AR-RAHNU LOAN POLICY

1.0 PRODUCT POLICY – LOAN

Islamic pawnbroking loan is a Islamic pawnshop scheme offered by Ar-Rahnu Xchange. It

comprises two types of schemes:

1. Ar-Rahnu scheme
2. Az-Zahab scheme

OBJECTIVE

The objective is to introduce a scheme for the following:

1. Provide alternative to the community especially for the lower income group in fulfilling
their immediate cash flow needs
2. Abolish element of “interest” in pawnbroking management
3. Emancipate the group of borrowers especially Muslims from being abused by
conventional pawnbrokers

CLARIFICATION

The procedure begins from the workflow of supply logistics to safekeeping to workflow of acid
testing, sell-off and steps to undertake in the event of emergency and crisis management.

A) Terms and conditions for applicant eligibility

1. Malaysian citizen of age 18 years old and above

2. For applicants age 65 and above, the shop outlet must ensure and check authenticity
and purity of gold valuables to guarantee value and quality
3. Not a bankrupt and mentally incapacitated or retarded ( not inebriated, drugged or
under hallucinatory state or drunk while conducting transaction)
4. The applicant should reside in the vicinity of the operating outlet and is readily
contacted
5. Staff of Ar-Rahnu X’change inclusive of spouses, parents and children are not
allowed to apply for pawning facilities

B) TERMS OF LOAN

For Malaysian citizen whose age is not less than 18 years old

1. Ar-Rahnu

To receive pawning of valuables which purity and quality of gold is listed as follows:

PURITY OF GOLD GOLD CONTENT

 24.0 carat 99.9%
22.8 carat 95.0%
22.0 carat 91.6%
21.0 carat 87.5%
20.0 carat 83.5%
18.0 carat 75.0%

2. Az-Zahab

To receive pawning of valuables which purity and quality of gold is listed as follows:

GOLD PURITY GOLD CONTENT

24.0 carat 99.9%
22.8 carat 95.0%
22.0 carat 91.6%
21.0 carat 87.5%
20.0 carat 83.5%
18.0 carat 75.0%

Note: Kelantan gold can be accepted for pawning by using the nearest to lower
approximate gold purity criteria

C) LOAN LIMIT

For Malaysian citizen whose age is not less than 18 years old

1. Loan Limit

a) Ar-Rahnu scheme

65% on value of pawned goods or minimum RM100.00 and maximum

RM50,000.00 for each and every pawning.

Note: the maximum loan limit which can be disbursed for every pawning is 65%
on the value of the pawned goods or maximum RM50,000.00

b) Az-Zahab scheme

65% on the value of the pawned goods or minimum RM10,001.00 and maximum
RM100,000.00 for every pawning.

2. Frequency of Pawning

a) Ar-Rahnu Scheme
 The total loan accumulation on the same day must not exceed RM10,000.00 and
total loan accumulation must not exceed RM50,000.00 per individual pawner (not
counting safekeeping fee)

b) Az-Zahab Scheme

The total loan accumulation must not exceed RM100,000.00

3. Re-pawning

The pawner is allowed to re-pawn the same pawned goods with the term and
condition of this former loan and safekeeping fee be defrayed to start afresh with the
new loan. The total new loan depends on the current value of the pawned goods
(depends on the current gold market pricing).

4. Defrayment of pawning

a) Ar-Rahnu

Repayment can be made in one go or in installment basis

b) Az-Zahab

Repayment is monthly installment for the entire duration period, and on monthly
installment or at one go for duration period of 6 months or less.

5. Safekeeping Fee

a) The safekeeping is calculated based on the value of the pawned goods and
number of months passed before the pawned goods is redeemed. The rate of
safekeeping fee is as follows:

Ar-Rahnu

Loan category margin of disbursement safekeeping rate on

pawned goods for every
RM100.00 per month
<RM1,000.00 65% RM0.65
>RM1,000.00- 65% RM0.65
RM5,000.00

Az-Zahab

margin of disbursement Safekeeping rate on pawned goods for

every RM100.00 per month
< RM1,000.00 RM0.65
b) Safekeeping fee is calculated on the date of redemption using the following
formula:

US = NM x K/100 x 12 x T/365

US Upah Simpan NM Nilai Marhun

T Tempoh (hari) K Kadar

Translation: Safekeeping Fee = Pawned Value x Rate/100 x 12 x Duration/365

c) For definition of safekeeping fee calculation on pawned goods valued at lower

than RM100.00, the value of the pawned goods is calculated at RM100.00 base
d) For safekeeping fee calculated based on the duration period of number of actual
days the pawned goods are pawned. Nevertheless, the minimum safekeeping fee
is equivalent to the rate at which minimum half month will be levied on the
pawned goods for duration period of less than 15 calendar days
e) Calculation workflow for Ar-Rahnu is as follows:

Example 1

Value of pawned goods = RM1,200.00

Total loan = RM780.00 (65% on pawned value)
Pawn date = 15 July 2001
Duration = 180 days (6 months)
Maturity date = 15 January 2002
Safekeeping fee = RM0.65

Case 1

The pawner redeems the pawned goods on due date ie exactly 6 calendar months:

Safekeeping fee = RM1,200.00 x 0.65/100 x 12 x 180/365 = RM46.16

Total redemption amount = RM826.16

Case 2

The pawner redeems early ie 30th November 2001:

Safekeeping fee = RM1,200.00 x 0.65/100 x 12 x 135/365 = RM34.62

Total redemption amount = RM814.62

Note: actual duration of 4 months 15 days transpired is counted as 135 days (4 x

30 days + 15 days)
Case 3

The pawner redeems late ie 10th November 2002:

Safekeeping fee = RM1,200.00 x 0.65/100 x 12 x 205/365 = RM52.57

Total redemption amount = RM832.57

Note: actual duration of 6 months 25 days transpired is calculated as 205 days (6

x 30 days + 25 days)

Case 4

The pawner redeems early ie 25th July 2001:

Safekeeping fee = RM1,200.00 x 0.65/100 x 12 x 15/365 = RM3.85

Total redemption amount = RM783.85

Note: actual duration of 10 days transpired is calculated as 15 days

Example 2

Pawned Value = RM5,400.00

Total loan = RM3,510.00 (65% on pawned value)
Pawn date = 15 July 2001
Duration = 180 days (6 months)
Maturity date = 15 January 2002
Safekeeping rate = RM0.65

Case 1

The pawner redeems the pawned goods on the due date ie exactly 6 calendar
months

Safekeeping fee = RM5,400.00 x 0.65/100 x 12 x 180/365 = RM207.72

Total redemption amount = RM3717.72

Case 2

The pawner redeems early ie on 30th November 2001

Safekeeping fee = RM5,400.00 x 0.65/100 x 12 x 135/365 = RM155.79

Total redemption amount = RM3,665.79

 Note: the actual duration transpired is 4 months 15 days is calculated as 135 days

Case 3

The pawner redeems late ie on 10 February 2002

Safekeeping fee = RM5,400.00 x 0.65/100 x 12 x 205/365 = RM236.56

Total redemption amount = RM3,746.56

Note: the actual duration transpired is 6 months 25 days is calculated as 205 days

f) Calculation workflow for Az-Zahab is as follows:

Example 1

Pawn value = RM10,000.00

Total loan = RM6,500.00 (65% on pawn value)
Pawn date = 27 April 2001
Duration = 365 days (12 months)
Maturity date = 27 April 2002
Safekeeping fee = RM0.65

Safekeeping fee = RM10,000.00 x 0.65/100 x 12 x 365/365 = RM780.00

Therefore, the total installment = (Loan + Safekeeping fee )/12
= 6,500 +780/12
= RM606.70

Example 2

Pawn value = RM10,000.00

Total loan = RM6,500.00 (65% on pawn value)
Pawn date = 27 April 2001
Duration = 730 days (24 months)
Maturity date = 27 April 2002
Safekeeping fee = RM0.65

Safekeeping fee = RM10,000.00 x 0.65/100 x 12 x 730/365 = RM1,560

Therefore, the total installment = (Loan + Safekeeping fee)/24
= 6,500 + 1,560/24
= RM335.83
Example 3

Pawn value = RM10,000.00

Total loan = RM6,500.00 (65% on pawn value)
Pawn date = 27 April 2001
 Duration = 1095 days (36 months)
Maturity date = 27 April 2003
Safekeeping fee = RM0.65

Safekeeping fee = RM10,000.00 x 0.65/100 x 12 x 1095/365 = RM2,340.00

Therefore, the total installment = (Loan + Safekeeping fee)/36
= 6,500 + 2,340/36
= RM245.55

g) If the maturity date falls on a weekday holiday which is general or special public
holiday therefore the monthly safekeeping fee is not taken account when late
redemption is made past the due date. The maximum exception is 2 consecutive
holidays. This exception can only be approved by the outlet manager.
h) The approval to the exception must be made on the safekeeping/payment slip. The
outlet must notate the date(s) and holiday(s) concerned.
i) Safekeeping fee will only be taken account as earnings when payment is made
(actual and not accrual concept)
j) Safekeeping fee for pawned goods for the purpose of auction must be taken
account when the period for settlement is made based on the pawn value on the
actual date of redemption

6. Approval Authority

a) The limit of authority to approve loan follows the Schedule of Authority Limit to
Approve Current Loan
b) Limit of authority to approve second and further consecutive loans for the same
pawner or approving extended duration period is the same as the authority to
approve as above-said on separate basis. On the other hand, the authority to
approve redemption is without limit
c) The total loan amount disbursed for each pawning must be evened and rounded
up to the last ten ringgit
d) The outlet manager is given negotiating authority to increase the total loan
amount to maximum 0.5% of the actual eligibility for purpose of rounding up the
total eligibility up to the next hundred ringgit. Even then, the total loan amount
inclusive of additions/increments (rounding up) must not exceed the allowable
maximum limit.

2.0 MISCELLANEOUS MATTERS

The following are clarification regarding matters related with pawnbroking.

A) Gold Price

The current gold pricing will be used to value the pawned goods. The franchisor will
supply the latest gold prices on more regular basis for the day if the daily price
 fluctuates on volatile basis. Otherwise, the pricing is given on scheduled regular
basis.
B) Assigning duty of safekeeping pawned goods

1. If the outlet manager on duty will go on holiday or will be attending seminar

course, the manager must make effort to assign his duty to other officer(s) to take
over his work as proxy or relief duty
2. The said manager must fill up the duty assignment form and fill up attestation
form that the pawned goods kept in the safebox in the strongroom up to date of
assignment of duty to relief officer and the special safebox key(s) are as stated in
the Pawned Goods Enumeration Report
3. If the condition permits, the relief officer (manager) who is handed over the duty
and the concerned keys must check and inspect the gold valuables kept in the
special safebox at the handover
4. The relief officer when returning back duty and the safebox keys to the official
manager must fill in the same duty assignment form and attestation form
5. The duty assignment form must be used in all conditions which require
assignment/change of duty and handover of the key for the safekeeping of pawned
goods kept in the special safebox kept in the strongroom

C) Missing/misplaced Pawn Letter

1. The pawner must fill in the attestation letter for misplacement/loss and stamped as
testimony of missing document and handed over to the counter clerk together with
identity card.
2. Complete a copy and original copy of Pawn Acknowledgement Letter (PAL) and
hand over to the outlet manager for certifying and chopping as “certified true
copy”
3. The officer must obtain the third and fourth copy and hand over to the outlet
manager for taking notation that the pawner has been given a copy of the same
document

D) DEATH AND MENTAL INCAPACITY

1. In signing off borrower account who has passed away or become mentally
incapacitated before the redemption due date, the Officer has the authority to
approve extension of duration period for a period not exceeding two months
without requiring the family members of the deceased pawner to discuss about the
said pawn matters
2. For the deceased account whose pawning is still ongoing duration, safekeeping
fees are levied up to the month end of the death occurrence and safekeeping fees
are not charged for the balance of duration outstanding
3. If the heir intends to redeem the pawned goods:
i) The heir must produce the death certificate or doctor’s letter verifying the
pawner’s death or mental incapacitation of the pawner
 ii) The officer must calculate the total loan outstanding and safekeeping fees
from date of pawning to date the pawner is certified deceased or mental
incapacitation
iii) This total will constitute the total defrayment of the outstanding pawn debt
4. If the heir and the pawner’s family are unable to redeem the pawned goods within
the pawn duration period:-
i) The officer based on their individual authority and discretionary powers
can extend the duration of pawning for a period not exceeding two months
without having to settle the original safekeeping fees and without levying
additional safekeeping fees on extended duration and/or outstanding
duration
ii) If the heir and the pawner’s family agree that the pawn goods should be
auction after the end of pawn duration period or extended period
5. For auction proceeds must be hand over to the heir or pawner’s family after
deducting the total outstanding loan, safekeeping fees from date of pawning to
date the pawner is certified deceased or mentally incapacitated and service or
administration fee

E) INSPECTION/VERIFICATION

1. At every end of day, all forms and documents must be checked and certified by
the outlet manager
2. The outlet manager and any officer appointed are encouraged to perform
revaluation exercise on pawned items kept at the end of the day. This valuation
must be notated on the envelope of the pawned goods. The frequency of checking
must be regularly performed
3. Not less than two times every month by the outlet manager
Note: for each inspection, the pawned goods envelope must be re-stamped
4. One specially designated book must be provided for this inspection
5. Every month end, the outlet must perform balancing on the outstanding loan
balance stated in the control card to ensure the balance is the same as the General
Ledger

F) POLICE CASE

1. Observing pawned goods and documents involved in pawnbroking.

i) If the police wishes to look (without taking away) the pawned goods
and/or documents involved in pawnbroking to obtain details on the
pawner, the police must give written directions to the outlet under Section
51 of the Criminal Procedure Act.
ii) The written instructions must state the following:
a) Detailing the aspects to be observed for purpose of investigation
b) That the direction is under section 51 (1) of the Criminal Procedure
Act
 iii) With such written instructions as above stated, the outlet must allow the
police to inspect the pawned goods and/or relevant documents

2. Confiscating pawned goods

a) If the police intends to confiscate the pawned goods (whether observing
beforehand or henceforth or not) based on section 435, the police can
confiscate the pawned goods suspected of being stolen
b) Under section 413, the police can report the taking away/confiscation of
pawned goods to the Magistrate which will be the final arbiter on who will be
given ownership of the pawned goods. The police have no power or mandate
to hand-over the pawned goods to anyone after receiving Magistrate’s finality.
c) If the police is present at the outlet to take away the pawned goods, the outlet
must obtain written verification from the police that the police are
confiscating the pawned goods under section 435 of the Criminal Procedure
Act. The written verification must state the details and particulars of the
pawned goods.
d) the outlet can take civil action against the pawner to retrieve back its loan
outstanding