An overview of the shariah issues of Rahnbased financing in Malaysia

Ever since the establishment of Islamic pawn broking (al-rahn) in Malaysia more than two decades ago, this kind of short-term microfinancing has now become a promising business. The increase in demand for al-rahn based products was contributed by some factors among others low storage charge, service efficiency, religiosity, attitude, low earning and so forth. Despite the positive growth of al-rahn from the demand side on the one hand, some issues have been identified in a number of researches from the other. One of them pertains to Shariah issues on the theory and practice of al-rahn. This paper is an attempt to study the Shariah issues theoretically in the aspects of custodial fee, conflict in the substance of combined contracts, benefitting from al-rahn, financing structure, transaction sequence and some other issues. In identifying and understanding the issues, the literatures will be reviewed and examined using content analysis. It is expected that this paper could shed some thoughts about the Shariah issues in alrahn-based products theoretically and practically