Head of Department of Shariah and Economics, Academy of

Islamic Studies, University of Malaya, explain some of the other things that xoppress and harm the
borrower. According to him, the pawn dealers charge on receipt of charges. Actually, the mortgagee
may be the receipt for free when applying for a deferment. However, there are bold traders take
advantage of pawn charge 50 cents for each copy of the receipt of the nextcharge.

The Act does not require the provision of receipts for pawned goods unless the holder want to
surrender the pawn ticket. It also does not require the dealer to show clearly on the receipts the
interest rates charged or explain to the borrowers who are illiterate. Simply

because the pawn business is not closely monitor. In fact the Act does not set the controls or
regulations on the auction event for unredeemed pledge or pawned item .Furthermore, the pamned
item to be auctioned is not displayed for public review.

Furthermore, six months is a very short period to redeem the

pledge item if the amount borrowed is huge. The Act also limits the pawn dealer to provide the
maximum loan to borrower to RM5,000. Any amount above that, the pawn dealer need to be a
licensed moneylender. The contract does not expire or become invalid mortgage even if the
borrower dies. Successors will replace them. If the heirs are still young or going abroad, the
beneficiary can

sell the property with the consent of the mortgagee charge. It can be used to settle debts of the
deceased.

In addition, the lenders also exposed to other risks. In Klang recently, a pawn shop was raided and
jewelry worth RM50,000 were seized by the local authorities due to illegal pawn shop operation. The
syndicate was believed to have bought at a higher rate than the market but also impose a higher
interest rate that is 5 % instead of 2 % per month. The borrowers will receive a receipt that says his
name and date of the transaction, without other important information such as the identity card
number and phone number. The redemption period is only 3 months. Failure to redeem, the items
will be auction without the owners' knowledge. This activity is definitely illegal. Unfortunately, the
local authorities cannot take action since there are not many information about this type of
pawnshop owners.

Other than that, the pawnshops do not accept payment in installments. The borrower must pay the
full amount of RM1,000 plus interest within a specified period. Failure to pay means loss of
collateral. How do pawnshops make a profit? Assuming the actual charge is RM1,500 but valued
RM800, pawnshops may give loans RM300. If the borrower fails to redeem, the oss of RM1,500 -
RM336 = RM1,164 . Pawnshops profit from high interest rates and extra

fees charged on transactions with borrowers.

Fortunately, under the Islamic system, Islamic pawn broking business (murtahin) do not charge
interest (usury/riba). The gain obtained is of the fees keep the assets pledged. For example, if the
charge is RM1,000 or less, the fee charged is safe (RM1,000 / 100 ) x 40

cents, or RM4 per month. Typically, about half of the value of the security given to the borrower
(rahin) as a loan without interest. Thus, a loan of RM500 payable within 6 months will be charged a
fee of RM4 x 6 = RM24.

To redeem, murtahin rahin have to pay RM524. Rahin may seek an extension of the repayment
period but have to pay additional storage fees. If rahin still fails to pay, the right to auction off
murtahin pledged assets. Murtahin will claim what is due to the remaining ceded

to rahin. If rahin cannot be located, the remainder will be given to the treasury. Rahin can claim their
rights of the treasury in the future.

Murtahin rahin cannot sell assets for investment purposes and profit alone. Murtahin can earn
revenue from asset store not profit from the use of the asset. If this happens without the knowledge
or consent of rahin and if it is a loss, murtahin must take responsibility for the loss.