Usage of ar-rahnu towards achieving financial self-sufficiency for women micro-entrepreneurs in Malaysia

Abstract

Issues of financial shortage among micro-enterprises have always being given attention by Malaysian government. Although there are incentives and grants offered by Malaysian government, these incentives and grants are still very limited. Micro-enterprises need to explore other potential financing channels in order to access for capital. One of the financing channels is by approaching Ar-Rahnu. Ar-Rahnu industry has shown growing acceptance and become a viable and competitive mode of financial instrument in the Islamic finance industry. Ar-Rahnu is one of the alternatives used especially by women micro-entrepreneurs. In order to cater these issues, this study aims to investigate the usage factors namely shari’ah compliancy, customer satisfaction, service charges, locality and collateral for Ar-Rahnu among women micro-entrepreneurs in Malaysia. Subsequently, it attempts to determine the role of Ar-Rahnu in contributing to financial self-sufficiency for the women micro-entrepreneurs. Besides, demographic factors are added as a moderator to better reflect the impact of the usage toward financial self-sufficiency. The samples of this study are 600 women micro-entrepreneurs from three states, namely, Kedah, Kelantan, and Terengganu. The structural equations modeling (SEM), in particular the analysis of moment structure (Amos) was used to investigate the relationship among the variables. The results revealed that the usage factors have positive and significant relationship towards the Ar-Rahnu usage. The results also provide strong evidence of the relationship between the Ar-Rahnu usage and financial self-sufficiency. Since the findings of the previous studies have been inconclusive, therefore to better understand the relationship between Ar-Rahnu usage and financial self-sufficiency, moderating variables were introduced. Demographic factors such as education level, age, marital status and location were used as moderating variables in between the relationship of Ar-Rahnu usage and financial self-sufficiency. The results showed the demographic factors have moderating effects in between Ar-Rahnu usage and financial self-sufficiency. This thesis contributes to the theoretical, practical and policies by providing evidence about the relationship between Ar-Rahnu usage and financial self-sufficiency and further, added moderating variables to fully understand this relationship. In general, the findings have provided empirical support that Ar-Rahnu is gaining acceptance among the community, particularly among women micro-entrepreneurs. Ar-Rahnu assists women micro-entrepreneurs to diversify and enhance their businesses. Therefore, it is important to ensure the growth of the Ar-Rahnu in order to cater the need for women micro-entrepreneurs. This can be ensure by offering the shari’ah compliancy product, the lowest service charges, near to potential customers, lenient on collateral and treat customer fairly regardless their races or religious.