurs. This study organized aspects that affect women micro-
entrepreneurs' decision to employ Ar-Rahnu as a financing medium, a technique that has not
been specifically mentioned in prior studies. The essential reasons motivating women micro-
entrepreneurs to utilize Ar-Rahnu services have been highlighted by the implementation of
Ar-Rahnu in the informal credit market theory. Shariah compliance, customer happiness,
collateral, geography, and service fees are a some of the topics that have been addressed.
One endeavour to improve the current products is the discussion of improving ar-
rahn. The goal of the procedure is to give consumers more options when using the debt-based
contract financing mechanism, not to replace the current product. The current Ar-Rahn
product will be improved when its potential is fully realised and it eventually develops into a
worthwhile alternative product in the financial markets. For the benefit of all parties
involved, this is just the beginning of an ongoing endeavour that has to be carefully evaluated
in the future.
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7.0 REFERENCES
Agrobank. (2020). Terma dan Syarat Pembiayaan Ar-Rahnu. Retrieved from Agrobank:
https://www.agrobank.com.my/wp-content/uploads/2019/07/TERMA-SYARAT-
PEMBIAYAAN-AR-RAHNU.pdf
Bank Muamalat Malaysia berhad. (2022). Banking. Retrieved from Malaysia International
Islamic Finance Centre: https://www.mifc.com/-/bank-muamalat
New Straits Times. (2019, June 21). Bank Muamalat to grow revenue from Islamic
pawnbroking. Kuala Lumpur, Malaysia.
Nik Hadiyan Nik Azman, M. Z. (2020). The Adoption of Ar-Rahnu and Financial Wellbeing
of Microentrepreneurs in Malaysia. International Journal of Academic Research in
Business and Social Sciences, 36-53.
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