Unleashing the Ar-Rahnu as a Micro-Financing Instrument for Micro-Entrepreneurs in Malaysia

Abstract

The purpose of this paper is to compare the Islamic micro-financing and Ar-Rahnu. Using the content analysis approach, the paper examines the reports of micro-financing provided by Bank Negara Malaysia and comparing the rate with Ar-Rahnu. To validate the content analysis facts and to reveal the actual behavior and perception of micro-entrepreneurs towards Ar-Rahnu, this study also conducted in-depth interview. The results show significant advantages of Ar-Rahnu as a better option as compared to the Islamic micro-financing as Ar-Rahnu has the lowest pricing charges, offer higher margin and lesser procedures required. In fact, Ar-Rahnu also have skilled employees reflected to their customer satisfaction and updated with the current technology of innovation (fintech). This paper's contribution to the literature is by including a comparison between the products within the Islamic financial system setting. Besides, in term of methodology, this study used multiple approaching techniques of qualitative method which are content analysis and in-depth interview.