Factors influencing acceptance of Ar-Rahnu : comparison between private and state Ar-Rahnu providers in Terengganu

Abstract

Many Muslim customers are hesitant to patronise the conventional pawn-broking due to the element of interest which is prohibited in Islam. The establishment of Ar-Rahnu provides a convenient form of financing which is both shariah-compliant and low-cost for the public. Amid the demand for a shariah-compliant pawn-broking product, the first Islamic pawn-broking was set up by Maidam in Terengganu. Since then, there are several private Ar-Rahnu providers such as the Ar-Rahnu post-office and Ar-Rahnu Bank Rakyat. This paper aims to compare the factors influencing the acceptance of Ar-Rahnu between private and state Ar-Rahnu providers in Terengganu. Questionnaires were distributed to 400 customers of State's Ar-Rahnu (Ar-Rahnu Maidam) and private which is Ar-Rahnu Post office and Ar-Rahnu Bank Rakyat Terengganu through purposive sampling. Data analysis methods of descriptive, multiple regression and cross tabulation were used to analyse the information collected. Overall there are six factors being evaluate namely services quality, locality, pledge asset, pricing, Shariah view and social factor. Based on the regression analyses for state ar-rahnu, services quality, pricing, pledge asset and shariah view were significant. Meanwhile for private ar-rahnu services quality, locality, pledge asset and shariah-compliancy factors were shown to be significant toward customer acceptance. In highlighted the difference between private and state ar-rahnu, pricing is the best predictor for state Ar-Rahnu but the factor is not significant with the acceptance of private Ar-Rahnu. For state Ar-Rahnu, locality is not significantly related with acceptance but for private Ar-Rahnu, the factor is one of the predictors and is significantly associated with acceptance of services provided by Ar-Rahnu scheme. The significance of the ouput is, the researcher is able to compare the factors influencing customers' acceptance of private and state Ar-Rahnu providers based on the data obtained from the respondents. There is lack of studies comparing of acceptance between both private and state Ar -Rahnu. This study is necessary for future development of Ar-Rahnu services. The management of Ar-Rahnu is able to recognise the influential factor customers accept Ar-Rahnu regardless whether it is the state or private Ar-Rahnu. For instance, as the pricing system is identified as the most significant factor for customers adopt state ar-rahnu, Ar-Rahnu management shall maintain this factor to satisfy the existing customers and to attract the potential customers. As the location one of insignificant factor, Ar-Rahnu shall re-create strategy or allocate more branches to ensure easy access by the customers. Further research is proposed to measure other variables that are not noted in this study and to make comparison between private and state Ar-Rahnu in other states in Malaysia. As this study only focuses on three Ar-Rahnu shops, future research could examine many other Ar-Rahnu run by various cooperatives provided by state and private sector. This is to ensure the assumptions and generalisations have a much wider scope.