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Friday, February 12, 2010

Al-Rahnu

Literally: - the Arabic term ‘rahn’ may refer either to constancy, or to holding and bindingness. In regard, the verse ‘every soul will be held (rahinah) in pledge for its deeds’ [74; 38] refers to the binding aspect of the term. Of the two opinions, the holding aspect is the more physical one, and hence we deem it to be the primary linguistic meaning, while the permanency meaning is derived from that primary one.
Juristic; - ‘rahn’ is refer to the object that was pawned to ensure a debt.
Legally; - pawning or mortgage contract define as holding an item in lieu of legal right that may be satisfied from that item. Or the contract involves holding valuable non-fungible goods as insurance against a part thereof.
From the definition, we could understand that ar-rahn is a secondary contract. It means that it cannot stand by itself unless there is primary contract and that is “debt”. Hence, jumhur consider “debt” as one pillars of ar-rahn contract as it is the reason why ar-rahn contract comes to existence. A debt can exist out of sale contract, a loan contract, compensation of rights, in marriage, etc.

6.2. Legality; -
The proofs and legality of pawning contract are stated clearly in the Qur’an and the Sunnah.
• Cited from the Quran at the verse “If you are on a journey and cannot find a scribe, then use the receipt of pawn object” (2:283)
• Cited from the sunnah: “The Prophet (s.a.w) bought some food from a Jew, and he pawned his iron shield with him”.
• From this proofs and legality that pawning is permissible (MUBAH).

6.3. Cornerstones; -
The pawning contract has five components from Hanbali side;
• The debtor; - who pawns an object of his.
• The creditor; - who receives the pawned object.
• The pawned object; - as insurance of the debt.
• The debt; - in lieu of which the object is pawned.
• Offer and acceptances.
From the others jurist, pawning contract has four components;-
• The debtor.
• The creditor.
• The pawned object.
• The debt.

6.4. Conditions; -
The pawning contract has conditions for conclusion. Condition for validity, and one bindingness condition (which is receipt of the pawed object). In what follow, we shall list the contract conditions by its components (contracting parties, contract language, ect)
a. contracting parting party conditions
• Eligibility
There are three that we need to consider for the Hanafis rulings on a guardian’s or plenipotentiary’s pawning of the property of the property of a young child:
• A child’s property may be pawned in lieu of a debt on he child
• In a lieu of a debt of the guardian or plenipotentiary
• The status of the pawned object from the child’s point of view once he reaches legal age.
b. contract language conditions
The Shafi’is listed three types of conditions in pawning contracts
• Valid conditions: under this category, they list all conditions that are implied by the pawning contract. They also stated that valid conditions must be of benefit to the contract, and must not lead to any uncertainty
• Nugatory condition: under this category, they list all conditions that do not serve any beneficial purpose. For example, that a pawned animal is not fed a certain type of animal feed, such conditions are voided and invalidated, but the contract is deemed valid.
• Conditions that render the contract defective. Conditions that harm the pawn broker render the pawning contract defective. Example of such harmful conditions include: a condition that the pawn-broker may not sell the pawned item except one month after this is due but unpaid, or a condition that puts a ceiling on the price at which he pawned item may be sold. Similarly, conditions that harm the debtor and benefit the pawn-broker render the pawning defective.
c. Underlying debt conditions
i. First Hanafi’s condition is underlying right of which an object is pawned must be binding and matured as a liability on the debtor. The underlying right must be a matured debt that is established as a liability on the debtor.
ii. Second Hanafi’s condition also stipulated a condition that the pawned object must make it possible for the creditor to extract repayment of his debt.
iii. Third Hanafi’s conditions are the liability underlying a pawning contract must be known to all parties. Thus, the pawning is deemed invalid if there is any uncertainty. Example, if the debtor pawns one object for an unnamed debt out of two that are owed to the creditor.
iv. The Shafi’is and Hambalis stipulated three conditions that the liability underlying a pawning contract must satisfy.
d. Pawned object conditions.
The Hanafi’s listed eight conditions for the object of a pawning contract:
• Being valued property
• Being known
• Being deliverable
• Being in receipt
• Being in possession
• Not being attached to a non-pawned item
• Being separate from other parties
• Being distinguished from other parties.
e. Receipt of the pawned object.
All jurist agree that receipt is a condition in the pawning contract, based on the verse “…then use received pawned objects (as insurance of the debt)” [2:283]. However, they differed over the classification of this condition as one of contract completion or as a bindingness condition.

6.5. Modus Operandi; -
Recently, ar-Rahn scheme combined two types of Syariah contracts which are ar-rahn, al-wadiah yad dhamanah and al-qardhul Hassan.




i. Ar-Rahn (Collateralized borrowing)
Ar-rahn is referring to the mechanism whereby a valuable asset is placed as collateral as a security of loan. The debt may be extracted from the pledge property if the debtor fails to pay back the debt.

ii. Al-Wadiah yad dhamanah (savings with guarantee)
Al-Wadiah yad dhamanah is a method of keeping valuable property with guaranteed. Every guarantee must be paid as wages and every goods or deposits which have been deposited by another person, who is not the owner for safekeeping purposes. As wadiah is a trust, the depository becomes the guarantor and, therefore guarantees repayment of the whole amount of the deposits, or any part thereof, outstanding in the account of depositors, when demanded. The depositors are not entitled to any share of the profits but the depository may provide returns to the depositors as a token of appreciation.

iii. Qardhul Hassan (benevolent loan)
Al-Qardhul Hassan is an interest free loan. The borrower is only required to repay the principal amount borrowed, but he may pay an extra amount at his absolute discretion, as a token of appreciation.

iv. al-Ujrah (fee)
Al-Ujrah is a fee to the safekeeping of al-Marhun. The borrower should pay fee to the pledgee. The fee is in fixed rate.

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