Section 4: Other Structures for Rahn-Based Islamic Microcredit Facility

This section will be focused on three different structures of Islamic Microcredit Facility, with the
analysis of Sharia issues that found in each structure.
1. Structure 2: Combination of Wadiah bi Ajr, Qard, and Rahn al-Wadiah
In this structure, the customer keeps his/her gold to the bank based on principle of Wadiah bi
Ajr which enable bank to charge safekeeping fee. Furthermore, Bank will give a loan (qard hasan)
on the condition that customer should pledge the gold to the bank with on base of rahn al-wadiah,
if the customer accepts the condition then the loan will be given.
The sharia issue that found from this structure is the Qard contract. When the bank gives a
benevolent loan to the customer, that contract cant be stipulated with another condition that the
customer must pledge the gold to the bank based on rahn contract. However, the bank still seeks
an income when the Qard contract is combined with Wadiah bi Ajr contract which enable bank
to charge the safekeeping fee. Thus, the combined contract can be led to Qard Jarra Manfaah.

2. Structure 3: Combination of Tawarruq contract (through commodity Murabahah)

and a Rahn contract
The financing facility that provided here is based on tawarruq contract. This structure begins
when the client requests cash financing from the bank. The bank then buys a commodity from
Broker A and sells that commodity to the client with a mark-up price and deferred payment. The
client then pledges his/her gold to the bank with rahn based contract. Furthermore, the client
appoints bank as agent to sell the commodity to Broker B with cash payment. If the customer fails
to fulfill his/her debt obligation, the bank will sell the pledged gold and give the surplus price.
This scheme is safe from the prohibited element of bai wa salaf and qard jarra manfaah. The
banks income doesnt involve qard, but it is generated from the mark-up sale via tawarruq. The
sharia issue in this structure is tawarruq munazzam, which is controversial in terms of its
legitimacy. The classical tawarruq scheme is allowed, but munazzam scheme which is currently
practiced now is far from the classical. The munazzam scheme can be considered as the same as
bai inah.

3. Structure 4: Combination of Qard, Rahn, and Hibah

Another structure to be discussed is the Islamic Microcredit Facility with the Combination of
Qard, Rahn, and Hibah that had been practiced by Muassasah Gadaian Islam Terengganu (MGIT).
This structure has a unique scheme, which begins when MGIT offers a financing facility (qard)
without charging the safekeeping fee for the pledged gold (rahn). Therefore, the customer may
give a gift (hibah) to appreciate MGIT for the financial facility, but this hibah is not stipulated in
the qard contract. On the maturity date of qard contract, the customer should pay only the
financing amount without any excess.
The main idea to be emphasized, that MGIT gives loan to the customer without taking any
benefit from that loan, which mean it is free from qard jarra manfaah or riba. In the maturity
date, MGIT receives the hibah from the customer as their contribution, but this hibah is not
contractual because it hasnt been stipulated in the previous contract. The sharia issue appears
when the hibah become the commonly practiced (urf) because it can be known as the stipulated
agreement and can be led to qard jarra manfaah. Thus, this structure is the best suited-Islamic
financing facility structure, but from a business perspective this scheme is not commercially viable.