Ar-rahnu as an alternative microfinance tool for small traders

Abstract

The present literature on ar-rahnu presents insufficient amount of research being conducted with regards to the small traders. This research examines the level of understanding and awareness of the small traders about the ar-rahnu schemes and their perception towards the schemes as well as the reasons as to why they chose ar-rahnu scheme to finance their business. The totals of 169 structured interviews have been conducted amongst small traders that run their business in Kota Bharu, Kelantan. The findings from the interviews have been analyzed by means of SPSS Version 17 .0. The result shows that the small traders' level of understanding and awareness about the ar-rahnu schemes is only at the satisfactory level and they believed that the ar-rahnu schemes can be one of their sources of business financing, but they will not consider ar-rahnu schemes as a last resort for business financing. Good customer service has been found to be the major reason as to why the respondents chose ar-rahnu schemes. The outcome of this research will give clear gmdelines to the ar-rahnu scheme providers on the actual demands and needs from the small traders' side and to conduct business in a way that is consistent with the needs of the target market and the society.