OBJECTIVES: After completing this chapter, students should be able to: 1. Understand the concept of AlRahn in Islam. 2.

Appreciate the benefits of AlRahn in securing loan transactions 3. Apply their understanding to the modern business practices.

hapter

Al-Rahn (Pawning)
DEFINITION
Literally:  Fixed, permanent and continuity; or detained, confined, prison and hostage  Translated in English as pledging, pawning or mortgage  {[But1] every human being will be held in pledge for whatever he has earned} 2(At-Tur: 21)  {[On the Day of Judgement] every human being will be held in pledge3 for whatever [evil] he has wrought} (AlMuddaththir: 38) Technically:  Rahn is to make a property a security in respect of a right of claim, the payment in full of which from that property is permitted4 or  Possession offered as security for a debt so that the debt will be taken from them in case the debtor fails to pay back the due money.  Rahn is classified as a contract under the category contract of security or contracts pertaining to authentication  The purpose of Rahn is to convince the creditor that the debt will not simply disappear or vanish in case of default payment on part of the debtor.

The verse begins with {And as for those who have attained to faith and whose offspring will have followed them in faith, We shall unite them with their offspring; and We shall not let aught of their deeds go to waste: .} implying that the righteousness of their children increase the merit of the parents. 2 The righteousness of the parents cannot absolve their offspring from individual responsibility (Muhammad Asad page 808) 3 detained, confined and hostage 4 THE MEJELLE, page 107; The Other Press
1

 This is because, in case of non-payment, the pledged property will be sold or auctioned and the proceeds will be taken by the creditor to compensate for the losses as a result of the bad debt.  However, the creditor is only entitled to the total amount owed to him by the debtor and the balance will be returned back to the owner of the pledged property (the debtor)

EVIDENCE
Quran: {And if you are on a journey and cannot find a scribe, pledges [may be taken] in hand: but if you trust one another, then let him be conscious of God his Sustainer}. (Al-Baqarah: 283)  Even though the above verse highlighted the legitimacy of Rahn for travelers during their journey, majority of the jurists including Syafie, Malik, Abu Hanifah and Ahmad had actually concluded that the ruling is also applicable and relevant to those who are not traveling and are residing or staying in a certain location. Only Mujahid and Daud suggested that Rahn is only permissible during the journey based on the above verse.  The verse draws our attention to the travelers because under normal circumstances, voyagers would find it difficult to find writers that could document their debt transaction during their voyage.  It does not also indicate that if the debtor can find any writer, they cannot pledge their property since the evidence from the Sunnah had proven otherwise.  The verse actually intents to guide the people on how to secure and authenticate their debt in a simple way in case they cannot find any writer at all.5 Hadith:
Narrated by Aishah (r.a) to the effect that: The Prophet (s.a.w) had bought some food from a Jew, and he (s.a.w) pledged to him his steel armour.6 Narrated by Anas (r.a) to the effect that: The Prophet (s.a.w) had pledged his steel armour to a Jew in Madinah, and in return he (s.a.w) took from him some wheat for his family7.

Ijma: The Muslim jurists had unanimously agreed on the legitimacy of the rahn contract especially because it had its origin in evidences found in both the Quran and Sunnah.8

WAHBAH AZZUHAILY; 6:4209 Reported by al-Bukhari and Muslim 7 Reported by al-Bukhari, Ahmad, NasaI and Ibnu Majah 8 WAHBAH AZZUHAILY; 6:4210
5 6

PILLARS OF RAHN
1. 2. 3. 4. 5. Rahin (pledgor) A person who gives a Rahn or the debtor Murtahin (Pledgee) A person who takes a Rahn or the creditor Marhoun (pledged asset) Property to be pledged Marhoun Bih the liability of the rhn or the debt Sighah Ijab (Offer) and Qabul (Acceptance)

BENEFITS OF RAHN:
 Rahn is indeed a very useful contract, which functions as a multipurpose tool that is beneficial and advantageous to both parties especially to the creditor. Creditor:  Compared to the contract of al-Kafalah, or the documentation of debt, or providing witnesses, all these measures can never match the security that Rahn can provide for the benefit of the creditor.  This particularly because Rahn is a form of authentication of debt, which is under the custody of the creditor in return for his right of claiming back his money from the debtor.  In case of default payment, the creditor could secure the loan repayment can retrieve back his money by selling off the pledged property with the consent from either the court or the debtor himself 9.  The creditor can also be assured that the debtor will not forget or take for granted his obligation to settle the loan since his valuable assets are still under the custody of the creditor/pledgee Debtor:  Could get some fast cash by temporarily pledging his valuable items to the creditor.  Can convince the pledgee/creditor to lend him the money since he has something to offer in return as a guarantee of payment. Nobody will normally lend him any amount of money if he has nothing to offer as a security in the first place.

CONDITIONS OF RAHN:
 Any objects that can be sold can be pledged. What cannot be sold cannot be pledged  A person can borrow something which he can pledge with a man whom he should specify and name to the lender  If the mortgagor and mortgagee agree to place the pledge with a third person, they cannot change this agreement as long as the third person remains honest.  If the mortgagor pays back part of the debt, the mortgage does not terminate; it will stay until the whole sum is paid back.  The mortgagor cannot dispose the object by selling, granting or endowing it or in any other way.  A pledge is a trust in the hands of the mortgagee.
9

WAHBAH AZZUHAILY, 6:4210