AR-RAHNU MICROCREDIT SYSTEM SHOULD BE EXPANDED NATIONWIDE

KOTA BAHARU, (Malaysia) June 16 (Bernama) -- The Islamic pawnbroking or
Ar-Rahnu microcredit system should be expanded, nationwide, as it will help with
economic development and upgrade the social economic status of the people, said
Prime Minister Najib Razak.

He said 4.3 million people were already reaping the benefits of such a
scheme as they were able to obtain quick financing for their businesses.

Najib, who is also Finance Minister, said the Ar-rahnu microcredit system
offered the best options as it conformed to Islamic principles and met customers
needs with its reasonable lending rates.

"I am very keen with the Islamic pawnbroking system as it is fair and the
pawned items can be redeemed. It is far more advantageous and there is no risk
of deceit, as with "Ah Longs", who trapped unsuspecting victims with exorbitant
interest rates.

"Ar-Rahnu can reduce and help combat the illegal activities of "Ah Longs"
which was widespread now in the country," Najib said here Wednesday when
launching Bank Islam Malaysia Bhd's Islamic pawnbroking service.

The Prime Minister said Malaysia can be proud of the fact that the country
was now recognised as an international Islamic financial centre.

He said the pawnbroking system was introduced to tin miners in the 19th
century but it was found to be burdensome then to the low-income group.

"The government proposed an alternative pawnbroking system via the Ar-Rahnu
service which was in accordance with Islamic principles. It is yet another
Islamic financial instrument," he added.

Najib said it was a good alternative of obtaining financing especially for
the low-income when they were in urgent need of quick capital for small
businesses.

The A-Rahnu microcredit programme was introduced by Yayasan Pembangunan
Ekonomi Islam Malaysia (Malaysia Islamic Economic Development Foundation) in
1993.

Najib said the government ensured all strata of the society ranging from
large coporations, small-and-medium enterprises to petty traders, had easy
access to financing.

"This is the reason why I emphasised on the Ar-Rahnu pawnbroking business in
my 2010 Budget speech last October," he said.

The Prime Minister also said Ar-Rahnu had many benefits in that customers
could obtain the full value of the pawned items, it attracted zero interest, the
value did not depreciate with time and the money obtained, over and above the
value of the pawned item when sold in the event they are not redeemed, is
returned to the customer.

"The repayment period is also reasonable and ample notice is given to
defaulters in the event of an auction (of their pawned items)," he added.
-- BERNAMA


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