Authors : Zamzuri Zakaria, Rosliza Abdul Latif, Salmy Edawati Yaacob and Mat Noor Mat Zain
Abstract: Al-rahn scheme or Islamic Pawnbroking and conventional Pawnbroking play significant role in helping people for getting short-term loan easily, quickly and at affordable rate. However, based on the type of complaints received by the ministry of housing and local government and also by the National Consumer Complaints Centre, there are common mistakes committed by the pawnbrokers related to the collaterals safety which could lead to customers losses. Therefore, this study aims to compare the ability of Al-rahn scheme and conventional Pawnbroking to guarantee security of the gold as collateral. The basic criterias in measuring the ability of both institutions are protection insurance compensation payment for loss or damage of the collaterals license authorization to running Pawnbroking business and auction notice procedures. The approach used are library research and interview. The study found that both Al-rahn scheme and conventional Pawnbroking are capable in ensuring the security of the collaterals for taking insurance and operating with a valid license. However, Al-rahn schemeis better for customer for its more fairer compensation which is calculated based on the amount remaining after deducting the amount ofthe loan and keeping charges before loss occurs regardless ofany reason. Where as for conventional Pawnbroking, compensation valueis calculated as a quarter more than the amount of loan given. In addition, the auction notice procedures of Al-rahn schemeis more clearer and effective which is customer will be notified about the auction of the unredeemed collateral regardless of the loan amount through official letter, phone calls or short messaging services before the expiry of the maximum 10 months. If thesale price exceeds the amount of loan, the institution will refund the excess to the pawner. Meanwhile for conventional Pawnbroking, only collateral for a sum exceeding RM 200.00, customer will be notified by registered letterat least 10 days before the auction date. Collateral that are less RM 200.00 will be owned by Pawnshop automatically. Usually customers are not informed of the auction as Pawnbrokers does not auction the goods off and takes possession of the goods instead. There were also complaints that Pawnbrokers do not return the surplus to the pawners after the goods have been auctioned off.
Zamzuri Zakaria, Rosliza Abdul Latif, Salmy Edawati Yaacob and Mat Noor Mat Zain, 2013. The Ability of Al-Rahn Scheme and Conventional Pawnbroking to Guarantee Security of Gold as Collateral. International Business Management, 7: 426-431.