Ar-Rahnu Scheme Among Low-Income Civil Servants in Malaysian Public Universities

Ar-Rahnu scheme which provides short-term, fast, hassle-free, and riba -free financing to the public becomes more popular nowadays. Several factors can motivate the public to subscribe to Ar- Rahnu products, namely customers’ Shariah view, good customer service, pledge asset, good pricing system, locality, product management, and advertisement. This study reveals that Shariah view, pledge asset, pricing system, locality, and advertisement have a significant relationship with the acceptance of the civil servants in Malaysian public universities towards the Ar-Rahnu scheme. The most dominant factor contributing to the acceptance of low-income civil servants in Malaysian public universities towards Ar-Rahnu scheme in Malaysia is locality. The respondents from the lower-income group in Malaysian public universities agree that the locality of financial institutions providing Ar-Rahnu scheme in their system is considered an important element in enhancing the acceptance towards Ar-Rahnu scheme in Malaysia. Subsequently, future study is needed to acknowledge the acceptance and effect of Ar-Rahnu towards all levels of societies and wider areas. This paper aims to study the opportunities provided by the Ar-Rahnu scheme among low-income civil servants in Malaysian public universities. The objectives of this research are to examine the acceptance level of Ar-Rahnu scheme among low-income civil servants in Malaysian public universities and identify the most significant factor that enhances their acceptances towards Ar-Rahnu scheme. The study is guided by the following questions:


Introduction
Ar-Rahnu scheme in Malaysia started in 1992 when the Terengganu State Government introduced the Islamic-based pawn broking system, which is known as Muassasah Gadaian Islam Terengganu (MGIT), in prioritising the Terengganu residents. Sulaiman et al (2014) stated that since the introduction of Ar-Rahnu in Malaysia, banks expanded their banking services to the poor and people with low-income who are less comfortable with conventional bank loans but more comfortable with conventional pawn loans. Ar-Rahnu scheme provides short-term, fast, hassle-free, and riba-free financing to the public (Rasmin & Markom, 2014). Abdul Razak (2008) affirmed that the Ar-Rahnu scheme is the most appropriate financial mechanism for the lower income group and those with limited capital small business. This paper aims to study the opportunities provided by the Ar-Rahnu scheme among lowincome civil servants in Malaysian public universities. The objectives of this research are to examine the acceptance level of Ar-Rahnu scheme among low-income civil servants in Malaysian public universities and identify the most significant factor that enhances their acceptances towards Ar-Rahnu scheme.
The study is guided by the following questions: 1.What is a significant relationship level between the selected variables such as Shariah view, customer service, pledge asset, pricing system, locality, management, and advertisement with the acceptance of Ar-Rahnu scheme among low-income civil servants in Malaysian public universities? 2. What is the most significant factor that enhanced the acceptance of low-income civil servants in Malaysian public universities towards the Ar-Rahnu scheme?

Literature Review and the Development of Hypotheses
Recently, the Ar-Rahnu scheme is well-known among Malaysians due to their advantages over conventional pawn broking system. The main advantages of Ar-Rahnu scheme are as follows: a cheaper way to obtain financing that is free from riba (interest), the pawned assets are guaranteed to be kept safely, and the scheme has a fair practice in auctioning and bidding (Hisham et al., 2013).
However, the Ar-Rahnu scheme in Malaysia lacked certain features in the system. According to Rasmin and Markom (2014), no law or act protects Ar-Rahnu's transaction. It is reported in many cases that MGIT has received fake gold that are worthless for the auction. Even though MGIT has their guidelines to guide Ar-Rahnu's activity, both charger and charge are concerned whether the guidelines could protect them in certain situations. In contrast, the conventional pawn broking system in Malaysia is regulated by the Pawnbrokers Act 1972. The main purpose of the Pawnbrokers Act 1972 is to guarantee a healthy pawnshop industry and safeguarding the interests of customers (Abdul Razak, 2008).
This study is quantitative method using regression analysis to identify factors that influence acceptance of Al-Rahnu among low-income civil servants in Malaysian public universities. Among Independents variable identified are Shariah view, customer service, pledge asset, pricing system, locality, management, and advertisement.

Shariah View
Shariah view is one of the essential elements that distinguish an Islamic-based pawn shop from a traditional pawn shop; Shariah view has a very strong relationship with customer acceptance (Amin et al., 2007). The principles of Ar-Rahnu scheme are Qard, Al-Wadi'ah, and Al-Ujrah that show a clear distinction between the Islamic-based pawn broking system that applies Shariah compliance and the conventional pawn broking business that follows the Pawnbroker Act 1972. Based on the research in Al-Rahnu, it is mentioned that shariah view is seen as an important factor by the customers in accepting Ar-Rahnu. So, it is imperative for Ar-Rahnu operators to increase the level of Syariah practices in the scheme in future (Abdul Rahman and Kassim, 2017). According to Rasmin and Markom (2014), there are two basic principles of Islamic banking, which are riba prohibition (interest-free) and the sharing of profit and loss between the bank and its customers (mudharabah and musharakah). Riba is the root of injustice in human society (Hossain, 2002). Ar-Rahnu scheme is not bound to the Pawnbrokers Act 1972 due to some sections of the act that cannot be applied. For example, the interest charged to the customer is identified as a form of oppression to the needy people. This type of rule violated one of the principles of the Ar-Rahnu scheme, which is Qard Hasan or good loan.
According to Abdul Hamid et al. (2014), Shariah view dominates the customers' preference on Ar-Rahnu scheme in Bank Rakyat due to four elements; (1) Al-Quran and Sunnah as the source of business; (2) Ar-Rahnu operation that is based on Islamic law and principle; (3) the application of interest-free loan; and (4) the application of free uncertainties. Thus, the management of the Ar-Rahnu institution should maintain a high level of Shariah compliance.
Customer Service Customer service is an important factor to strengthen customer acceptance towards Ar-Rahnu scheme. According to Ahmad et al (2012), customer service is one of the most dominant factors in enhancing public awareness of the Ar-Rahnu scheme. The opinion is consistent with Othman et al. (2012) who conducted research on customer satisfaction towards the Ar-Rahnu scheme in Kelantan revealing that high satisfaction is depended on service quality. According Ali et. al (2017) said, extended the themes with more researchers exploring issues and challenges in providing Ar-Rahnu, efficiency, acceptance, and satisfaction of the Ar-Rahnu services among customers, comparative study between conventional pawn broking and Ar-Rahnu as well as other issues such as Ar-Rahnu model/framework and Ar-Rahnu keeping fee. Then she has also mentioned, MGIT has also offered the best services to the Ar-Rahnu customers by charging 0% safekeeping fees, which is also in accordance with Qardh Al-Hasan model of financing (Ali et. al, 2017). Amin et al. (2007) argued that customer service is significantly associated with customer acceptance due to three main reasons: the approval for the transaction is efficient and fast, the advice service or consultation that is offered to facilitate customers' transaction, and the service is free from any issue of discrimination.
Abdul Syukor and Sabri (2013) suggested that institutions that offer Ar-Rahnu product needs to consider the importance of responsiveness, reliability, and assurance in the service to enhance customer satisfaction. Customers' loyalty towards marketing activities can be reinforced due to satisfaction. The intention to use the Ar-Rahnu scheme in the future and the positive word of mouth are the consequences of customer satisfaction towards Ar-Rahnu product.
Pledge Asset Pledge asset is also an essential element of customer acceptance towards Ar-Rahnu scheme. However, the only allowable pledged item in Islamic-based pawnbroking business is gold. There are several advantages of gold as the collateral compared to other pawned items such as that gold can be easily resold, gold's purity is easily determined and the mispricing of the collateral can be minimised, gold chains and rings typically require only a small flat envelope for storage, and women often receive gold chains and bracelets as their wedding gift and retain them for personal ownership (Abdul Razak, 2008). Abdul Rahman and Kassim (2017) expressed that pledge asset is significantly associated with acceptance and it is seen as a crucial factor. According to the study conducted by Azman and Kassim (2015), a few respondents proposed to diversify the mortgaged items. Respondents said that it is necessary to diversify the items that can be pledged at Ar-Rahnu, as not everyone possesses gold. Therefore, all banking institutions in Malaysia that offer Ar-Rahnu product only allow gold for the pawn. However, the types of gold that can be pawned have different conditions in each banking system.
Pricing System According to Amin et al (2007), pricing system has a weak influence on customer acceptance towards Ar-Rahnu scheme, and it is argued that this factor is the main problem in introducing the Islamic-based pawn shop, but this factor plays an important role in attracting customers. According to Abdul Rahman and Kassim (2017), in terms of pricing, the low storage charges imposed by these Ar-Rahnu providers had attracted customers to choose Ar-Rahnu service rather than the conventional pawnshop.
In contrast, Bhatt and Sinnakkannu (2008) stated that the cost of borrowing in the Ar-Rahnu scheme is the lowest compared to conventional pawn broking, which is the reason it is preferred by pawning customers. Although the price of gold remained stable for long periods and has been free from fluctuating, it is important to have an Ar-Rahnu shop that offers a competitive rate to reflect the average pricing system in the market (Bhatt and Sinnakkannu, 2008) Locality Locality can be defined as the position or site of something that has several opinions. According to Abdul Rahman and Kassim (2017) despite the mounting attention on Ar-Rahnu, the scheme still receives critics as for its limited availability to certain segment of the population. There are cases where people cannot subscribe to the Ar-Rahnu service because of the limited branches, especially those living in rural area and facing difficulties to reach the urban area. Hence, this study will consider the locality factor which may influence people acceptance Ar-Rahnu. According to Amin et al. (2007), the locality of an Islamic pawnshop is less important in establishing the system, but a well-informed location can enhance the awareness of potential customers. The locality factor should be considered in setting up an Islamic-based pawnbroking business because it is a significant factor for the development of the pawnshop (Abdul Hamid et al., 2014). According to Ahmad et al. (2012), locality is important and highly relevant in customer acceptance towards Ar-Rahnu scheme.
Most of the locality of banking institutions that offer Ar-Rahnu scheme are located in the city and not in rural areas. According to Rasmin and Markom (2014), the lack of Ar-Rahnu business in rural areas is one of the disadvantages of the Islamic-based pawnbroking institution. More Islamic pawnshops should be opened in rural and overpopulated areas to avoid monopolisation and control by a few pawnbrokers (Bhatt and Sinnakkannu, 2008). Potential customers that are from rural areas will have to commute from the village to the city to pawn their valuable items to get quick cash. This situation has led potential customers to go to a conventional pawnshop instead of Ar-Rahnu institution (Rasmin & Markom, 2014).

Management
Management can be defined as the total of activities as follows: (1) determining objectives, plans, policies, and programs; (2) securing men, material, and machinery that are cheap; (3) putting all resources into operations through a sound organisation; (4) directing and motivating workers at work; (5) supervising and controlling their performance; and (6) providing maximum prosperity and happiness for the employer, employees, and public at large. Managers are the ones who play the daily role of managing the company so that the company can achieve the goal. They should be truly identified by a company to hire those who can communicate and coordinate very well in the company, eventually prevent managers from maximising their own utility at the company"s expenses (Yacob & Soon, 2017) According to Ahmad et al. (2012), the most dominant factor that contributes to customer acceptance towards Ar-Rahnu scheme in Majlis Agama Islam dan Adat Melayu (MAIDAM), Dungun is the management practices; the practices include the charging fee (ujrah) that is lower than other Ar-Rahnu schemes; the interest-free loan that creates satisfaction among customers; and MAIDAM's customers are not forced to redeem the collateral item and customers are given an extension of four months to redeem the item.
According to Qaed (2014), the main role of management from the Islamic perspective is to inculcate the Muslim communities in continuing their living by offering an alternative approach for Islamic ways of doing things. Thus, good management is very important in controlling the Ar-Rahnu scheme.

Advertisement
One of the objectives of the advertisement is to create a good public image that can lead potential customers to put their trust and buy the products from the institution. The use of advertisement which engage customers with feelings and emotions, especially prior to the consumption of products or services will encourage customers to purchase the product. (Ismah et al, 2018) According to Abdul Hamid et al. (2014), advertisement is one of the factors that has a weak relationship with customer acceptance towards Ar-Rahnu scheme. This situation happened due to a lack of promotion for the Islamic-based pawn broking institutions. The operators of Ar-Rahnu scheme must take an aggressive measurement in creating awareness among prospective customers by spreading the information about operations, principles, and schemes through media, brochures, and online frequent ask questions (FAQs) (Bhatt and Sinnakkannu, 2008).

Acceptance
According to Qaed (2014), acceptance as the adoption and continued use of a product, service, or idea. Individual acceptance towards something is believed to be influenced by their perceptions (Bhatt and Sinnakkannu, 2008).
It is believed that each customer has his or her perception of the products or services received or rejected. According to Abdul Hamid et al. (2014), customer acceptance is the degree of acceptance level of customers towards certain products or services. In addition, customer acceptance of products or services has always been associated with the familiarity and degree of awareness and use of any given tool (Mansor et al., 2014). It can be said that customer acceptance is equal to customer satisfaction.

Research Method and Data Collection
This study focuses on the acceptance towards Ar-Rahnu scheme among low-income civil servants in Malaysian public universities. The questionnaire describes the demographic profiles of respondents, the awareness level of low-income civil servants, and the acceptance factors that influence low-income civil servants to use the Ar-Rahnu scheme. The respondents of this study are 100% Muslim which equal to 70 persons. It is due to the Al-Rahnu is not popular among customers. The demographic profiles and awareness level were measured using normal scale while acceptance factors were measured using a 5-point Likert scale ranging from 5 (strongly agree) to 1 (strongly disagree) (International Encyclopedia of Education (Third Edition), 2010).
Based on the literature review, the hypothesis can be written as follows: 1 = Shariah view, customer service, pledge asset, pricing system, locality, management, and advertisement have a significant relationship on the acceptance of low-income civil servants in Malaysian public universities towards Ar-Rahnu scheme. The multiple regression model (MRM) is employed to predict the influence in the construct model. This study used cross-sectional data because the primary data were collected through a questionnaire. According to Tranmer et al. (2020), Multiple linear regression extends simple linear regression to include more than one explanatory variable. In both cases, we still use the term 'linear' because we assume that the response variable is directly related to a linear combination of the explanatory variables. Equation (1) is the formula of the multiple regression model: Y=β°+B 1 X 1 + β 2 X 2 + β 3 X 3 + β 4 X 4 + β 5 X 5 + β 6 X 6 + β 7 X 7 + μ This study used the survey method of primary data collection and the unit analysis used was individuals who are the customers of Ar-Rahnu scheme and persons who intended to use the scheme among low-income civil servants in Malaysian public universities. Out of 100, 70 respondents returned the questionnaires directly to the researcher that can be used for further analysis. The data yielded a response rate of about 87.5 percent. The respondents consist of Ar-Rahnu customers and non-customers from various demographic types such as gender, race, religion, age, marital status, education level, and monthly income. Table 1.0 shows that most respondents were not customers of the Ar-Rahnu scheme, and only 11 respondents (11.57 percent) were the users of the Ar-Rahnu scheme. Among the users, eight respondents (72.7 percent) were customers of Ar-Rahnu scheme in Bank Rakyat, followed by Maybank with two respondents (18.2 percent), and Bank Muamalat with one respondent (9.1 percent). The majority of Ar-Rahnu customers decided to use this scheme for debt settlement, followed by business capital, education, and other reasons such as daily expenses. However, among the non-customers, 28 respondents (47.5 percent) intended to use Ar-Rahnu in the future and the majority of them chose to use Bank Islam.

Data Analysis
The analysis also shows that most respondents were female constituting 88.57 percent, whereas male respondents consist of 11.43 percent. In relation to race, most low-income civil servants in Malaysian public universities are Malay with 97 percent, followed by other Sindhis that are known as one of Pakistan's ethnics. In terms of age, the majority of respondents that took part in the research were above 50 years old with 28 respondents (40 percent), followed 40 to 49 years old with 21 respondents (30 percent). The result reported in Table 4.1 indicates that in terms of respondents' marital status, the majority of low-income civil servants in Malaysian public universities were married with 74.3 percent (52 respondents) and the least was the divorced status with 7.1 percent (5 respondents). For the education level, most respondents were SPM holders, followed by primary education background. No respondent was a degree holder or also known as tertiary education level. The majority of respondents earned a monthly income between RM 801 and RM 1,500, followed by 14.3 percent of the respondents with a monthly income group between RM 501 and RM 800. There was one respondent each that earned below RM 500 and above RM 1,500.

Data Analysis
The variables of customer service (0.636), pledge asset (0.635), and pricing system (0.658) have the Cronbach's alpha values that were more than 0.600 which can be used for further research. The explanatory variables of Shariah view (0.706) and advertisement have the alpha values of more than 0.700, which are considered good in reliability testing (Keith,2017). Management and locality variables have 0.853 and 0.800 for their alpha values, respectively, which are considered good for this study. Thus, all the explanatory variables such as Shariah view, customer service, pledge asset, pricing system, locality, management, and advertisement were reliable to explain the dependent variable through the regression analysis.  Table 2.0 shows the model has R 2 of 0.470 indicating the total variation for the acceptance of low-income civil servants in Malaysian public universities towards Ar-Rahnu scheme was explained through Shariah view, customer service, pledge asset, pricing system, locality, management, and advertisement. The remaining 53% of the variability in the dependent variable was still unaccounted, indicating that there must be other variables that could be included in the regression to explain on the acceptance of low-income civil servants in Malaysian public universities towards Ar-Rahnu scheme. Since this independent variable and dependent variable derived from ARSAM model so this study is considered valid and is also continuity from previous study. Alternatively, this study found that the p-values associated with the coefficients of Shariah view, pledge asset, pricing system, locality and advertisement were below 0.05, which provided enough evidence to reject the null hypotheses of non-significance at 95% confidence level. Meanwhile, the p-values of 0.482 and 0.590 for customer service and management, respectively, suggested that these values were statistically insignificant at 95% confidence level.

Conclusion and Recommendation
This study provides some practicable insights in determining the relationship between the independent variables, which are Shariah view, customer service, pledge asset, pricing system, locality, management, and advertisement on the acceptance of low-income civil servants in Malaysian public universities towards Ar-Rahnu scheme in Malaysia.
All the seven independent variables have a significant relationship with the dependent variable, except customer service and management.
The study found that the most dominant factor that contributed to the acceptance of lowincome civil servants in Malaysian public universities towards Ar-Rahnu scheme in Malaysia was locality. The respondents from the lower-income group in Malaysian public universities agreed that the locality of financial institutions that provide Ar-Rahnu scheme in their system is considered an important element in enhancing the acceptance towards Ar-Rahnu scheme in Malaysia because the location must be near to the public transportation centre, shopping mall, business centre, residential area, and the respondents' workplaces. The availability of nearby parking space is also essential factor in the location of financial institutions. The following recommendations are offered for this study: • Widen the area of the study, which is the diversity of respondents from various racial, ethnics, religious, and academic background.
• Use interviews and observations for qualitative measurement.