The Effectiveness of Ar-rahnu Cooperative Financial Performance in Malaysia

Abstract

Malaysia cooperative come into existence since 90 years ago during the Colonial British administration. It is one of the vital institutions in Malaysia that offering various product and services towards community and its members. One of the demanding services by community is ar-rahnu. The increase in business in recent years has also been made possible by the fact that the number of co-operatives offering ar-rahnu financing has increased from 35 in 2010 to 103 in 2020, a threefold increase in ten years. Given the intriguing figures of cooperatives and outlets providing ar-rahnu services, it is critical for this study to assess the level of efficiency of cooperative ar-rahnu in the context of improving its financial performance in the future. This study uses the quantitative approach by distributing questionnaires to 455 ar-rahnu cooperative outlets in Malaysia. 308 completed copies of the questionnaire were then analyse using IBM SPSS for preliminary analysis on the data (descriptive analysis) and the partial least squares-structural equation modelling (PLS-SEM) SmartPLS 3.2 software for measurement and structural model. All in all, human capital has a significant relationship towards ar-rahnu financial performance. Therefore, human capital could be considered as an important element in strengthening and ensuring the sustainability of the financial performance of ar-rahnu business.