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 (2nd

ICBER 2011) PROCEEDING

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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: [email protected] [email protected]

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 Petani’s 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, gold’s 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 Gibbon’s word that loan portfolio equity, as the loans outstanding are a microfinance organization’s 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 AIM’s 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 CGC’s 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 Government’s 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 1990’s. 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 government’s 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 doesn’t 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 can’t pay their loan, pawn shop will do the auction for the customer’s 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 doesn’t 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 Good customer service 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 Islamic pawn broking (Ar 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 Minister’s 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.

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Agrobank.

Arrifin, M.I. (2005), Towards the expediency and leniency of Islamic finance through Islamic micro credit

financing. Prosiding Seminar Kewangan dan Ekonomi Islam: Pengukuhan dan Transformasi Ekonomi dan

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

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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

http://www.bnm.gov.my/

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

Journal of Social Economics, 24(11), 1343-1352.

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.

Proceedings of National Seminar in Islamic Banking and Finance: Islamic Wealth Management, Prospects, Issues

and Challenges, 29-30 August, Serdang, Selangor Darul Ehsan.20

Lao, J.J. (2005), Unexplained pawn pricing behavior: A study of Las Vegas pawnshops. MIT Undergraduate

Research Journal, 12, 45-53.

Mohamed Ishak Hj Badarudin Rais.(2007), The Demand of Pawnbroking Services: Evidence from Malaysia.

Available at: http://ibacnet.org/bai2007/proceedings/Papers/2007bai7490

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

in Malaysia, Journal of Yala Rajabhat University, Vol.2 No.1 January - June 2007

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

presented at the “Konvensyen Ar-rahnu Serantau” on 12th – 13th October: Kuala Lumpur

SME annual report (2006), National SME Development Council

Skully, M. S. (2005), “Islamic Pawnbroking: The Malaysian Experience". Paper presented at the 3rd International

Islamic Banking and Finance Conference 2005

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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 pawn broking(Ar Rahnu) 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



% of Total 6.0% 10.0% 16.0%

Total Count 51 99 150



% of Total 34.0% 66.0% 100.0%

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Table 4.2


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



35.7% 7.1% 16.7%

% of Total 11.9% 4.8% 16.7% Indian Count 3 18 21



7.1% 21.4% 16.7%

% of Total 2.4% 14.3% 16.7% Total Count 42 84 126



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%


33.3% 20.0% 25.0%

% of Total 12.5% 12.5% 25.0% Indian Count 6 12 18



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%


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


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


Yes 3 27 30



Yes 3 3

Total 3 3


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



Yes 3 3 6

No 3 3 6

Total 6 6 12

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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

Chinese Respondent's awareness of Islamic pawn broking(Ar Rahnu)

Yes 9 9

Total 9 9


Yes 6 6

Total 6 6

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Table 4.4 Respondent's total montly income

Respondent working status

respondent's race

Malay Chinese Indian Total Below RM1000 Employed by

Government Respondent's awareness of 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 Islamic pawn broking(Ar Rahnu)

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 Islamic pawn broking(Ar Rahnu)

Yes 3 3

Total 3 3

Above RM2000 Retired Respondent's awareness of Islamic pawn broking(Ar Rahnu)

Yes 3 3

Total 3 3

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Table 4.5

How did respondent know about Islamic pawn broking(Ar Rahnu)

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

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Table 4.6

Respondent's age

18-25 26-35 36-45 46-55 55 above Total Respondent's awareness of Islamic pawn broking(Ar 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


Yes 6 27 9 3 45 No

0 3 3 0 6

Total 6 30 12 3 51


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

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Table 4.8

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

Medical expenses

Pressing bills

Personal expenses Debt Others Total


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 pawn broking(Ar Rahnu)

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 Good customer service 150 3.68 located in convenient place and nearer to home

150 3.10

Low income 150 4.34 Valid N (listwise) 150

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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 Islamic pawn broking(Ar Rahnu)

-.003 .080 -.003 -.032 .975

Good customer service in Islamic pawn broking (Ar 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

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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


Yes 9 9 18 48 42 126

Total 9 9 18 48 42 126

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A Study on Islamic Pawn Broking Awareness and Factor That Influencing the Scheme in SP

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