Nowadays people need cash to live as all transaction in daily life need to pay in cash. However not all people are affordable like others. So assessing credit facilities seems to be essential to most people around the world. However to lend from financial institution they need to fulfill the requirement that the institution affirmed. For those who meet the requirement, it means that they were given a backup financial assistance when needed. However in getting the support one need to pay for its services. For some financial institutions the amount would be reasonable but for some others it would be much higher. As in Malaysia government are initiated an Islamic version financial instrument that can be used by community peacefully to avoid community from the burden apply by conventional financial institution when they apply for financial assistance. Islam as a way of life views the need to help others as one of the responsibilities that need to be address collectively.
As such one of the instrument been initiated by Malaysian Government was the establishment of Islamic Pawn broking (Ar-Rahnu). Islamic Pawn broking (Ar-rahnu scheme) means a pledge or a security related to a loan. Under the Shariah views, Al-rahnu is by definition is a possessing a guarantee. The Quran refers to the idea of mortgage as 'mortgage with possession' (rihanun maqbudha). Quran also supports the idea of furnishing a pledge against a debt. Further explanation by Khan and Nisar (2004) refers Ar-Rahnu as an arrangement whereby a valuable asset is placed as collateral for a debt. The collateral may be disposed off in the event of default. Al-rahn is the agreement to deliver the customer's asset for collateral to the bank.
The establishment of Ar-Rahnu scheme by Bank Kerjasama Rakyat Malaysia is purposely designed for giving alternative to the Muslim especially during their hardship by giving them the debt with collaterals. The important of helping the needy especially the poor has long been emphasized in much of Islamic faith. It is through the concept of Ar-Rahnu, the institution like Bank Rakyat offers a much convenience Islamic micro credit financing that provides service that is governed by Syariah rules which prohibit the charging of the interest. The development of Ar-Rahnu is to cater the Muslims who want to have an alternative pawn broking service which is in accordance to the Syariah principle. It is because, some Muslims may not use the conventional pawn broking service due to the forbidden of interest or riba element in conventional pledging for mobilizing and disbursing funds. Ar-Rahnu scheme not only free from any riba element, but it also offers with a reasonable fee charges. The main idea of providing this financial instrument is to make the life of the needy getting better.
1.1.1 History of Islamic pawnshop
Pre Islamic Era
Pawning has been a popular practice since pre-Islamic era. Among the most popular pawnbroker is Abdullah bin Judan. His business operation has exploiting the poor community by charging a high rate of interest. This is why he seemed to accumulate a lot of wealth.
During the prophets' time
Since the earliest period of Islam, the Muslims had practiced Ar Rahn for fulfilling their immediate financial need. They placed their jewellery as collateral in getting cash to fulfill their need, especially during emergency purposes. They will take back their collateral upon paying the debt for some important purposes. Adding the prophet himself has practiced Ar Rahn. In a tradition narrated by Aishah (r.a), the Prophet Muhammad (s.a.w.) in a bargain with a Jew for grain gave his coat of mail in pledge for the payment (Mohd Saufi 1990, pg. 6).
Pawning in pre-Islamic era is based on riba and motive of gain a lot of profit while during the Prophet time their main intention is to help the needy Muslims. During pre-Islam, any pawner who is unable to claim back his pledge in the specified period, the pledge will be taken by the pawnbroker as payment to the debt. This practice seems to exploit the needy people. In the Islamic perspective, Ar Rahn is a part of trade which is based on the principle quoted from Al- Quran, Hadith and the Opinion of Ulama. The concepts have been properly quoted by Muslim jurist so that it will outlying from the element of riba, injustice and exploitation over the needy Muslims.
Historical Perspective of Pawning In Malaysia
Pawnshops in Malaysia started to increase since the advent of tin mining in Larut during the mid 19th century. The Chinese who were successful in tin mining reinvested some of their accumulated savings by money lending through the pawn broking trade whereby the sole right of running the business were given to the heads of Kangchu Settlements (Rugayah Muhammad 1988, pg. 1).
The pawn brokers who are of Chinese origin are believed to be from the Tai Poh Khik or Hakka clan. In 1993 there are 188 pawnshops in the country. Perak with a total number of 38 pawnshops has the highest concentration of Pawnbrokers in the country.
Syariah banking concept
Al-wadiah (savings with trust/guarantee)
Al-Wadiah refers to agreement where customers deposit money in the Bank, and the Bank becomes wholly responsible for its safekeeping. As wadiah is a trust, the depository becomes the guarantor and, therefore guarantees repayment of the whole amount of the deposits, or any part thereof, outstanding in the account of depositors, when demanded. The depositors are not entitled to any share of the profits but the depository may provide returns to the depositors as a token of appreciation (Overview of Islamic Banking in Malaysia, n.d.).
Al-mudharabah (profit-sharing)
Al-Mudharabah refers to an agreement where customers deposit capital in the Bank, and the Bank becomes wholly responsible and liable in the management and investment the deposits in halal business ventures. Profits gained will be divided and distributed accordingly, based on margins agreed upon earlier. In the case of losses, the losses are borne by the provider of the funds (Overview of Islamic Banking in Malaysia, n.d.).
Bai-bithaman ajil (deferred payment sale)
Bai-Bithaman Ajil refers to the sale of goods on a deferred payment basis at a price which includes a profit margin agreed by both parties. In fact, it can be implicated in any sale contract, including sale contract, including musawamah, and murabahah (Khairuddin Zakaria, 2011).
Bai-al'inah (immediate cash)
Bai- Al'Inah refers to the selling of an asset by the Bank to the customer through deferred payments. At a later date, the Bank will repurchase the asset and pay the customer in cash terms at a discount. It can also be applied when a seller sells an asset to a buyer on a deferred basis. A seller will later buy back the same asset on a cash basis at a price, which is lower than the deferred price (Sharia UMEX, 2010).
Al-musyarakah (joint venture)
Al-Musyarakah refers to a partnership or joint venture for a specific business purposes with a profit motive, whereby the distribution of profits/losses will be apportioned according to the capital contributed. In the event of losses, both parties will share the losses on the basis of their equity participation (Overview of Islamic Banking in Malaysia, n.d.).
Qardhul hassan (benevolent loan)
Qardhul Hassan refers to an interest-free loan. The borrower is only required to repay the principal amount borrowed, but he may pay an additional amount at his absolute discretion, as a token of appreciation. It is however legitimate for a borrower to pay more than the amount borrowed as long as it is not stated or agreed at the point of contract (Sharia UMEX, 2010).
Al-ijarah thumma al-bai' (hire and purchase)
Refers to two contracts undertaken separately and subsequent as follows:
Al-Ijarah contract (hire)
Al-Bai' contract (purchase)
Under the first contract, the customer hires the goods from the Bank at an agreed rental amount over a specified period. Upon expiry of the hiring period, the customer enters into a second contract to purchase the goods from the Bank at an agreed price. (Bank Rakyat, 2011).During the period of the agreement, the bank owns the goods (Affin bank, 2010)
1.1.3 Basis in the shariah
Pawn broking is permissible in Islam based on the injunctions found in Al-Quran, Sunnah and Ijma" of Ulama.
Al-Quran
Allah says in the Holy Quran in Surah Al Baqarah verse 283: "If ye are on a journey, and cannot find a scribe, rahn maqbuda or pledge with possession (may serve the purpose)."
Al-Sunnah
In a tradition narrated by Bukhari and Muslim, the Prophet Muhammad (s. a. w) had pawned his coat of mail to a Jew, (Abu al-Shahmi) as collateral for a price of thirty gantang of grain that he had borrowed for his family (Hughes 1982, pg. 32).
Ijma" of Ulama"
Majority of Ulama have agreed that Ar Rahn is permissible in Islam even not in a journey and it is also permissible to do rahn with a non-Muslim provided that there is no element of riba involved (Ibid, pg. 32).
1.1.4 Term of Ar Rahn
Rahin - is a person who gives a rahn while in the existing system he is called the pawner.
Murtahin - is a person who takes a rahn while in the existing system he is called the pawnbroker,
Marhun is the property that is made into a rahn.
Marhun bih - loan extended to Murtahin by Rahin.
Sighah - How the offer and acceptance are made.
Background of the company
Bank Rakyat was established in September 1954 under the Cooperative Ordinance1948, following an expansion of the cooperative movement in Peninsular Malaysia. To facilitate the expansion of the cooperative movement, the co-operatives set up their respective union banks provide financial needs to their members. On 28 September 1954, 11 of these union banks decided to merge and form Bank Agong (Apex Bank).In 1967, Bank Kerjasama Malaysia Berhad replaced Bank Agong with its membership opened not only to the cooperatives, but also to individuals. Subsequent changes in the by-laws also resulted in the creation of its subsidiary companies and opening of branches to serve customers as well as members.
On 6 January 1973, the name was changed to Bank Kerjasama Rakyat Malaysia Berhad or better known as Bank Rakyat. Bank Rakyat is governed by its laws and Bank Kerjasama Rakyat (M) Berhad Act 1978 (Special Provision 202), which allows Bank Rakyat to provide financing to non-members (Bank Kerjasama Rakyat, 2011). In 1989, Bank Rakyat was placed under the Ministry of Land and Co-operative Development and the Ministry of Finance. In 1993, the Cooperative Act was reviewed which allows the Bank to operate in Sabah and Sarawak.
On 8 May 1993, Bank Rakyat took a giant step towards becoming a syariah co-operative bank by introducing Islamic banking products at four of its branches. Bank Rakyat became a full-fledged Islamic cooperative bank in 2002. Hence, with this major decision, Bank Rakyat marked another milestone in history where it became the third bank to offer total Islamic banking products in Malaysia (Bank Kerjasama Rakyat, 2011). On 15 February 2002, Bank Rakyat together with six other financial and development institutions was placed directly under the supervision of Bank Negara Malaysia (Central Bank of Malaysia) under the Development of Financial Institution Act (DFIA).
On 27 March 2004, Bank Rakyat was placed under the supervision of the Ministry of Entrepreneur and Cooperative Development. On 15 April 2009, after the cabinet restructuring, Bank Rakyat was absorbed under the Ministry of Finance and was later placed under the Ministry of Domestic Trade, Co-operatives and Consumerism. To date, Bank Rakyat has a total of 127 branches offering Islamic banking facilities to its customers (Bank Kerjasama Rakyat, 2011).
1.2.1 History of ar-rahnu product (Bank Kerjasama Rakyat Malaysia)
The Bank Kerjasama Rakyat Malaysia Berhad ar-rahnu scheme was introduced in 1993. It was first introduced in six branches but now there are 112 branches (including Kedai Ar Rahnu) operating throughout Malaysia. The bank had also opened the first stand alone Kedai Ar-Rahnu in Kota Bharu, Kelantan in June 2000. These schemes are more of a social oriented to customers. It is not for profit and thus, the customers will benefit from it. A fee for safekeeping the goods is collected based on the value and the pawning period (Azila Abdul Razak, Malaysia Practices of Ar-Rahnu Scheme: Trends & Development, n.d.).
The scheme is open to Malaysian residents aged 18 and above and not more than 65years old. Only gold jewellery is accepted as collateral. Loans for the pawned goods will not be more than 50 percent of the goods value. Maximum loan is RM5, 000 for each time or a cumulative worth of RM25, 000 for each customer. Pawning period is only six months, which may be extended for another three months.
If the customer fails to claim the goods, the bank will send a notice to auction off the goods. The bank will subtract the loan amount, fees for safekeeping and other costs involved in the auction process from the auction profits. Then the balance will be given to the customer. A week before the six month period, the bank will send the first reminder. After six months, a second reminder will be issued. After the third reminder, if the customer is unable to claim the goods, the pawnbroker will disposed the goods by auction to the licensed auctioneer.
1.2.2 Clarification
The procedure begins from the workflow of supply logistics to safekeeping to workflow of acid testing, sell-off and steps to undertake in the event of emergency and crisis management.
Term and condition for applicant eligibility
Malaysian citizen of age 18 years old and above
For applicants age 65 and above, the shop outlet must ensure and check authenticity and purity of gold valuables to guarantee value and quality.
Not a bankrupt and mentally incapacitated or retarded (not inebriated, drugged or under hallucinatory state or drunk while conducting transaction)
The applicant should recide in the vicinity of the operating outlet and is readily contacted
Staffs of Ar-Rahnu X‟ change inclusive of spouses, parents and children are not allowed to apply for pawning facilities
(Bank Kerjasama Rakyat, 2011).
1.2.3 Types of ar-rahnu product
Ar-Rahnu
This scheme provides a source of immediate financing to assist individuals in overcoming cash-flow needs.
Quantum of Financing:
Financing up to 70% of the pawned gold value (Marhun value)
Each pawned item not exceeding RM10, 000.00 per day and a cumulative amount not exceeding RM50, 000.00.
Repayment Period:
Financing tenure: 6 months only
Extension period : 6 months (multiple extensions) subject to settlement of safekeeping fee for the past 6 months
Pawn Products:
Gold jewellery 18K - 24K
Fees:
A minimum fee is charged for the safekeeping of the valuables.
Type of Scheme
Financing Amount
Safekeeping fee for every RM100.00 of gold value per month
Ar-Rahnu
RM100.00 - RM1,000.00 RM1,001.00 - RM10,000,00
RM0.65
RM0.75
(Bank Kerjasama Rakyat, 2011).
Az-Zahab
An extension of the Ar-Rahnu scheme, Az-Zahab also offers instant cash to overcome financial needs. This facility offers a higher facility amount and a longer repayment period.
Quantum of Financing:
Financing up to 70% of the pawned gold value (Marhun value)
Each pawned item exceeding RM10,001.00 and a cumulative amount not exceeding RM100,000.00
Repayment Period:
Maximum 36 monthly installments or
Lump sum payments for a 6 months period
Acceptable Items:
Gold jewellery 18K - 24K
Fees:
A minimum fee is charged for the safekeeping of the valuables.
Type of Scheme
Financing
Safekeeping fee for every RM100.00 of gold value per month
Az-Zahab
RM10,001.00 - RM100,000.00
RM0.75
(Bank Kerjasama Rakyat, 2011).
Problem statement
As we know currently Malaysia are in developing country phase. Therefore the rate of poverty is still higher especially among rural part of the country which is dominated by Malay Muslim community. Their immediate source of financing mostly comes from the traditional money lenders or by pledging their jewellery to the pawnbrokers .Pawning appear to be popular among them since unlike organized financial institutions, they provide easy credit to clients, especially those who come from the lower income level. This source is found to be easily available and does not require long procedures as compared to the organized financial institutions. However, the conventional pawnshop were more motivated on making profit from the needy and indeed oppressed and put a burden on the lower income group. Besides that it also against the shari'ah practices (Azila Abdul Razak). The concern over higher interest rates, usurious and exploitative activities by conventional pawnshop makes customers choose to deal with Islamic pawnshop (Azila Abdul Razak).
A pawnbroker is an individual or business (pawnshop) that offers secured loans also known as people or business who making advances of ready cash to people, with items of the pledges which are personal property mainly gold and jewellery are held as collateral until the period of redemption expires. The word pawn is derived from the Latin pignus, for pledge, and the items having been pawned to the broker are themselves called pledges or pawns, or simply the collateral. If an item is pawned for a loan, within a certain contractual period of time the pawner may purchase it back for the amount of the loan plus some agreed-upon amount for interest.
The amount of time, and rate of interest, is governed by law or by the pawnbroker's policies. If the loan is not paid (or extended, if applicable) within the time period, the pawned item (collateral) will be offered for sale by the pawnbroker. Pawnbroker has physical possession of the item and may redeem the loan value through outright sale of the item (the collateral). The pawnbroker also sells items that have been sold outright to them by customers. The existing system of pawning has created a great deal of exploitation in human life. The existing system is biased towards the pawnbrokers and it creates exploitation and injustice to the pawners/borrowers. In addition, the borrowers were burdened with the high interest rate imposed on the loans that used conventional system.
Realizing the need of Muslim community towards Islamic pawn broking in Malaysia, efforts were taken by certain authorities like government and public company in making the Islamic approach in micro credit financing more practicable. Realizing the increasing popularity, relative usefulness and contribution of Islamic pawn broking as means for financial assistance, this paper proposed a comprehensive investigation by evaluating awareness and factors which influence the acceptance of customers at Ar-Rahnu Bank Kerjasama Rakyat Malaysia.
1.4 Objective of the study
The main concern of this paper attempted to investigate factors contributing customer to accept and awareness of Ar-Rahnu as their Islamic Pawn broking. Specifically, the investigation is expected to achieve the following objectives:
To measure public/customer awareness toward Islamic pawn broking (ar-rahnu) product?
To examine the strength of relationship and significant level between the selected variable such as gender, age, race, education background, working status, income level and marketing tools.
To measure public/customer acceptance toward Islamic pawn broking (ar-rahnu) product?
To examine the strength of relationship and significant level between the selected variables such as storage charge, service quality, locality and management with the acceptance of Ar-Rahnu.
To make comparison between the existing system of pawning (conventional) and Ar Rahn.
To investigate whether ar-rahnu scheme are prevent from higher interest rates, usurious and exploitative activities like conventional pawnshop.
To certify whether ar-rahnu scheme are following shariah rules.
To examine ar-rahnu scheme are giving better service in the pawn broking business as to achieve justice between both parties; the pawnbrokers and the pawners.
1.5 Research Question
The study has come out with some research question to be asked and tested at the end of the study. This will determine the reliability of the finding of this research. The research questions are as follows:
What is the level of public awareness towards ar rahnu product?
What is the relationship between gender and customer awareness toward ar-rahnu?
What is the relationship between age and customer awareness toward ar-rahnu?
What is the relationship between race and customer awareness toward ar-rahnu?
What is the relationship between education background and customer awareness toward ar-rahnu?
What is the relationship between working status and customer awareness toward ar-rahnu?
What is the relationship between income level and customer awareness toward ar-rahnu?
What is the relationship between marketing tools and customer awareness toward ar-rahnu?
What are the significant factors that influence people toward ar-rahnu scheme?
What is the relationship between storage charge and customer acceptance towards ar-rahnu?
What is the relationship between service quality and acceptance towards ar-rahnu?
What is the relationship between locality and acceptance towards ar-rahnu?
What is the relationship between management and acceptance towards ar-rahnu?
What is the difference between conventional and Islamic pawning (ar-rahnu) system?
Does the ar-rahnu scheme solve customer problem over higher interest rates, usurious and exploitative activities that face by conventional pawnshop?
Does the ar-rahnu scheme follow the rules according to sha'riah law and principles?
1.6 Significant of Study
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 (ArRahnu) to make further research to study the extent of awareness and 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.
1.7 Scope of Study
This research is concern on the issue to identify the level awareness and public/customer acceptance of the existence Islamic pawning (ar-rahnu scheme). Factor influencing customer awareness will evaluate based on the variables such as gender, age, race, education background, working status, income level and marketing tools. Furthermore factor influencing customer acceptance is estimate according to variables such as storage charge, service quality, locality and management. Respondents are customer and staff of Bank Kerjasama Rakyat Malaysia Greentown Branch which will randomly select. The total number of questionnaires will be distributed to the respondent from 1st November until 9th November 2012. Completed and usable questionnaires were collect from the public are ready to be evaluated.
Limitation of study
Time constraint
The time given is limited and not sufficient in order to conduct this research. Besides, we cannot give fully attention to complete this research since we are tight with responsibilities doing our internship at the same times doing research but still trying to produce a good quality of research.
Financial Constraint
A large sample size will require a bigger financial allocation in order to get satisfactory. For example, we should distribute a lot of questionnaire to respondents.
Man power
Basically, this study is an individual project and all things related in this report/research will be find and organize individually. So, there will be a limitation of man power.
1.8.4 Unavailability of the data
Another constraint is the unavailability data from the respondents, where the researcher is not able to know whether respondents are honest in their answers. This can affect the validity of the result.
CHAPTER 2: LITERATURE REVIEW
2.1 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.
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, Race, Education background, Working status, Income level and Marketing tools
2.1.1 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)
2.1.2 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.
2.1.3 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.
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).
2.1.4 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).
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)
2.1.5 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.
2.1.6 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).
2.1.7 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)
2.2 Factors influencing customer acceptance toward 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. According to Naylor and Greco (2002), customer acceptance begins with clear, operational definitions from both the customer and the organization. Understanding the motivations, expectations and desires of both provide a foundation in how to provide best services to the customer by most businesses. Hence factors that be chosen for this research are Store charge, Service quality, Locality and Management
2.2.1 Storage charge
It is important to have Islamic pawnshop that offered competitive rate to reflect the average pricing system in the market. Referring to the relative importance of the concept, Ar-Rahnu itself is the contract of Tabarru' which is welfare contract where it is known to operate as the donation of money lending without any earning of profit by pledging the particular items as collateral. The expenses for keeping the pledged items are based on their value.
Lending a loan to customers is a form of "Sadaqah" (donation) as well as giving a valuable item to the lender as collateral also is a "Sadaqah" (Naim, 2004). Based on Johari, Sanusi and Rais (2007), most of pawn broking customers are individuals who do not have access to a formal financial system. Prior study done by Razak (2008) shows that the concern over higher interest rates, usurious and exploitative activities imposed by the conventional pawnshop makes the customers choose to deal with the Islamic pawnshop. The conventional pawnshops had indeed oppressed and put a burden on the lower-income group.
2.2.2 Service quality
The conceptualization and measurement of perceptions of service quality found to be highly debatable and controversial especially in services-marketing literature (Caceres et. al., 2007; Brady and Cronin, 2001; Zeithaml, 2000; Zins, 2001; Rust and Oliver, 2000). Due to the nature of services which are intangible, the processes of accessing quality among consumers are highly subjective. Such perceived service/ product quality has been referred as unstable or keep on changing (Parasuraman et al, 1985) and thus research development relative to the construct is still considered remain unsolved (Carhuana et. al, 2000).
While understanding the importance of other elements such as employee's performance, layout of the working area, but the most importance factor still emphasized the service quality rendered by the provider (Norudin Mansor, 2010). Mohammed et al (2005) mentioned the important 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 "Syariah" view concern. Research done by Amina et al (2007) revealed that customer service is significantly associated with the acceptance. Indeed, this result offer points for local authority and businesses to consider.
2.2.3 Locality
The location decision always remained important as the organization agreed to commit resources before operating the services. In addition the choice of location will affect the growth and sustainability of a given business (Mc Daniel et.al. 2011). Though the nature of services like Islamic Pawnshop may not involved intense competition but still it need to be carefully located by considering traffic flows, land costs, zoning regulations, parking availability, and also the public transportation. Ismail and Ahmad (1997) materialized the important of location for setting up pawnshops business and verified that pawnshops are highly unevenly distributed across the Malaysian states, with 40 pawnshops in Perak.
They also argued that the barriers to entry into pawn are small. Specifically, most of the pawnshops are built in the town areas to facilitate the customer of doing transactions. On the basis of these studies, the present study has proposed the "locality of Islamic-based pawnshop" and tests it in the study model. Locality has a major impact upon virtually all products, services, markets and customers. In another perspective mentioned by Malhotra (2007), the selection of business locations are depending on types of business itself.
2.2.4 Management Practices
David (2001) identified that management is the organizational process that includes strategic planning, setting objectives, managing resources, deploying the human and financial assets needed to achieve objectives, and measuring results. Management also includes recording and storing facts and information for later use or for others within the organization. Management functions are not only limited to managers and supervisors, but the whole organization include all staff also involve in management functions. Every member of the organization has some management and reporting functions as part of their job.
The main concern of Islamic perspective of management is to create Muslim cultural mould which will further act as a medium to change and acculturate Muslims throughout the world by offering alternative approach to management. It should operate within the moral context of Islam (Khaliq Ahmad & Fontaine, 2011). According to Appannan and Doris (2010), 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), alwadiah yadd hammanah (keeping valuable goods by guarantee), al-ujrah (storage fees) and ar-rahn (collateral). Marry Parker Follet who is an early management scholar offered what is come to be known as the classic definition when she described management as the art of getting things done through people.
