AL-RAHN

DEFINITION
LITERALLY
Constancy and continuity, or holding and binding
Technically
Taking a property as a security against a debt, whereby pillars the secured
property can be utilized to repay the debt in the case of non payment
Also termed as pawning, mortgage, collateral, charge, lien and
pledge
Rahn literally means to detain a thing. Legally, it is the detention
of a corporeal property on account of application a claim such as a
debt which may be satisfied out of that property
 NATURE OF AL-
RAHN
Al-rahn in Arabic means al-tsubut wa al-dawam (fixed definition and
eternal)
Rahn is classified as a it does not require any financial evidences obligation
on the part of murtahin (creditor) when the rahin (debtor) gives him the
pawned object
The purpose of rahn is to convince the creditor that the pillars debt will not
simply disappear or vanish in case of default payment on part of the debtor
This is because, in case of non-payment, the pledged property will be sold
or auctioned and the proceeds will be taken by the creditor to compensate
for the losses as a conditions result of the bad debt
However the creditor is only entitled to the total amount application owed
to him by the debtor and the balance will be returned back to the owner of
the pledged property ( the debtor)
 PILLARS OF
RAHN
Rahin
Pledgor a person who gives rahn/ the debtor
Murtahin
Pledgee a person who takes rahn/ the creditor pillars
Marhun
Pledged asset a property to be pledged
Marhun Bih
The liability of rahn/ the debt
Sighah
Ijab (Offer)
Qabul (Acceptance)
 THE USE OF PLEDGE BY THE
PLEDGEE
The pledge is considered a trust in the hands of the pledgee. He is
responsible for its safety and preservation. However, he is liable if the
pledged property is damaged or destroyed as a result of his negligence
Pledge is intended to be a security for the payment of debt. It is not meant
for investment and profitable use. As such a pillars pledgee is not allowed
to exploit or use the pledged property even with the permission of the
pledger
Exploitation of the pledged property is prohibited based on the principle
that all loans that generate profit are usurious
Thus, exploitation and profitable use of the pledge is considered usury
However, if the pledge is an animal that can be used for application riding
or milk, the pledgee may make use of it in return for its maintenance
 BENEFITS OF AL-
RAHN
Creditor/Pledge
a) Compared to the contract of kafalah, documentation of debt PILLARS or
providing witnesses, all these measures can never match security that
Rahn provide for benefit of creditor
b) Rahn is form of authentication of debt, which is under the benefits custody
of the creditor in return for his right claiming back his money from the
debtor conditions
c) In case of default payment, the creditor could secure the loan repayment
can retrieve back his money by selling off the pledged property with the
consent from either the court or application the debtor himself
d) The creditor can also be assured that the debtor will not forget or take for
granted to settle the loan since his valuable assets are still under the
custody of the creditor/pledge
 BENEFITS OF AL-
Debtor
RAHN
a) Could get some fast cash by temporarily pledging his valuable items to the
creditor
b) Can convince the pledgee/creditor to lend him the money since he has
something to offer in return as a pillars guarantee of payment
 COMPARISON
AL-RAHN PRINCIPLES CONVENTIONAL
PAWNING
Institution based eg: banks, OPERATOR Sole proprietor based
YAPEIM, state government Individual based
agencies etc
Monthly safekeeping charges CHARGES Interest is charged
No interest charges More expensive rate
Cheaper
Only pure gold accepted ITEMS Any valuable items
Gold plated items are not
acceptable

Takaful coverage INSURANCE Not covered

If the pedged items are lost,
only a 25% compensation is
offered
 COMPARISON
AL-RAHN PRINCIPLES CONVENTIONAL
PAWNING

Up to 60%-70% of the value PAWNING VALUE Valuation is much lower than

Valuation based on the current the market value
market value Average 30.5%

Must provide proof of OWNERSHIP Not required to provide proof

ownership of ownership

Pledged items will be auction DEFAULT Not transparent publicly

publicly
Transparent and notice will be
sent

The balance after the auction BALANCE AFTER The balance after the auction
will be returned back by the will not be returned back by
companyto the pledger AUCTION the companyto the pledger