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Sunday, December 13, 2009

Ar Rahnu -- An Alternative And Easy Source Of Credit

By Salbiah Said   |  KUALA LUMPUR, Dec 13  09  |  Bernama  

Mention pawnbroking and you will imagine the destitute who use this service to raise money.

But Bank Rakyat plans to remove this stigma attached to the industry by promoting the Islamic concept of pawnbroking called Ar-Rahnu through its wholly-owned subsidiary Rakyat Management Services Sdn Bhd.

Ar-Rahnu was introduced as an alternative and easier source of credit, with gold as collateral in exchange for cash. It ensures privacy for the customer as against the conventional pawnshop, which handles the business openly.

"This system (Ar-Rahnu) provides for transparency, privacy and security," Mohamad Sabri Nor, general manager of Rakyat Management Services, told Bernama recently.

"It can also turn borrowers away from Along (loan sharks) or unlicensed pawnbrokers," he said after giving a talk on the Ar-Rahnu scheme managed by Rakyat Management Services at Bernama's Centre of Excellence recently.

Ar-Rahnu is an Islamic-based pawnbroking 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.

As an example, under the conventional pawnbroking system, an individual who pawns a gold chain worth RM1,000 will only be given a loan of RM600, which carries a two per cent interest or RM13 a month.

"We only charge 65 sen for every RM100 worth of valuables kept. For a gold item worth RM1,000, we only charge RM6 a month for safekeeping, a big difference from the conventional system," said Mohamad Sabri.

"Among the advantages are premises and items kept are protected and insured. In case of losses or untoward incidents, reimbursements will be made based on the value of the lost items."

"In the initial stages, it was rather difficult to convince our customers. However, they have now realised that there are more benefits to be derived from Ar-Rahnu," he said, adding that all tests to determine the value of gold items were conducted in front of the customer.

"This business is only open to cooperatives and not for individuals and those planning to set up the business should not worry if they don't have the knowledge about gold. We will help them," said Mohamad Sabri.

Bank Rakyat's Ar-Rahnu scheme had its roots in 1993 through capital injection from the Islamic Economic Development Foundation, Malaysia (YAPEIM). The foundation, which was the pioneer of Ar-Rahnu, received funds from the various state religious councils, which in turn channelled them to Bank Rakyat.

During the early years, Bank Rakyat had only six Ar-Rahnu outlets under the supervision of Bank Negara as advisor.

To date, Rakyat Management Services operates 15 Ar-Rahnu outlets under the Ar-Rahnu X'Change brand, with the tagline "Gold For Cash". Of the total, seven are owned by Bank Rakyat while another eight are franchise-based.

"My only advice to businessmen is you can use your valuables as capital. This is the quickest and easiest way of financing your projects," said Mohamad Sabri.

"Those who visit pawnbrokers are still shunned by society. The mere mention of the word 'pawn' is strictly forbidden and it's taboo for them. But this is slowly changing as more people are aware of the benefits of Ar-Rahnu."

"What's important is that these customers have assets and they are using them in times of need. They should not be ashamed as they are not purely taking loan, but have valuables as collateral for cash. This is the message that we want to drive home to the people," he said.

Rakyat Management Services, which has some 300,000 clients, also plans to open five Ar-Rahnu outlets every year to cater to the demand, said Mohamed Sabri.