The rahn-based Islamic microcredit product is an increasingly popular financing option among small entrepreneurs, lower income groups and gold traders. However, its Shari'ah structure has been sharply criticised by some Islamic scholars despite its success for those who offer it such as Islamic banks and Islamic pawnshops. Hence, it is undeniable that there are some debatable Shari'ah issues that need further examination and immediate solution. This situation is most likely a result of using the contract of rahn (pledge) in an income-generating product, which obviously contravenes the fundamental purpose of rahn. In fact, rahn is merely a security contract ('aqd al-tawthiq) that serves as a legitimate guaranty of debt, whether the debt arises from loan contracts (qard) or deferred contracts of exchange (bay' mu'ajjal).
Readership Map
Content Distribution
The rahn-based Islamic microcredit product is an increasingly popular financing option among small entrepreneurs, lower income groups and gold traders. However, its Shari'ah structure has been sharply criticised by some Islamic scholars despite its success for those who offer it such as Islamic banks and Islamic pawnshops. Hence, it is undeniable that there are some debatable Shari'ah issues that need further examination and immediate solution. This situation is most likely a result of using the contract of rahn (pledge) in an income-generating product, which obviously contravenes the fundamental purpose of rahn. In fact, rahn is merely a security contract ('aqd al-tawthiq) that serves as a legitimate guaranty of debt, whether the debt arises from loan contracts (qard) or deferred contracts of exchange (bay' mu'ajjal).
If you are an existing member, Log in to read the full text
New to IKR? Sign up as our member
