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Analysing ar-rahnu in the context of informal credit market theory: evidence from women micro-entrepreneurs in Malaysia

Nik Azman, Nik Hadiyan and Kassim, Salina and Adeyemi, Adewale Abideen (2018) Analysing ar-rahnu in the context of informal credit market theory: evidence from women micro-entrepreneurs in Malaysia. ISRA International Journal of Islamic Finance, 10 (2). pp. 237-250. ISSN 0128-1976 E-ISSN 2289-4365

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Purpose – This study aims to offer a new area of discourse by investigating the factors determining the usage of the Islamic non-bank financing product ar-rahnu (Islamic pawnbroking) among women microentrepreneurs in Malaysia within the framework of the informal credit market theory. Design/methodology/approach – The study is based on primary data obtained by using selfadministered questionnaires distributed in three states in Malaysia: Kedah, Kelantan and Terengganu. The questionnaires were distributed to a total of 750 participants, with each state contributing 250 respondents. Total number of respondents valid for data analysis was however 600. Findings – Based on descriptive and inferential statistics by using the IBM statistical package for the social sciences and structural equation modelling analysis of moment structures, the results show that the main factor influencing women micro-entrepreneurs to use ar-rahnu is the service charge. Research limitations/implications – This study only covers three states in Malaysia and is limited to examining the use of ar-rahnu by women micro-entrepreneurs in those states. Practical implications – As micro-entrepreneur s often face constraints to obtaining financial access in the formal credit market, ar-rahnu provides an alternative mode of obtaining business financing to female micro-entrepreneurs, so they can sustain their operations and even expand their businesses. The significance of such factors like service fee, as revealed in this study, indicates that managers should focus on this element when offering Islamic financial products, especially to women micro-entrepreneurs. Originality/value – The informal credit market theory is frequently used in conventional studies. This paper adds Sharīʿah compliance in the context of this theory as a new area to be considered when discussing Islamic financial products.

Item Type: Article (Journal)
Additional Information: 4600/70033
Uncontrolled Keywords: Sharīʿah compliance; Ar-rahnu; Informal credit market theory; Women micro-entrepreneurs
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD72 Economic growth, development, planning
H Social Sciences > HG Finance
H Social Sciences > HG Finance > HG4001 Financial management. Business finance. Corporation finance.
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button): Institute of Islamic Banking & Finance (IIiBF)
Depositing User: Prof. Dr. Salina Kassim
Date Deposited: 23 Jan 2019 16:47
Last Modified: 13 Mar 2019 12:29
URI: http://irep.iium.edu.my/id/eprint/70033

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