FIQH

MUAMALAH
ISLAMIC BUSINESS TRANSACTION


CHAPTER SIX

AL-RAHN

MAHYUDDIN KHALID  emkay@salam.uitm.edu.my

 CONTENT
 DEFINITION
DEFINITION  EVIDENCE
 PILLARS OF AL-RAHN
EVIDENCES  BENEFITS OF RAHN
 CONDITIONS OF RAHN
BENEFITS  APPLICATION OF AL-RAHN

CONDITIONS

COMPARISON

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 DEFINITION
 Literally
DEFINITION  constancy, or holding and binding.
 Technically
EVIDENCES  To make an object with economic values in Islamic law
perspective as a trust for the payment of debts, so that
BENEFITS enabling mortgagee (murtahin) to get all or a part of the
debts from the object
CONDITIONS
 Rahn literally means to detain a thing. Legally, it is the detention
of a corporeal property on account of a claim such as a debt
which may be satisfied out of that property.
COMPARISON

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 NATURE OF AL-RAHN
 Pledge is a security for the payment of a debt that will enable the
DEFINITION lender to reclaim the debt or to satisfy it out of the pledged
property.
EVIDENCES  Al-rahn in Arabic means al-tsubut wa al-dawam (fixed and
eternal).
 Rahn is classified as a contract under category contract of
BENEFITS
security or contract pertaining to authentication
 The purpose of rahn is to convince the creditor that the debt will
CONDITIONS
not simply disappear or vanish in case of default payment on
part of the debtor
COMPARISON  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 result of the bad debt
 However the creditor is only entitled to the total amount owed to
him by the debtor and the balance will be returned back to the
owner of the pledged property ( the debtor)
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 EVIDENCE
 Quran
DEFINITION

EVIDENCES

BENEFITS
 The Quran refers to the idea of pawning as ‘mortgage with
possession’ (rihanun maqbudha). Quran also supports the
CONDITIONS idea of furnishing a pledge against a debt.

COMPARISON

 According to Quranic verses, every soul is in pledge or

rahina for its deeds. {Quran, 74:38}
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 EVIDENCE
 Hadith
DEFINITION  The issue of mortgage is not only an issue for “modern
society”. In Islam, the history of mortgage has been being
EVIDENCES since the time of Prophet Muhammad.
 From Aishah that Allah's Apostle bought some foodstuff
from a Jew and mortgaged his armor to him.”
BENEFITS
 From Anas that Allah’s Apostle mortgaged his armor to a
Jew in Madinah and bought barley bread from the Jew for his
CONDITIONS
family.”
 and in the saying of the Prophet, “the soul of a believer is
COMPARISON marhuna or pledged for the debt until it is paid off”.

 Ijma
 Muslim jurist unanimously agreed on the legitimacy of the
rahn contract

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 PILLARS OF RAHN
1. Rahin
DEFINITION  Pledgor – a person who gives rahn/ the debtor
2. Murtahin
EVIDENCES  Pledgee – a person who takes rahn/ the creditor
3. Marhoun
BENEFITS  Pledged asset – a property to be pledged
4. Marhoun Bih
CONDITIONS  The liability of rahn/ the debt
5. Sighah
COMPARISON  Ijab (Offer)
 Qabul (Acceptance)

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 FLOWS OF A-RAHN

DEFINITION
Marhoun Bih Deliver debt
(Liability of Rahn/Debt)
EVIDENCES

BENEFITS
Financing contract
Murtahin Rahin
CONDITIONS (Pledgee/ Creditor) (Pledgor/ Debtor)
Debt + Mark Up

COMPARISON

Marhoun
Custody/ Pledged (Pledged Asset)

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 THE USE OF PLEDGE BY THE PLEDGEE
 The pledge is considered a trust in the hands of the pledgee. He
DEFINITION is responsible for its safety and preservation. However, he is
liable if the pledged property is damaged or destroyed as a result
EVIDENCES 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 pledgee is
BENEFITS
not allowed to exploit or use the pledged property even with the
permission of the pledger.
CONDITIONS  Exploitation of the pledged property is prohibited based on the
principle that “all loans that generate profit are usurious”.
COMPARISON  Thus, exploitation and profitable use of the pledge is considered
usury.
 However, if the pledge is an animal that can be used for riding or
milk, the pledgee may make use of it in return for its
maintenance.

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 BENEFITS OF AL-RAHN
 Al-rahn - very useful contract; multi purpose tool that is beneficial
DEFINITION and advantageous to both parties especially to the creditor
 Creditor
EVIDENCES  Compared to the contract of kafalah, documentation of debt or
providing witnesses, all these measures can never match
security that Rahn provide for benefit of creditor
BENEFITS
 Rahn is form of authentication of debt, which is under the
custody of the creditor in return for his right claiming back his
CONDITIONS money from the debtor
 In case of default payment, the creditor could secure the loan
COMPARISON repayment can retrieve back his money by selling off the
pledged property with the consent from either the court or the
debtor himself
 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.

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 BENEFITS OF AL-RAHN
 Debtor
DEFINITION  Could get some fast cash by temporarily pledging his
valuable items to the creditor
EVIDENCES  Can convince the pledgee/creditor to lend him the money
since he has something to offer in return as a guarantee of
payment.
BENEFITS

CONDITIONS

COMPARISON

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 CONDITIONS OF AL-RAHN
1. Any object that can be sold can be pledged; and what
DEFINITION cannot be sold cannot be pledged
2. A person can borrow something which he can pledge with
EVIDENCES whom he should specify to the lender
3. If the mortgagor and mortgagee agree to place the pledge
BENEFITS with 3rd person, they cannot change this agreement as long
as the 3rd person remain honest
CONDITIONS 4. If the mortgagor pay back the debt, the mortgage does not
terminate; it will stay until the whole sum is paid back
COMPARISON 5. The mortgagor cannot dispose the object by selling,
granting, or endowing it
6. A pledge is a trust in the hands of mortgagee

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 COMPARISON
AL-RAHN PRINCIPLES CONVENTIONAL PAWNING

DEFINITION
• Institution based eg: banks, co- OPERATOR • Sole proprietor based
operatives, YAPEIM, state • Individual based
EVIDENCES government agencies etc
• Monthly safekeping charges CHARGES • Interest is charged
• No interest charges • More expensive rate
BENEFITS • Cheaper

• Takaful coverage INSURANCE • Not covered

CONDITIONS • If the pedged items are lost,
only a 25% compensation is
offered
COMPARISON • Only pure gold accepted ITEMS • Any valuable items
• Ornamented gemstones on gold
items will not be valued
• Gold plated items are not
acceptable
• Pound gold and white gold
(platinum) not accepted

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 COMPARISON
AL-RAHN PRINCIPLES CONVENTIONAL PAWNING

DEFINITION • Must provide proof of ownership OWNERSHIP • Not required to provide proof
either through the letter of of ownership
purchase/ receipt or letter of
EVIDENCES undertaking
• If it belongs to someone else, a
letter of consent/ approval from
the owner is required
BENEFITS
• Up to 60%-70% of the value of PAWNING • Valuation is much lower than
pawned gold VALUE the market value
CONDITIONS • Valuation based on the current • Average 30.5%
market value
• Pledged items will be auction DEFAULT • Not transparent
COMPARISON publicly
• Transparent and notice will be
sent
• The balance after the auction wil, BALANCE • The balance after the auction
be returned back by the company AFTER will not be retuned back by
to the pledgor AUCTION the company to the pledgor

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 END OF CHAPTER

DEFINITION

EVIDENCES

BENEFITS

CONDITIONS 
COMPARISON

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