A study on the impact of Ar-Rahn loan on the socioeconomic of the microentrepreneurs in Kota Bharu / Hasnida Mat Nor

Ar-Rahn is an agreement between borrower and the lender whereby the borrower puts up a valuable asset as collateral to the lender to convince him (lender) that his right on loan intended will not be forsaken if the borrower fails to pay. In such eventuality, the lender has the right to sell off the charged asset to compensate loan. Any balance arising from the sale after deduction of the balance in the borrowed amount will be returned to the customer (owner). This study surveyed the impact of Ar-Rahn loan on the socioeconomic of the micro entrepreneurs in Kata Bharu in term of their business performance and standard of living. Firstly, this study is conducted with the objectives of to understand the concept of Islamic mortgage in Kelantan and secondly to compare the Islamic Mortgage system by Ar-Rahn shops of PKB and Ar-Rahn Scheme of Bank Rakyat. Thirdly, to determine the effect of Ar-Rahn scheme on the socioeconomic of the micro-entrepreneurs in Kata Bharu. The 137 of micro entrepreneurs that taking Ar-Rahn loan was selected. The finding suggests that Ar-Rahn loan is very helpful to the micro entrepreneurs in Kata Bharu. They will improve or start their business by getting loan from Ar-Rahn. Besides that they will also improve their standard of living.