The Customer Perception of Ar Rahnu Islamic Pawn System by Bank Rakyat in Kuching, Samarahan and Serian, Sarawak.

UNIVERSITI TEKNOLOGI MARA
THE CUSTOMER PERCEPTION OF AR-RAHNU,
ISLAMIC PAWN SYSTEM BY BANK RAKYAT
IN KUCHING, SAMARAHAN AND SERIAN,
SARAWAK
NORSHAHRIMAN BIN NORDIN
MOHAMAD RAFIQ BIN LATIF
MAISARAH BINTI MARZUKI
MBA
July 2014

UNIVERSITI TEKNOLOGI MARA
THE CUSTOMER PERCEPTION OF AR-RAHNU,
ISLAMIC PAWN SYSTEM BY BANK RAKYAT
IN KUCHING, SAMARAHAN AND SERIAN,
SARAWAK
Dissertation submitted in partial fulfillment of the requirement
for the degree of
Master of Business Administration
Arsyad Ayub Graduate Business School
July 2014

ii
AUTHOR’S DECLARATION
We declare that the work in this dissertation was carried out in accordance with the
regulations of Universiti Teknologi MARA. It is original and is the results of our own
work, unless otherwise indicated or acknowledged as referenced work. This topic has
not been submitted to any other academic institution or non-academic institution for
any degree or qualification.
In the event that our dissertation be found to violate the conditions mentioned above,
we voluntarily waive the right of conferment of our degree and agree be subjected to
the disciplinary rules and regulations of Universiti Teknologi MARA.
Name of Candidate : Norshahriman Bin Nordin
Candidate I.D. No. : 2012469828
Programme : Master of Business Administration
Faculty : Business Management
Thesis Title : The Customer Perception of Ar-Rahnu, Islamic
Pawn System by Bank Rakyat in Kuching,
Samarahan and Serian, Sarawak.
Signature of Candidate : …………………………………………
Date : July 2014

iii
Name of Candidate : Mohamad Rafiq Bin Latif
Date : July 2014
Name of Candidate : Maisarah Binti Marzuki
Date : July 2014

iv
LETTER OF SUBMISSION
Date :
The Head of Program
Master of Business Administration
Faculty of Business Management, Centre of Graduate Studies,
Universiti Teknologi MARA Sarawak, Kampus Kota Samarahan,
Jalan Meranek, 94300 Kota Samarahan,
Sarawak
Dear Sir,
SUBMISSION OF APPLIED BUSINESS RESEARCH ( ABR796 )
Attached is the project paper titled “The Customer Perception of Ar-Rahnu, Islamic
Pawn System By Bank Rakyat in Kuching, Samarahan and Serian, Sarawak” to fulfill
the requirement as needed by the Arsyad Ayub Graduate Business School, Faculty
of Business Management, Universiti Teknologi MARA.
Thank You.
Your sincerely,
……………………………………………….
2012469828
……………………………………………….
2012683108
……………………………………………….
2012427924

v
ACKNOWLEDGEMENT
In the name of Allah s.w.t, the Most Gracious, the Most Merciful.
Alhamdulillah, all thanks and praises are due to Allah s.w.t for his wisdom, strength
and blessings have made us able to complete this project paper accordingly.
The most important person towards to this succeeded, we would like to express our
appreciation to our respectable advisor Prof Madya Dr. Rosita Hj Suhaimi who has
made a significant contribution, valuable guidance, continuous support and
encouragement in the completion this project.
An appreciation also goes to our examiners Datuk Dr. Hj. Abdul Kadir Bin Hj.
Rosline, Dr. Corina Ak Joseph and Prof. Madya Dr. Voon Boo Ho for their time
spending in evaluating our proposal, presentation and final report.
We would like to dedicate our deepest gratitude to our beloved parents, husband,
brother, sisters and relative for their encouragement and understanding support
towards to our successful. May Allah bless our family.
Last but not least, to Branch Managers of Bank Rakyat in Satok, Simpang Tiga, Kota
Samarahan, Matang Jaya and Kota Padawan, Head of Kedai Ar-Rahnu X’Change
Satok, Tuan Zulhairil Bin Sulaiman (Senior Assistant Registrar High Court Kuching),
En Mohamad Hanif Bin Abudullah (Maisarah’s Husband), En. Abang Othman Bin
Abang Shibeli (Statistic Expert), all our friends and fellow colleagues who have
endure with us directly or indirectly for giving brilliant idea and supporting to our
research.
May Allah grant all of you with greatest blessing.
Thank you.

vi
TABLE OF CONTENT
CONTENT PAGE
Declaration of Original Work ii
Letter of Submission Iv
Acknowledgement v
Table of Content
List of Tables
List of Figures
vi
ix
x
CHAPTER ONE - INTRODUCTION
1.0 Introduction 1
1.1 Background of Company 3
1.1.1 Products and Services 7
1.1.2 Subsidiaries 8
1.2 Background of the Study 9
1.2.1 Pawn Broking 10
1.2.2 Ar-Rahnu 13
1.3 Problem Statement 18
1.4 Research Objective 18
1.5 Significant of Study 20
1.5.1 The Management of Bank Rakyat 20
1.5.2 Financial Institutions and Co-operatives 20
1.5.3 References of Customer 20
1.6 Scope of Study 20
1.7 Limitation of Study 21
CHAPTER TWO - LITERATURE REVIEW
2.0 Introduction 23
2.1 Ar-Rahnu
2.2 Concepts of Ar-Rahnu
2.2.1 Loan under Al-Qard Contract
2.2.2 Rahnu
2.2.3 Ujr (fee)
2.2.4 Mortgage / jewelries
2.3 Functions of Ar-Rahnu
23
23
23
24
24
24
24

vii
2.4 Ar-Rahnu Products By Bank Rakyat
2.5 Definition of Terms
25
2.5.1 Perception 28
2.5.2 Awareness 28
2.5.3 Demographic Factors 29
2.5.4 Marketing 29
2.5.5 Quality Service 30
2.6 Knowledge Imposed From Syariah View 30
2.7 Expose an Awareness to Pledge Asset Factor 32
2.8 Reveal Important Roles of Pricing System 33
2.9 Important of Advertising 34
2.10 Customer Service 35
2.11 Locality of Ar-Rahnu Pawnshop 36
CHAPTER THREE - THEORETICAL FRAMEWORK
3.0 Introduction 38
3.1 Theoretical Framework 38
3.1.1 Syariah’s View of Ar-Rahnu 40
3.1.2 Pledge Asset Factor 40
3.1.3 Pricing System 41
3.1.4 Advertisement 41
3.1.5 Customer Service 41
3.1.6 Locality 42
3.2 Conclusion 43
CHAPTER FOUR - RESEARCH DESIGN AND METHODOLOGY
4.0 Introduction 44
4.1 Research Design 44
4.2 Sampling 45
4.2.1 Sampling Technique 45
4.2.2 Sample Size 47
4.3 Data Collection Method 49
4.3.1 Primary Data 49
4.3.1.1 Interview 49
4.3.1.2 Questionnaire 50
4.3.1.3 Questionaire Design 52

viii
4.3.1.4 Types Of Questionnaire Items 53
4.4 Unit of Analysis 54
4.5 Procedure for Data Analysis and Interpretation 55
4.5.1 Frequency Distribution 56
4.5.2 Descriptive Analysis 56
4.5.3 Reliability (Cronbach’s Alpha) 57
4.5.4 Cross-Tabulation Analysis 57
4.5.5 The Coefficient of Correlation 59
4.5.6 Hypotheses Testing 60
4.5.7 Hypothesis Of Study 61
CHAPTER FIVE - DATA ANALYSIS AND FINDINGS
5.0 Introduction 63
5.1 Profile of the Respondents 63
5.2 Descriptive Analysis 65
5.2 Cross-Tabulation 69
5.3 Reliability Analysis 75
5.4 Correlation Analysis 76
5.5 Hypothesis Testing 78
CHAPTER SIX - CONCLUSIONS AND RECOMMENDATIONS
6.0 Introduction 81
6.1 Conclusions 81
6.2 Recommendations 83
6.2.1 Increase Customer Perception towards Ar-Rahnu 83
6.2.2 Maintain Service Quality Provided 84
6.2.3 Increase Promotions and Advertisements on Ar-Rahnu 84
REFERENCES 86
APPENDIX 90

ix
LIST OF TABLES
TABLE CONTENT PAGE
1.1 The Differences of Ar-Rahnu and Conventional Pawn
Broking
13
4.1 Sample Size Given the Population Size 40
5.1 Respondent’s Demographic Profile 55
5.2 Descriptive Analysis of the Items in the Questionaires 57
5.3 Likert Scale used in the Questionaire 59
5.4 Gender & Type of Transactions or Services Cross-
Tabulation
60
5.5 Age & Type of Transactions or Services Cross-Tabulation 61
5.6 Marital Status & Type of Transactions or Services Cross-
Tabulation
61
5.7 Race & Type of Transactions or Services Cross-Tabulation 62
5.8 Employment Status & Type of Transactions or Services
Cross-Tabulation
63
5.9 Average Monthly Income & Type of Transactions or Services
Cross-Tabulation
64
5.10 Realibility Scale 65
5.11 Cronbach Alpha for 42 Items 66
5.12 Cronbach Alpha for 7 Components 66
5.13 Correlation between Ar-Rahnu Factors towards Customer
Perception
67
5.14 Guilford’s Interpretation 68
5.15 Correlation Coefficient Test for Hypothesis 70

x
LIST OF FIGURES
FIGURE CONTENT PAGE
1.1 List of Statutes and Government Linkages 5
1.2 Bank Rakyat’s Subsidiaries Linkage 7
3.1 Bank Rakyat Ar-Rahnu Theoretical Framework 36

1
CHAPTER ONE
INTRODUCTION
1.0 INTRODUCTION
Bank Rakyat is one of the leading finance institutions in Malaysia that operate
fully Islamic Banking Practice under Syari’ah Laws and monitored by Bank
Negara Malaysia through compliance of DFIA. It is a Largest Islamic
Cooperative Bank in Malaysia. The organization is well-established
cooperative banks standing among of successful and gigantic financial
service and product providers in Malaysia.
In 2008, global economic environment arising from the financial crisis in the
United States which has its contagion effects in Europe and Asia. The global
economic crisis has created a significant impact to most Asian business and
most importantly our own country which has been badly affected but the bank
successfully to improve their performance in terms of total factor productivity
along the crisis. The bold and courageous decision by the management to
meet the demands of members and customers in a full-fledged Islamic bank
has placed Bank Rakyat where it is today – a Bank that is able to stand on its
own feet while providing a multitude of products and services and various
facilities to customers.
The success strategy plan is one of the main components practice by this
bank to maintain the successful profitable performance each year. Bank
Rakyat offers a wide range of banking products and services which includes
consumer financing, commercial financing as well as deposit and investment
products at affordable rates to cater for various segments of the financial
services market. The Bank is also committed in promoting thrift and savings

2
amongst its customers and focus on Islamic pawn broking services (Ar-
Rahnu) for sustaining of movement.
The Ar-Rahnu product fund is a short term fund that never involved usury
element and it is allowed unless if there are illegal activities such as usury
fraud and it is prohibited. Although Islam encourages businessmen to
augment their capital through trade, it explicitly prohibits them from capital
expansion through lending on interest. The size of the rate of interest charged
is inconsequential. There is no opportunity cost of lending money in Islam.
The lender is likely to be wealthy and the borrower poor, usury simply
increases the gap between the have and the have-nots. Islam encourages the
circulation of wealth.
It is worth noting that the move to provide the Ar-Rahnu Pawn Broking-I from
the mid-1980s, a favorite choice with many customers today. Since then Ar-
Rahnu has expanded to reach every nook and corner of the country while
being a viable alternative to the conventional pawn broking. Allah states in the
Quran:
“You are the best of peoples, evolved for mankind, enjoining
what is right, forbidding what is wrong, and believing in Allah” (Qur’an
3:110).
“Those who devour usury will not stand as stands one whom the
Evil by his touch driven to madness. That is because they say: “Trade is
like usury,” but Allah has permitted trade and forbidden usury” (Qur’an
2:275).
Islam through the example of the Prophet (S.A.W.) and the rightly guided
Caliphs, demonstrate the importance of trade in business. Abu Bakr (R.A.A)
ran a cloth business; Umar (R.A.A) had a corn trading business and Uthman
(R.A.A) a cloth business. The Ansar among the Companions of the Prophets

3
(may Allah be pleased with them) engaged in farming. In fact, except for the
trades that have been prohibited, Islam actively encourages Muslim to get
involved in business and commerce.
After 60 years of the most challenging and full color of incident, condition,
situation and survival efforts, Bank Rakyat enjoys a very cozy place resulted
as one of strong and stable financial institution in the country. As a Largest
Islamic Cooperative Bank in Malaysia, it’s supported by more than 970,500
individual and 2,700 cooperative carrying an amount of RM 2.9 billion of
investment. The huge numbers of members and the value of investment give
Bank Rakyat good manipulative advantages to stay ahead in the business
1.1 BACKGROUND OF COMPANY
Bank Rakyat is currently one of the leading finance institutions in
Malaysia which operate fully under Syari’ah Law s (Islamic Banking
Practice) and directly monitored by Bank Negara Malaysia through
compliance of DFIA.
The cooperative movement in this country was started by the British
colonial administration way back in the early 1920s and that provided
the foundation and platform for the sector’s dynamic growth three
decades later. Bank Rakyat was established under the Cooperative
Ordinance 1948, following an expansion of the co-operative
movement in Peninsular Malaysia.
On 28 September 1954, Eleven Union Banks decided to merge and
form Bank Agong Kampong Bekerjasama-sama Persekutuan Tanah
Melayu Dengan Tanggongan Berhad or formerly known as Bank
Agong (Apex Bank) and was registered under the Cooperative
Ordinance 1948. The head office was in Bukit Mertajam, Penang. The

4
function is to facilitate the expansion of the co-operative movement
and the co-operatives set up their respective union banks provide
financial needs to their members. Led by Menteri Besar Perak at that
time, as a Cooperative Bank, the main objective was to protect the
Malays and local people of Perak and Tanah Melayu as generally,
their rights to receive a proper financial advisor and product in order to
represent the fishermen and farmer or agriculture based of group in
Perak as to serve as a financial consultant and service provider.
The bank moves its head office to Kuala Lumpur in 1964 with capital
raised from RM2 million to RM20 million. In 1967, Bank Kerjasama
Malaysia Berhad or in short, Bank Kerjasama was replaced Bank
Agong with its membership opened not only to the co-operatives, but
also to individuals. Bank Rakyat came about due to the farsightedness
of those at the forefront of the cooperative movement who believed
that progress in the sector would also help transform the country’s
economic landscape and thereafter, improve the economic well-being
of the people. Subsequent changes in the bylaws also resulted in the
creation of its subsidiary companies and opening of branches to serve
customers as well as members. On 6 January 1973, the name was
changed to Bank Kerjasama Rakyat Malaysia Berhad or better known
as Bank Rakyat. Bank Rakyat is governed by its bylaws and Bank
Kerjasama Rakyat (M) Berhad Act 1978 (Special Provision 202),
which allows Bank Rakyat to provide financing to non-members. The
head office moves from Jalan Ipoh in 1979 to a 22-storey building
owned by the Bank at Jalan Tangsi, Kuala Lumpur. The head office
remains here until today. In 1989, Bank Rakyat was placed under the

5
Ministry of Land and Co-operative Development and the Ministry of
Finance.
In 1993, the Co-operative Act was reviewed which allows the Bank to
operate in Sabah and Sarawak. On 8 May 1993, Bank Rakyat took a
giant step towards becoming a Syari’ah co-operative bank by
introducing Islamic banking products at four of its branches.
Bank Rakyat became a full-fledged Islamic co-operative bank in 2002.
Hence, with this major decision, Bank Rakyat marked another
milestone in history where it became the third bank to offer total
Islamic banking products in Malaysia. On 15 February 2002, Bank
Rakyat together with six other financial and development institutions
was placed directly under the supervision of Bank Negara Malaysia
(Central Bank of Malaysia) under the Development of Financial
Institution Act (DFIA). In 2003, Bank Rakyat operates fully by Syari’ah
when its able to change conventional balance asset totaled 1.1% of
Syari’ah's asset.
On 27 March 2004, Bank Rakyat was placed under the supervision of
the Ministry of Entrepreneur and Co-operative Development. On 15
April 2009, after the cabinet restructuring, Bank Rakyat was absorbed
under the Ministry of Finance and was later placed under the Ministry
of Domestic Trade, Cooperatives and Consumerism.
Bank Rakyat is well aware that investments channeled into building its
brand values must have depth and breadth initiatives before they can
demonstrate real impact, and they often yield benefits that are
intangible. The Bank acknowledges that brand values are not only
enhanced through branding and promotions per se. It can also be
achieved through Corporate Social Responsibility initiatives that

6
benefit the people and contribute towards better living in the
community at large. The Bank takes pride in helping the less fortunate
who need the Bank’s support, assistance and care; the philanthropic
role of an institution in the society an Islamic Bank considers just as
important as commercial ones.
Bank Rakyat carrying out the mandate given effect, in order to align
corporate strategies with government agenda as well as the strategies
of statuary bodies or agencies.
The figure 1.1 is the list of statutes and government linkages.
Figure 1.1: List of Statutes and Government Linkages
Bank Rakyat is promoting the Islamic concept of pawn broking called
Ar-Rahnu through its wholly-owned subsidiary Rakyat Management
Services Sdn Bhd (RMS). Ar-Rahnu X'Change brand is based on the

7
transfer of expertise and experience of the Bank Rakyat’s Ar-Rahnu
product since 1993 to franchise manage by RMS.
1.1.1 Products and Services
Bank Rakyat succeeded to convert its full banking operations
from conventional practices to Islamic Banking System abide
to Syari’ah terms of law. All the products from financing,
depositing, saving, profit sharing and many more are blended
and operated based on the Syari’ah and this practice gives
Bank Rakyat an opportunity to venture easily in the line of
business. The defining characteristics of Syari’ah laws itself
gives Bank Rakyat a golden trademark and competitive
advantages in managing its effort to overcome competition
challenges rise up by the others.
The product such as personal finance provides an accurate
and determined rate of profit so that customers can negotiate
and decides the preferred outcomes due to the financing
actions. Same practices are bared in other financial product
such as housing or home financing; contract financing that
covered certain amount of cost to be fulfilled by the contractors
in order to complete certain projects, car financing, educational
fund financing, Islamic Pawn Shop and many more.
All in the rates of determined and clear defined percentages,
no uncertainty and hidden rates involved. In this research
proposal, we are concentrating on Ar-Rahnu, Islamic pawn
system and the public’s level of awareness since it was
operated.

8
1.1.2 Subsidiaries
Rakyat Holdings Sdn Bhd, which started on August 25, 1972 is
a wholly-owned subsidiary of Bank Rakyat. As the parent
company of Bank Rakyat’s subsidiaries, the company value
and support the growth and expansion of its subsidiaries,
namely: Rakyat Travel Sdn Bhd, Rakyat Hartanah Sdn Bhd,
Rakyat Management Services Sdn Bhd, Rakyat Asset
Management Sdn Bhd, Rakyat Facility Management Sdn Bhd
and Rakyat Niaga Sdn Bhd.
Figure 1.2: Subsidiaries Linkage
Business operations using Ar-Rahnu X'Change brand is based
on the transfer of expertise and experience of the Bank
Rakyat’s Ar-Rahnu product since 1993 to the franchise. Rakyat
Management Services Sdn Bhd (RMS) is Founded in 1975
and one of the wholly-owned subsidiaries of the Bank. RMS
operation is based on gold trading. For Ar-Rahnu franchise,
the franchisor RMS in managing the business operations of the
Ar-Rahnu through a franchise system. The transfer of
knowledge ensure smooth business operations, safety and

9
security risks are minimal. Currently, there are 39 cooperatives
have joined the franchise network Ar-Rahnu X'Change been
operating. In addition, RMS is also responsible for managing
34 Ar-Rahnu X'Change owned Bank Rakyat. RMS is also
aggressively expanding its business in line with its core
business such as sale and purchase of used gold and is now
expanding into the trade of gold bars, jewellery and the like.
Distribution channels that have been identified include
franchises, co-operatives and indigenous entrepreneurs.
For advisory services, RMS has been entrusted to conduct
training operations Ar-Rahnu Bank. RMS also offers other
related services such as the checking of jewellery stocks and
the compliance of the Ar-Rahnu operations. RMS also in an
effort to expand overseas business with a number of foreign
companies has expressed interest in working with RMS on
Islamic pawn business activities.
1.2 BACKROUND OF THE STUDY
Generally, a pawnbroker is an individual or a business (pawn shop is
a business (pawnshop or pawn shop) that offers secured loans to
people, with items of personal property used as collateral. According
to Wikipedia the word pawn is derived from the Latin pignus, for the
pledge, and the items having been pawned to the broker are
themselves called pledges or pawns, or simply the collateral.
Pawnbroking service is one of the instruments for getting easy cash,
especially to consumers who are not from the formal financial service
system. The emergence of the conventional and Islamic pawn broking

10
services has given clients the choice to choose the best service
provider in order to get fast and easy access to cash compared to
getting loans from commercial banks or finance companies.
At the same time, the implementation of the Islamic pawn broking
service has provided an opportunity to Muslim consumers to choose
transactions that do not involve riba and gharar.
1.2.1 Pawn Broking
Pawn broking services had started since the 15th century
which was introduced by the Chinese traders during the
Malacca Sultanate. This business continued to flourish
especially after the discovery of tin mining in Larut in the 19
century. In the beginning, this business does not conform to
any specific regulation. Nevertheless during the British rule, a
system of licensed pawn broking services was introduced with
the establishment of Pawnshop Ordinance 1871. Initially, the
ordinance was only applicable to the Straits Settlements, later
it was introduced in the Federated Malay States and finally the
UN-federated Malay States. During that period, the Pawn
Broking enactment was already practiced in certain states,
such as the 1917 Pawn Broking Enactment which was the first
Pawn Broking Law in the state of Johore. The effort to
introduce a single uniform act was successful with the
enforcement of the 1972 Pawn Broking Act in June 1973.
The inclusion of Syari’ah regulation in the banking system in
1983 has encouraged its implementation in other finance
institutions such as insurance, trust unit and Islamic pawn
broking (Ar-Rahnu). The main reason is to eliminate interest

11
which was imposed by pawnbrokers as payment of the cash
being loaned. The effect can be seen by the emergence of two
pawn broking systems in Malaysia, namely the conventional
pawn broking system and the Islamic pawn broking system.
The conventional pawn broking system is popular for quick
cash borrowings. Mostly the services consume by lower
income earners in rural areas. Nevertheless there is a
downside of conventional pawn broking services which known
as a high interest charges and unfair practices.
There is some evidence shown that the Islamic pawn shop
becomes popular because of weaknesses in the conventional
pawn shop. In his report (Adnan, 2004), has listed nine
weaknesses faced by the conventional pawn shop. Firstly, the
most number of complaints received from customers is related
to the decreasing value of pawned goods. The second
weakness is that pawnbrokers are likely to offer a higher
interest rate compared to the rate stated in the Pawnbrokers
Act 1972. This often happens to illiterate customers or
impoverished people and villagers from rural areas. Thirdly,
pawnbrokers are likely to give a low collateral value during the
valuation process. The fourth weakness is that unscrupulous
pawnbrokers would often issue an illegible pawn ticket. This
happens when the pawnbroker offers a much higher interest
rate or does not complete the information needed as stated in
Pawnbrokers Act 1972.
As for the fifth weakness, it has been reported that some
unscrupulous pawnbrokers had asked for 50 cents for each

12
replacement of pawn receipts and extension of the pawning
period. The sixth weakness is that some immoral pawnbrokers
will auction pawned goods worth more than RM200 without the
customer’s knowledge. As for the seventh weakness, it has
been reported that pawnbrokers do not return the surplus after
the goods have been auctioned off. The eighth weakness of
the conventional pawn shop system is that many customers do
not know when their collateral will be auctioned off. The
notices about the auction are only publicized in Chinese and
English language papers. Lastly, some pawnbrokers will ask
for advance payment from the pawnshop customers although
this is against the Pawnbrokers Act 1972.
In order to eliminate riba and gharar in the conventional pawn
broking system, the Islamic pawn broking system was
introduced. The first Islamic pawn broking institution,
Muassasah Gadaian Islam Terengganu (MGIT), was set up by
the Terengganu State Islamic Affairs and Malay Customs in
January 1992. Following in March 1992, Ar-Rahnu, a
subsidiary of Permodalan Kelantan Berhad commenced its
operations as a stand-alone Islamic pawn shop. The Minister
of Finance announced the introduction of a scheme, known as
Ar-Rahnu product through the collaboration of three institutions
namely Bank Negara Malaysia (providing the expertise in
financing field), Islamic Economic Development Foundation
Malaysia or YPEIM as the funder, and Bank Kerjasama Rakyat
Malaysia Berhad (Bank Rakyat) on 21 August 1993 which
provide the infrastructures and managing the transaction. On

13
27 October 1993 the first phase of Ar-Rahnu product was
launched at six branches of Bank Rakyat. Currently, the Ar-
Rahnu product is available at all Bank Rakyat branches
throughout Malaysia. At the same time, YPEIM had taken the
initiative to launch counters of Ar-Rahnu product through
YPEIM co-operatives.
1.2.2 Ar-Rahnu
Ar-Rahnu, one of the so-called subsidiaries of Islamic financing
terms has been conducted by several Islamic financial
institutions around the world since the early age of Islamic
economic history. Its main criteria are by helping people who
have the items that have values reaching the price of gold and
pledge them in the financial institutions as to get some
agreeable amount of money, in return the financier charge the
borrower with a reasonable rate for safekeeping the items until
the borrower make a redemption.
The borrower is required to produce returnable collateral to
ensure repayment of the loan. The borrower entrusted the
lender to look after her belongings during the loan period. If
something happens to the collateral item but not due to the
lender’s negligence, the lender is not required to replace the
item. The amount of charges is stated accordingly to the
current of gold price, the weight of the items and the
safekeeping period needed by the customers. The lender is
allowed to charge a reasonable fee for keeping the pawned
items safe and in good condition.

14
The aim of this product is to give an aid of financing source for
the small and medium size of business people and the public
that needs a minimum amount of loan and for sure in a faster
way to get. Bank Rakyat as one of the Islamic based of finance
institution in Malaysia is well known for conducting and serve
this kind of finance facility for the public.
Currently, the main and only collateral required is gold. The
concept of practicing is accordingly to Qardhul Hassan,
meaning ‘charity contribution’ or free-service principle whereby
the priority of the product's existence is to help the people in
getting the money faster and easier without being charged with
high rate of interest but only charged for a minimum
safekeeping commission.. Historically, the Muslims in Malaysia
were anxious of banks because of the interest imposed.
Indeed, interest is prohibited in Islam and the situation has
improved especially after the introduction and practice of
Islamic financial system.
However, the culture of keeping money in the form of gold
prevails and pawn service sustains its popularity. The fast and
hassle free service making pawning the preferred choice of
micro credit (Dr Mohd Aji Haji Bahrum 2005). Compared to
conventional pawn shop, Ar-Rahnu has its own benefit. As
such, no Riba, the pawned items are still the same as before
as there will be no issues such as the gold is shorter or lighter
than before. Nevertheless, notice to the borrower will be issued
if the borrower can’t pay the items, and as per agreed, the
bank will auction the item. Though it has been auctioned, the

15
surplus from the auction will be returned to the borrower.
Below, are the greater view of the differences between Ar-
Rahnu and conventional pawn shop.

16
Table 1.1: The Differences of Ar-Rahnu and Conventional Pawn Broking
Ar-Rahnu Conventional Pawn Broking
Concept - Islamic pawn based on
Syari’ah principles.
- Conventional pawn broking.
Cost of loan - Monthly safekeeping fees
based on the value of the
pawned gold (marhun value).
- No Interest. Only safekeeping
fees as agreed will be
charged on the pledged item.
- Loan up 65% to 70% of the
goods value (nilai marhum).
- 2% interest per month based
on the loan amount.
- Interest (riba)
- Amount of loan based on
Gold value.
Loan
Duration
- The first period of 6 months
and extended for 6 months.
- No limit of time.
- 6 month loan period may be
extended for another 6
months.
- A loan may be extended
indefinitely.
Collateral - 18K - 24K (750 – 999) gold
only.
- Gold bars, wafer gold bars,
gold coins/dinars, diamonds,
hollow gold jewelry are
accepted.
- Accepts gold of various
grades of fineness, white
gold, gold watches, gold bars,
gold coins/dinars, diamonds,
hollow gold jewelry and gold
jewelry with stones. Gold
items which are damaged,
broken, torn, or crushed are
also accepted.
Process - Customers must provide
information such as
employer’s name, work
address, occupation, gross
income and other personal
details to the bank.
- Most transactions will take
only a few minutes. No forms
to fill out.
Credit Check
and
Bankruptcy
Status
- Customers who are declared
bankrupt are not eligible to
apply for loans under the Ar-
Rahnu scheme.
- Loan details will be added to
the Central Credit Reference
Information System (CCRIS).
A customer's credit report will
be affected if the loan with the
bank is not repaid on time.
- No credit checks. Customers
who are declared bankrupt
can get a loan at a
pawnshop.
- No customer details will be
added to the CCRIS and a
customer's credit history will
not be affected.
Minimum
Loan Amount
- RM100 minimum. - Conventional Pawnshop can
loan you an amount of less
than RM100.

17
Opening
Hours
- Bank Rakyat and Kedai Ar-
Rahnu X’Change are closed
on weekends and public
holidays.
- Conventional Pawnshop has
open every day including
weekends and public
holidays.
Notice of
Auction
- If the borrower is unable to
repay the debt, they will be
notified of the charges and
about the forced sale
- No notified of the charges
and about the forced sale
Surplus - If the sales price exceeds the
remaining debt, the excess
will be returned.
- No excess will be returned.

18
1.3 PROBLEM STATEMENT
Bank Rakyat, led by Kuching branch has run the business of Ar-
Rahnu since its early establishment in about 1994, then followed by
Bank Rakyat Simpang Tiga Branch, Kota Samarahan Branch, Matang
Jaya Branch, Kota Padawan Branch and the latest was Kedai Ar-
Rahnu X’Change Satok (formerly the service was provided in Bank
Rakyat Satok Branch) that just operated on October 25th
, 2013.
The records from Bank Rakyat reviewed previously claims that there
is not much evidence that shows circumstances which can reflect the
maximum and huge amount of customer come to Bank Rakyat and
take up Ar-Rahnu.
The conventional pawn shop is the pioneer in Sarawak therefore, Ar-
Rahnu which is the similar function of the conventional pawn shop has
yet to be discovered by people in Kuching, Samarahan and Serian
area. Furthermore, the public has yet to discover the benefits of Ar-
Rahnu if compared to the conventional pawn shop. Obviously, the
existence of Ar-Rahnu has yet to be known by the public in Kuching,
Samarahan and Serian area.
There are also no previous scales or parameters to be referred in
assisting the study which is the perceptions of people in Kuching,
Samarahan and Serian towards its particular product.
1.4 RESEARCH OBJECTIVES
The overall aim of this paper is to conduct research on customer
perceptions on Ar-Rahnu product by Bank Rakyat especially in
Kuching, Samarahan and Serian. It also hopes to be able to provide

19
some preliminary indications of the impact of perception by customers
to the overall branches in Bank Rakyat.
The research objectives of this study are:
1.4.1 To examine the demographic profile towards Ar-Rahnu product
by Bank Rakyat in Kuching, Samarahan and Serian.
1.4.2 To identify the factors that influence the level of customer
awareness/perception on the Ar-Rahnu concept being applied
by the bank.
1.4.3 To determine the quality of customer service given by Bank
Rakyat on the implementation of Ar-Rahnu concept.
1.4.4 To recommend appropriate strategies in implementing Ar-
Rahnu concept for future references.
For further information, there were a few studies that have shown the
importance of Islamic pawn broking system or Islamic-based
pawnshop to the Muslim societies (Sanusi and Johari, 2006). However
these studies have disregarded the empirical research which is
important to understand the perception of individuals on Islamic-based
pawn shop. Furthermore there is no attention to draw to suggest a
model of Islamic-based pawn shop perceptions. In response to these
concerns, the up-coming study is motivated to provide an overview on
the empirical research relevant to Ar-Rahnu.
Perceptions can be described as 'how we see the world around us'.
Despite having exposed to a similar stimulus under the same apparent
condition, but how each person recognizes, selects, organizes and
interprets them is a highly individual process based on each person's
own needs, values, and expectations (Schiffman and Kanuk, 2000).

20
1.5 SIGNIFICANT OF STUDY
1.5.1 The Management of Bank Rakyat
This study will benefit the Bank Rakyat management and able
to gain more information related to the business financial
condition. It is also beneficial to the management as they are
able to monitor the performance and to develop new strategies
in Ar-Rahnu. The outcomes will be useful for Bank Rakyat as a
reference in determining Ar-Rahnu policy in an overall branch
of Bank Rakyat and Kedai Ar-Rahnu X’Change.
1.5.2 Financial Institutions and Co-operatives
Based on this research, the financial institutions and co-
operatives can review and improve their current regulations on
Pawn Broking business and to create new strategies in order
to gain more profit.
1.5.3 References of Customers
The results will be useful for Bank Rakyat especially in
Sarawak Region to know the response of Ar-Rahnu in
Kuching, Samarahan and Serian as an option to consume.
1.6 SCOPE OF STUDY
The study will be conducted to identify the customers’ perceptions
towards Ar-Rahnu product by Bank Rakyat which is one of the
selected Development Financial Institutions (DFI) in Kuching,
Sarawak.
The scope of the study involved the following:
1.6.1 The selected DFI is Bank Rakyat branches in Kuching which
are Simpang Tiga, Kota Samarahan, Matang Jaya, Kota

21
Padawan and Kedai Ar-Rahnu X’Change Satok (under
supervised of the Bank Rakyat Satok Branch)
1.6.2 The researcher gets the respondents from Bank Rakyat in
Kuching. The target respondents are the customers that come
to the bank and the questionnaires were distributed. The
research focused on customers from Kuching, Samarahan and
Serian area. The respondents were selected from the
customers of Bank Rakyat in this area and they were randomly
picked by the researcher. The questionnaires were distributed
for two months. To begin, the researcher distributed 10 sets of
questionnaires. Then, the research continues with the rest of
300 respondents.
1.6.3 Computer software named SPSS will be used to analyze the
data.
1.7 LIMITATION OF STUDY
The researcher has some limitations that arise during completing this
study. The study will use the questionnaire method to gather
information from the customer. Only customer of selected branch will
be distributed with the questionnaire. Limitations include no interview
session will be conducted which could be more concrete. Other
limitations would be the time constraint (gathering data from
correspondents).
This research also has been limited by factors of time frame and
finance – there was no third party funding this research, which
confined much of the sampling only focuses on respondents from
Kuching, Samarahan and Serian - a true city wide or statewide

22
sampling would have proved more challenging and more
comprehensive. The resultant or finding may assume the research
represents the country or state’ mentioned industry or business. The
sample of the respondents is randomly chosen from different major
part of places around Kuching, Samarahan and Serian, at very
different days and at the different time of the day. Due to that, there
are risks that the sample size may not be accurate and adequate.
Furthermore, there are only a few factors and research items have
been tested in this research and they can be categorized under more
details and facts. Yet, more appropriate questionnaires that suit the
perceptions towards Ar-Rahnu product need to be developed for
future research.
In addition, the results or findings may be varied accordingly to
the respondents’ opinion toward the features and satisfactions
driven by the product itself. Thus, there will be to have some
degrees of cultural and racial bias.

23
CHAPTER TWO
LITERATURE REVIEW
2.0 INTRODUCTION
This literature review explores the eight variables imposed towards the
perception of the customers on Bank Rakyat’s Ar-Rahnu. While perception is
the subject area of this particular research project, the scope of this literature
review is expanded to include factors that examine the related variables of the
research framework, regardless of the specific subject area.
2.1 AR-RAHNU
Ar-Rahnu is a pawn-transaction which can be done at a financial
institution, in this case is Bank Rakyat. The gold act as a collateral that
will be as possessions offered as security for a debt so that the debt
will be taken from it in case the debtor failed to pay back the due
money.
This scheme offers option/alternative to the community to get cash
immediately on the basis of Syari’ah mortgage principle to avoid loans
without a license / pimps, loan sharks and others.
2.2 CONCEPT OF AR-RAHNU
2.2.1 Islamic (Ar-Rahnu) Loan under Al-Qard Contract
Under this concept, the bank will give Islamic (Ar-Rahnu) loan
under Al-Qard contract (Benevolent Loan) and use jewelries as
collateral to the bank. For example: The customer borrows RM

24
5,000 from the bank and will pay back with the same amount
of loan, RM 5,000 without paying any additional charge.
2.2.2 Rahnu (collateralized borrowing)
Refers to an arrangement whereby a valuable asset is placed
as collateral for debt. The collateral may be disposed in the
event of default.
2.2.3 Ujr (fee)
It refers to the commissions or fees that will be charged for
services by bank.
2.2.4 Mortgage / jewelries
Jewelries will be kept by the bank and it will be safe under
bank safekeeping. This concept is based in the concept of Al-
Wadiah Yad Dhamanah (Guaranteed Custody). Here, the bank
will charge an administration fee to the customer. If the
customer fails to make the payment, the jewelries as collateral
to the bank will be auctioned in order to cover the losses
incurred by banks. But, if the amount of jewelries is higher than
the amount of the loan, the bank was responsibility to pay the
balance amount from jewelries to the customers.
2.3 FUNCTIONS OF AR-RAHNU
2.3.1 A financial instruments or products which can give business
opportunities for interested parties. Ar-Rahnu can be for solely
commercial or for welfare.
2.3.2 As a source of capital for small business owner that can
provide capital to small business owners by pledging gold as
collateral without tight procedures.

25
2.3.3 A mean to finance education especially for those who have no
saving for their education but have a gold in custody and need
money urgently to pay or sponsor their education fees.
2.3.4 It can be for social welfare with is it can help those people in
needs (especially for low income people) and free them from
other illegal and immoral scheme that possibly make them
incurred in a more difficult situation of finance.
2.4 AR-RAHNU PRODUCTS BY BANK RAKYAT
Ar-Rahnu products by Bank Rakyat are more of a social oriented to
customers. It is not for profit and thus, the customers will benefit from
it. The safekeeping fee of the gold is charged based on the gold value
and the pawning period.
The product is open to Malaysian residents aged 18 and above and
not more than 65 years old. The Bank Rakyat only accepts gold
jewelry as collateral. Loans for the pawned jewelry will not be more
than 65 percent of the gold value (Nilai marhum) for the first loan and
not more than 70 percent for overlap loan. The maximum loan is
RM10, 000 for each time or a cumulative worth of RM50, 000 for each
customer. Pawning period is only six months, which may be extended
for another six months and there is no time limit to extend. If the
customer fails to claim the gold, the bank will send a notice to auction
off the gold. The bank will subtract the loan amount, fees for
safekeeping and other costs involved in the auction process from the
auction profits. Then the balance will be given to the customer.
A week before the six month period, the bank will send the first
reminder. After six months, a second reminder will be issued. After the

26
third reminder, if the customer is unable to claim the gold, the
pawnbroker will dispose the gold by auction to the licensed
auctioneer.
Suppose the value of the item pawned is worth RM1, 666.00, and the
bank will only release a maximum loan of RM1, 000.00 with a
repayment period of six months. If the fee for safekeeping is 65 cents
for every RM100, then the fees will be RM10.68 per month or
RM64.08 for six months (Not surprisingly, with the same amount of
loan, customer of conventional pawn shops will have to pay almost
double which cost RM20). If the gold is auctioned at RM1, 666.00, the
bank will subtract RM1, 000.00 for the loan, RM96.12 for safekeeping
fees (9 months) and administration fees for the auction RM50, and
then the balance of RM519.88 will be returned to the customer.
Ar-Rahnu product provided by Bank Rakyat can be divided into bank
and also pawn shop (Kedai Ar-Rahnu). Both have the same product,
feature, procedure and requirements. The main difference between
both are the Bank Rakyat provide Ar-Rahnu product as their part or
one of their components in Bank Rakyat meanwhile Ar-Rahnu pawn
shop also called as Kedai Ar-Rahnu X’Change provide Ar-Rahnu
product as their main product. Most of people went to the Bank Rakyat
for Ar-Rahnu service because they are not aware about Kedai Ar-
Rahnu X’Change. However, the late Managing Director of Bank
Rakyat, Datuk Kamaruzaman Che Mat points that through its fully
owned subsidiary, Rakyat Management Services Sdn Bhd, is aiming
to open 15 branches of the Islamic based pawn franchise outlets each
year, which is called Kedai Ar-Rahnu X’Change. The opening of this
outlet is purposely to make people especially from Malays, low income

27
and from rural areas to get easy and excess cash rather than apply
personal loan with bank or financial institutions. Besides, Bank Rakyat
wants all people familiar with Islamic pawn shop and become the
leader in this industry in Malaysia. In future, Bank Rakyat has planned
to expand the Ar-Rahnu outlets in various locations in Malaysia.
Ar-Rahnu Product is no longer viewed as a second-class product that
is targeted at the Malay customers, low income and rural areas. The
participation of non-Bumiputera customers and the positive growth of
the business require the bank and the Kedai Ar-Rahnu X’Change to
increase their level of services professionally.
Until 3rd quarter ended on 30 September 2013, total disbursement of
Ar-Rahnu recorded by Bank Rakyat exceeding RM1, 716,361,000. It
is the interpretation of the acceptance of Ar-Rahnu at par with other
products such as micro-credit Personal Finance, Credit Cards and
some other products. Advertising and integrated products through
various media channels aimed to deliver a clear message that the
Bank has a product that is perfect to meet the immediate cash
requirements. The Islamic pawn shop nowadays are getting accepted
because of its fairness, transparence, not involve riba, economical and
professional. These opinions are shared by the regular customers of
Bank Rakyat.
Overall, the Islamic pawn shop needs to have certain direction or
guideline which they can follow in order to attract more customer to
use the Ar-Rahnu Product rather than conventional pawn shop.
Therefore, with the new model of customer acceptance towards Ar-
Rahnu Product, all Islamic pawn shops deserved a better perception
about Ar-Rahnu Product and refuse the service of the less fairness

28
conventional pawn shop. This model also can increase the level of
confidence of customers especially from rural area to use Islamic-
based pawn shop and assist them to get their cash easily rather than
apply for a personal loan.
Even though the product is not so-high interest rate given, there was
no single evidence or tagline showing that Bank Rakyat Simpang
Tiga, Kota Samarahan, Matang Jaya, Kota Padawan & Kedai Ar-
Rahnu X’Change Satok (formerly the service was provided in Bank
Rakyat Satok Branch) run thru the peak time of having the maximum
or big numbers of customer needed for this product.
2.5 DEFINITION OF TERMS
2.5.1 Perception
The process by which people translate sensory impressions
into a coherent and unified view of the world around them.
Though necessarily based on incomplete and unverified (or
unreliable) information, perception is equated with reality for
most practical purposes and guides human behavior in
general. It’s also a marketing concept that encompasses a
customer's impression, awareness and/or consciousness
about a company or its offerings. Customer perception is
typically affected by advertising, reviews, public relations,
social media, personal experiences and other channels.
2.5.2 Awareness
Awareness is someone's ability to perceive, to feel, or to be
conscious of events, objects or sensory patterns. At this level
of consciousness, sensory data can be confirmed by an

29
observer without necessarily implying understanding. More
broadly, it is the state or quality of being aware of something.
In biological psychology, awareness is defined as a human's
perception and cognitive reaction to a condition or event. In
this study, the awareness of customers towards Ar-Rahnu
concept be identified and further explain.
2.5.3 Demographic factors
In this study, the researcher uses the demographic factor in
order to determine the customers of Bank Rakyat Simpang
Tiga, Kota Samarahan, Matang Jaya, Kota Padawan and
Kedai Ar-Rahnu X’Change Satok (under supervised of the
Bank Rakyat Satok Branch). Demographic factor is the basic
information regarding the customer such as gender, age,
religion, education and household income. This demographic
information is useful in order to identify the relationship
between the factors that can affect the customer’s perception
on the Ar-Rahnu.
2.5.4 Marketing
Marketing is an activity of an institution to introduce their
product to the public. Marketing is a process of creating,
communicating, delivering and exchanging the idea of people
towards something. It is a process to build customer
relationships in a long term. In this study, the researcher
identifies the Bank staff in doing marketing of their product that
use Ar-Rahnu.

30
2.5.5 Quality Service
According to Berry and Parasuraman (1985), customers
access service quality by comparing what they want or expect
with what they are getting and that customers are the sole
decisions on service quality. It means that, the customers who
consume the products able to give their own perceptions and
satisfaction that will be determining the service quality.
Services are relatively intangible, produced and consume
simultaneously and often less standardized than goods.
These unique characteristics of services present special
challenges and strategic marketing opportunities to the service
marketer (Benjamin Schneider and David E. Bowen, 1995).
2.6 KNOWLEDGE IMPOSED FROM SYARI’AH VIEW
The definition of Syari’ah for Bank Rakyat is using the concepts of
Wadiah, Qardhul Hassan and Ujr in Islamic-based pawn shop. The
element of riba and gharar is eliminated from the system. Bank Rakyat
involved Syari’ah principle in all products because the bank wants to
attract the customer especially from rural area and laymen.
This group of people normally anxious to involve with the bank
because of riba and gharar. According to Ismail and (Sanusi, 2005)
examined on Islamic-based pawn shop and the importance of Syari’ah
rules in the implementation of Islamic-based pawn shop. In more
details, they argued that the Islamic principles such as Wadiah,
Qardhul Hassan and Ujr must be given a careful consideration in
establishing Islamic-based pawn shop. According to (Mohammed et
al., 2005) has the similar explanation as (Ismail and Sanusi, 2005),

31
argued that Wadiah, Qardhul Hassan and Ujr make Islamic-based
pawn shop clearly different from the conventional pawn shop.
According to (Hanudin Amin, Rosita Chong, Hazmi Dahlan and
Rostinah Supinah, 2007) Syari’ah view is a stronger factor influencing
the perception of Islamic pawn shops. The prior studies have
documented the importance of religion in Ar-Rahnu (i.e. Mohammed
et al., 2005).
The concept of Qard Hassan has been vocalized in many of literatures
(Islamic Banking System – Concept and Applications, (Sudin Haron &
Bala Shanmugam, Pelanduk Publications 1997). One kind of
benevolent loan that obliges a borrower to repay the lender the
principal sum borrowed on the maturity of the loan with stated charges
over the sum of the loan as a gift or donation. No extra interest rate
imposed whenever an unpaid loan happened. The lender is forbidden
to ask for extra payment but the borrower is encouraged to give a
token of appreciation. (Islamic Banking & Interest, Abdullah Saeed,
E.J Brill Leiden, N.Y KOLN 1996). Rahn or Ar-Rahnu itself means a
pledge or pawn. It’s a contraction of pledging in security and becomes
binding when processions of the pledge have taken place.
In other word, it is a system of finance by pledging valuable things
(gold definitely) as a collateral and guaranteed of its loans. This type
of loans can be given to all kinds of races and religions, not only for
Muslims.
The basic concept practically are based on Syari’ah Laws, whereby no
element of Riba’, a premium that must be paid by a borrower to the
principal sum as a condition of loans for an extension on its maturity.
(Chapra, 1992) are imposed. In Kuching, generally there are Islamic

32
pawn shops existed known as Ar-Rahnu YAPIEM and Bank Rakyat as
providers of the product. The main competitors of the product are
conventional pawn system managed by few Chinese own shops. In
this study, the main measurement aspect is to determine the basic
level of the knowledge about the rules and principles of the product
(Ar-Rahnu) itself among the people of Kuching, Samarahan and
Serian area. People are often internalizing new information which they
perceive to be knowledge but are in reality fill their minds with false
knowledge. (Robinson, Andrew (2003) pg. 34). Most of the people are
well-known with the term of the pawn by directly connect it to the
conventional and Chinese style of businesses whereby they still
accept a common pawn system which involve a very high interest of
the loan and a very minimal amount of eligible loan given. There are
no easy-to-get and available information about Islamic Pawn System
conducted by most of the service provider.
2.7 EXPOSE AN AWARENESS TO PLEDGE ASSET FACTOR
With less-knowledge of the product, an awareness is necessary to
expose the customer with the product. The definition of a pledge asset
for Bank Rakyat is merchandise that values such as gold and jewelry.
So far, the bank only accepts the gold and jewelry because of the
value increasing over the time.
The main difference between Ar-Rahnu Scheme with other loan is
there is no persecution and easy in obtaining cash. In Bank Rakyat,
the customer can choose either to get loan in hand or in saving
account. However, the customer required to put the merchandise as
collateral for the bank.

33
Comparatively, in conventional-based pawnshop---the items that are
accepted in this term besides gold and jewellery are Rolex watches
and diamond. Therefore, the researcher assumes this pledge asset is
a factor that can influence customer perception on Ar-Rahnu scheme
by Bank Rakyat in Kuching. In Islamic banking institutions, which offer
Ar-Rahnu schemes such as Bank Rakyat, customers can only use
gold as a pawn item. The previous studies have documented the
study on the pawned items that must be valuable (Sanusi and Johari,
2006; Mohamed et al., 2005 and Ismail and Ahmad, 1997). In more
details, (Sanusi and Johari, 2006) claimed that MGIT accepts pawned
items such as gold and jewellery. The question that may arise is that
whether the Bank Rakyat has done their awareness towards the
product's characteristic or not.
Schiffman and Kanuk (1998) defined that awareness encompasses
the notion of consumer awareness, interest level consumer readiness.
Therefore, bankers or service providers have to determine whether
consumers are aware of the products, interested in the product, or
need to be informed about the product. The assumption will be
consumers are aware about the product (or new product) but lack
information about it.
2.8 REVEAL IMPORTANT ROLES OF PRICING SYSTEM
There are many possible roles played by the scheme especially
towards the pricing system, thus, can be one of the interesting
features to create attraction in gaining knowledge or special attention
from the customers or respondents. The service charge imposed by
Islamic based pawn shops relatively cheaper than conventional pawn

34
shops (Mohammed et al 2005). This means that the cost of getting
quick cash with very minimum charge thus, a little burden bared by the
customers (Ismail and Ahmad 1997). In addition, the holy Quran
forbids discriminatory means of transactions (Nomani and Rahnema
cite Quran 55:9)
2.9 IMPORTANCE OF ADVERTISING
Advertisement is the process through which companies attempt to
convince customers to purchase their products (Brazell et al., 2006). A
person may know about the pawn shop by an advertisement or by
passing the pawn shop and asking a friend (Schrader, 2000). The
study by Schrader revealed that advertising is less important for the
pawnshop’s customer. The awareness of customers may give big
impact in developing a good advertising about pawn broking (Sam et
al, 2010).
Pawn broking belongs to chains of the prevalent branch network. A
contemporary online technology and particular computer programme
have been designed in optimizing the pawn broking operations.
Today’s pawn brokers are more parallel to banks or insurance
company offices in their outward show compared to the previous
image. Sometimes, the pawn broker made an aggressive
advertisement in television, radio and newspaper about their services
(Schrader, 2000).
The effectiveness of the advertising could be seen in the study by Alex
Biel (1990) which found that there is a correlation between advertising
expenditure and the market share (Biel, 1990). However, it is
contrasted with the study by Abraham and Lodith that only 46 percent

35
of the established brand received positive sales impact from
advertising (Adcock et al., 1998).
Study by (Mohd Fazli Mohd Sam, Md Nor Hayati Tahir, Noor
Khamisah Abdul Latif, 2010) measure level of awareness using
promotion. The researcher result of chi square indicates about
(60.761) not aware of Islamic pawn broking through promotion and
about (67.133) indicate that respondents even not know there is
Islamic pawn broking.
Besides that about (36.513) chi square result indicate that
respondents aware of Islamic pawn broking through promotion. The
researcher made a conclusion that majority of respondents’ not aware
Islamic pawn broking due to lack of effective promotion.
2.10 CUSTOMER SERVICE
Customer service, define by Turban, 2012, as a series of activities
designed to enhance the level of customer satisfaction – that is, the
feeling that a product or service has met the customer expectation.
However, there are many differences between the Islamic-based
pawn shop and conventional pawn shop.
The importance of service in the conventional-based pawnshop has
been in details explained by (Lao, 2005). He suggested that pawn
shops should offer a quick and convenient way to borrow money.
Unlike banking institutions, pawnshops are more convenient for
consumers. Most consumers use pawnshops primarily because their
poor credit and would be denied loans from traditional institutions. The
borrowed money is exchanged with pledges assets-to secure the loan

36
itself. (Mohammed et al., 2005) mentioned the importance of service
factor.
The Islamic-based pawnshop must maintain the record of customers,
keep the records confidences and treat the customers fairly regardless
of their race or religion. The Islamic-based pawnshop must stress the
importance of customer service in order to strengthen the customer
base, in addition to Syari’ah view concern. In addition to the above
studies, the present study will be able to add into the limited
knowledge available in Malaysia for Islamic-based pawn shop
perception
2.11 LOCALITY OF AR-RAHNU PAWNSHOP
It is a significant factor in the pawnshops ' development to consider
the location of the shops. For examples individuals tend to choose
pawnshops that near to their locality or residential. Specifically, the
most of the pawn shops are built in the town areas to facilitate the
customers doing transactions (Ismail And Ahmad 1997). This study
will consider this matter for future models.
Bank Rakyat can be divided into Unit of Ar-Rahnu and Kedai Ar-
Rahnu X’Change (Kedai Ar-Rahnu). The prior studies found that the
Ar-Rahnu service provided by another bank normally focus on high
income customer and need requirements in getting the loan. The prior
research said that the bank have too many procedures and need a
long time in processing the transaction. Therefore, they said that the
Islamic-based pawn shop or Ar-Rahnu shop is better than a Unit of Ar-
Rahnu. Therefore, this reason gives opportunity to the Bank Rakyat to
provide both Unit of Ar-Rahnu and Kedai Ar-Rahnu X’Change. The

37
main purpose they introduced Kedai Ar-Rahnu X’Change because
they want customers to feel much easier in obtaining cash through Ar-
Rahnu’s Scheme. With better location which is just in town area, it is
even easier for a customer of Ar-Rahnu and potential customers to
reach it. According to (Mohamad Shukri Johari, Nur Azura Sanusi and
Mohamed Ishak Hj Badarudin Rais, 2006) the distance between the
pawn shop and their home would incur costs such as transportation
fare or the cost of petrol. Therefore, respondent will ask for high
financing in one transaction. The customers will mortgage more
goods in one transaction or mortgage goods with high current
value in a transaction.

38
CHAPTER THREE
THEORETICAL FRAMEWORK
3.0 INTRODUCTION
Theories are formulated to explain, predict, and understand phenomena and,
in many cases, to challenge and extend existing knowledge, within the limits
of the critical bounding assumptions. The theoretical framework is the
structure that can hold or support a theory of a research study. The
theoretical framework introduces and describes the theory which explains
why the research problem under study exists. A theoretical framework
consists of concepts, together with their definitions, and existing
theory/theories that are used in this study. The theoretical framework
demonstrates an understanding of theories and concepts that are relevant to
our research and that will relate it to the broader fields of knowledge of the
study. In order to construct our theoretical framework, we review the previous
study by Abdul-Razak, Azila (2011) on the behavioral and perception analysis
of Islamic and Conventional Pawn broking in Malaysia.
3.1 THEORETICAL FRAMEWORK
The study conducted by the researcher on customer perceptions on
Ar-Rahnu product by Bank Rakyat especially in Kuching, Samarahan
and Serian while be able to provide some preliminary indications of
the impact of perception by customers to the overall branches in Bank
Rakyat The main product that provided by Bank Rakyat are personal
loan, Ar-Rahnu, saving & investment account, Tabung Haji and so on.
The Bank Rakyat’s branches in Kuching achieved a good response

39
from customer. Besides personal loan’s achievement, the bank also
gets good response for Ar-Rahnu product. In Bank Rakyat, there are
three sub-products under our-Rahnu Product which are air-Rahnu,
AZ-Zahab and Genius. The researcher wants to propose an advanced
framework for Bank Rakyat as the bank has a good achievement in
Ar-Rahnu service only within two years operation and with this
framework, the bank can use it as their guidelines with a very high
chance, the bank can maintain their performance based on this
framework especially in Kuching, Sarawak.
Based on Azila Abdul Razak (2011), Syari’ah views, pricing and
pledge asset factors were the issues in Malaysia Islamic pawn
broking. Her views on Syari’ah perspective was to ensure that the
transaction itself will be under Syari’ah compliance whereby the
pricing system is reflecting the average value in the market. The
pledge asset factor has been identified only with gold and jewelries.
Azila Abdul Razak mentioned the accessibility of the pawn shop is a
crucial issue as well. Advertisement and customer service factor were
adapted as mentioned by Mohamad Abdul Hamid, Ishak Abdul
Rahman, and Ahmad Nafis Abdul Halim (2007) which these factors
were also being considered for these studies.
In this study, the researcher has identified 6 independent variables,
which are Syari’ah view of Ar-Rahnu, pledge asset factor, pricing
system, locality, advertisement and customer service. Meanwhile, the
dependent variable is customer perception towards Bank Rakyat’s Ar-
Rahnu

40
3.1.1 Syari’ah’s View of Ar-Rahnu
From a conventional bank, Bank Rakyat took a giant step in
1993 to become Syari’ah-compliant at four of its branches and
subsequently became a full-fledged Islamic co-operative bank
by the beginning of 2003, when it successfully converted its
1.1 per cent conventional asset balance to comply with
Syari’ah guidelines. With this transformation, it gives the best
opportunities to bank to attract more customer especially
Muslim people. When converted into Islam-based pawn shop,
the bank no longer involved in riba’ and gharry. Therefore, the
bank only charges from Ujr’ or ‘upah simpan’. In brief, this has
become one of factor that influence the customer’s perception
on Bank Rakyat’s Ar-Rahnu Product rather than conventional
pawn shop.
3.1.2 Pledge Asset Factor
Comparatively, in conventional-based pawnshop---the items to
be accepted are beyond the gold and jewellery---including
Rolex watch and diamond. In Islamic banking institutions such
as Bank Rakyat, bank customers can only use gold as the
pawned item---other items were silent at the moment.
According to (Mohammed et al., 2005) mentioned the pawned
items including gold and platinum. According to (Ismail and
Ahmad, 1997) argued that the normal pawned items include
jewelleries and electronic assets. In brief, the researcher wants
this factor to include in the model and to study the influences
on customer perception.

41
3.1.3 Pricing System
Price system, defines as organizing economic activity. It does
this primarily by coordinating the decisions of consumers,
producers, and owners of productive resources. It is important
to have Ar-Rahnu product which offered competitive rate, to
reflect the average pricing system in the market. The service
charge imposed by Islamic based pawn shops relatively
cheaper than conventional pawn shops (Mohammed et al
2005). This pricing system will be part of the study to find out
whether this factor will affect the customer perception on this
product.
3.1.4 Advertisement
Kotler, P. (2006) defines advertising as any paid form of non-
personal presentation and promoting of ideas, goods, or
services by an identified sponsor. Advertisement can be a
cost-effective way to disseminate messages, whether to build
a brand preference or to educate people. Advertising is a
means of informing and communicating essential information.
As for Bank Rakyat Ar-Rahnu, advertising plays an important
role to promote its goods, services, ideas and events in order
to create consumer awareness.
3.1.5 Customer Service
According to (Mohammed et al., 2005) also mentioned the
importance of service factor. The Islamic-based pawnshop
must maintain the record of customers, keep the records
confidences and treat the customers fairly regardless of their

42
race or religion. This factor will be discussed as well in this
study to define the weighted of it towards the product.
3.1.6 Locality
According to (Mohammed et al., 2005), argued that the
location is the significant factor for the pawn shop
development. In more details, (Mohammed et al., 2005) also
argued that, individuals tend to choose pawnshops that near to
their houses. Because of this, the researcher wants to study
whether this factor also gives impact on the customer
perception on Bank Rakyat’s Ar-Rahnu Product in Kuching,
Samarahan and Serian.
Based on the theories above, there are 6 independent
variables that have been identified on customer perceptions of
Ar-Rahnu scheme by Bank Rakyat. Below are the framework:-
Figure 3.1: Bank Rakyat Ar-Rahnu Theoretical Framework

43
3.2 CONCLUSION
Bank Rakyat must be ready to create better communicators to
desire audience response. The desired ultimate responses are
purchasing the service, high satisfaction and favorable word-of-
mouth. Therefore the people who are going to lead for this
product of Bank Rakyat should know how to move the target
customers to higher states of readiness to buy the service.

44
CHAPTER FOUR
RESEARCH DESIGN AND METHODOLOGY
4.0 INTRODUCTION
Research methodology represents the strategies involves in collecting and
analyzing data collected, in order to have meaningful interpretations of the
research findings. This section attempts to give an insight into the way and
manner in which this research was carried out. This includes the mode of
data collection, how these data were analysed and the research design.
This chapter also includes the detail use of frequency distribution, reliability
test, cross-tabulation analysis and correlation in order to test the validity and
reliability of the data used for this study. It will highlight the research method
and the statistical technique in the determining the relationship between the
selected variable.
4.1 RESEARCH DESIGN
According to (Sekaran, 2006), business research can be best defined
as an organized, systematic, critical, scientific enquiry or investigation
into a specific problem, undertaken with the objectives of finding
answers or solutions to the problems. Research also can be designed
as the process of systematically obtaining accurate answers to
significant and pertinent questions by the use of scientific method of
gathering and interpreting information.
According to (Zikmund, 2000), research design is a master plan
specifying the methods and procedures for collecting and analyzing
needed information. There are three types of study; exploratory study,

45
descriptive study and casual study. (Zikmund, 2000) states that,
exploratory research is conducted to clarify and define the nature of
problems. Meanwhile the descriptive research design to describe the
characteristic of a population or phenomenon and casual research is a
research conducted to identify caused and effect relationships among
variables where the research problem has already been narrowly
defined. Since research is carried out to know the cause and effect of
the successful training program, the researcher chooses casual
research as a research design.
4.2 SAMPLING
According to (Zikmund, 1986), sampling involves any procedure that
uses a small number of items or parts of the population to make a
conclusion regarding the whole population. On the other hand, a
sample is a subset of a larger population. In this research the
probability sampling will be probability sampling.
According to (Sekaran, 2003), a sampling is the process of selecting a
sufficient numbers and elements from the population, so that a study
of a sample and an understanding of its properties and characteristics
of the population elements. The manner in which samples are taken
will determine the accuracy of the survey results and its generality. It
is a subgroup of the elements of the population selected for
participation in the study.
4.2.1 Sampling Technique
Sampling is the process of selecting a sufficient number of
elements of the population, so that a study of the sample an
understanding of its properties or characteristics would make it

46
possible for us to generalize such properties or characteristics
of the population elements.
The elements in the population do not have any probabilities
attached to their being chosen as sample subjects. This means
that the findings from the study of the sample cannot be
confidently generalized to the population. Some of the non-
probabilistic sampling plans are more dependable than others
and could offer some important leads to potentially useful
information with regards to the population.
This study prefers to use non probability sampling which is
purposive sampling. There are two types of purposive
sampling, judgment sampling and quota sampling. This study
use quota sampling. Quota sampling ensures that certain
groups are adequately represented in the study through the
assignment of a quota. The quota fixed for each subgroup is
based on the total numbers of each group in the population.
However, since this is a nonprobability sampling plan, the
results are not generalizable to the population. Although the
quota sampling is not generalizable like stratified random
sampling, it does offer some information, based on which
further investigation, if necessary, can proceed. It is possible
that the first stage of research will use the nonprobability
design of quota sampling, and once some useful information
has been obtained, a probabilistic design will follow. A
probability sampling design might indicate new areas for
research, and non-probability sampling designs might be used
to explore their feasibility.

47
4.2.2 Sample Size
According to (Malhorta, 2004) sample size is defined as the
number of elements to be included in the study. When
calculating the sample size, the most appropriate sample must
be determined as sample increases. Too large a sample might
lead to inefficiencies and wastage of the resources. Yet, too
small a sample will yield information that might not be valid for
making inferences about the population.
According to (Sekaran, 2006), sample size is the actual
number of subjects chosen as a sample to represent the
population characteristics. Roscoe, 1975, also mentioned, as a
rule of thumb for determining sample size, sample sizes are
larger than 30 and less than 500 are appropriate for most
research. Based on table of sample size, for a given population
by Sekaran, the sample size will be 100. Therefore, a
researcher must create a balance between cost and the
sample size that will enable him or her to make reasonably
accurate and precise generalizations.
In determining the sample size, Krejcie and Morgan (1970) had
simplified size decision by providing a table that ensures a
good decision model. Table 4 provides that generalized
scientific guideline for sample size decisions.

48
Table 4.1: Sample Size given the Population Size
From another point to consider, Roscoe (1975) proposed as a
rule of thumb, sample size between 30 for minimum
respondents and 500 maximum respondents could be effective
depending on the type of sampling design used and research
question investigated (Sekaran, 2004).
For this research, 300 respondents will be distributed with a
set of questionnaire. However, 100 respondents might be
appropriate for academic purpose and this research. The
researcher chooses 300 respondents due to time and
manpower constraints. Besides that, the researcher wants to
avoid any problem during submitting the questionnaires such
as uncompleted questionnaires or in case of data not accurate.
The respondents will be selected from regular customer of

49
Bank Rakyat in Kuching within two months which is January to
February 2014.
4.3 DATA COLLECTION METHOD
For this study, the methods of collecting data involve primary data on
where the researcher is giving out questionnaires, interviews, and
fieldwork (observation).
4.3.1 PRIMARY DATA
These are data collected by hand and should be the most
accurate and up to date data or information gathered. The
instruments that preferred to collect primary data are through
questionnaire and personal interviews. For this study, the
questionnaires will be distributed to customers of Bank Rakyat
in Kuching.
By distributing these questionnaires to Bank Rakyat’s
customers in Simpang Tiga Branch, Kota Samarahan Branch,
Matang Jaya Branch, Kota Padawan Branch & Kedai Ar-
Rahnu X’Change Satok (under the supervision of the Bank
Rakyat Satok Branch), researcher can gain the information to
create customer acceptance’s model.
4.3.1.1 Interview
The first part of the primary data used in this study
were obtained through interviews as part of a
qualitative research method. Because interview
designs are more flexible and open-ended, in this
research it is used to develop an in-depth
understanding of the underlying principle of Islamic

50
pawnbroking, its prospects and other related issues.
Interviews were also used in order to get information on
sensitive issues which could not be asked in the
structured questionnaire. This section, hence, provides
further details on the interview process pursued in the
study.
Since one of the objectives of this study is to develop
an in-depth understanding of the underlying principles
of Islamic pawn broking and other issues, an
unstructured interview has been done.
4.3.1.2 Questionnaire
In preparing a set of question for this research, the
researcher has been used several scales in the
questionnaire. A questionnaire is a formulated written
set of question to which respondents’ records their
answers, usually within rather closely defined
alternatives. Questionnaires are an efficient data
collection mechanism when the researcher knows
exactly what is required and how to measure the
variables of interest.
The questionnaires can be administered personally,
mailed to the respondents, or electronically distributed.
There are several scale uses in developing the
questionnaire.
Category scale is used multiple items to elicit a single
response. In this questionnaire, this scale will be

51
asked in section A, which is respondent profile. The
respondent profile is included:
a) Gender and Age
b) Marital Status
c) Race and Religion
d) Employment Status
e) Profession and Monthly Income.
f) Customer of Ar-Rahnu Product,
g) Type of transactions or services taken from
Bank Rakyat.
Likert scale is the measurement scale with six
response categories ranging from strongly agree and
strongly disagree. This type of question requires the
respondent to indicate the degree of satisfaction and
dissatisfaction with each of series of statement related
to the stimulus object.
These questions will be asked in Section B which is
customer preferences that includes six parts which
are:
a) Part one consist of customer’s knowledge on
Ar-Rahnu from Syari’ah view.
b) Part two consist of pledge asset factors of Ar-
Rahnu.
c) Part three consist of income where the
products are affordable or not.
d) Part four consist of distance between house
and pawnshop.

52
e) Part five consist of customer service.
f) Part six consist of advertisement.
Likert scale also use in section C which is a customer
perception measurement.
However, before the questionnaire is distributed, this
study used pilot test to investigate levels of customer
perception on Ar-Rahnu Product provided by Bank
Rakyat in Kuching. The pilot test was done by
distributing 10 sets of questionnaires to the regular Ar-
rahnu customers’. Then, the study continued with data
processing before the rest of 300 questionnaires were
distributed.
4.3.1.3 Questionaire Design
The design of the questionnaire will largely depend on
the research purpose and the respondents who are to
answer the questions. In order to develop the
questionnaires, the researcher adapted and modified
three questionnaires that were previously developed in
pawn shop research, such as Johnson and Johnson
(1998), Maamor et al. (2005) and Abdul. Razak, Azila
(2011) as well as other relevant Islamic banking and
finance studies. In addition, other journals, Ph.D
theses, and Masters dissertations, Islamic banking
and patronage factors related studies were also
reviewed in order to design a reliable questionnaire.
When a questionnaire is used, the design must be
such that it is easy to administer by the researcher and

53
is easily understood by the respondent. In this study,
the majority of the respondents who deal with
pawnshops came from the customers of Bank Rakyat.
Therefore, the questions tend to be relatively simple
and strive to quantify, to make sure that the persons
are comfortable in reporting their behavior and
opinions, as well as having a certain level of
communication skill and memory recall.
As for this study, the questionnaires were designed to
achieve various objectives that include the customers.
The questionnaire in this study is designed according
to identified objectives, which are to enquire about the
factors that influence the level of customer perception
on the Ar-Rahnu concept being applied by the bank, to
examine the demographic profile towards Ar-Rahnu
product by Bank Rakyat in Kuching, Samarahan and
Serian, and to recommend appropriate strategies in
implementing or-Rahnu concept for future references.
Thus, a questionnaire sets was developed for
customers of Bank Rakyat.
Each of the items in the questionnaire was designed
according to the hypotheses developed for this study.
4.3.1.4 Types of questionnaire items
In asking questions in the questionnaire, researchers
have two options regarding the questionnaire design:
closed questions and an open-ended question. A
closed question provides the respondents with a

54
predetermined choice of responses.Advantages of this
type of questions include their relative ease to be
answered and to be administered and coded into a
computer database for subsequent analysis. However,
the researcher needs to be confident that the limited
set of responses provides adequate coverage of the
range of possible responses (Miller et al., 2005: 250).
In contrast, open-ended questions offer the
respondents the opportunity to express their opinions
using their own words. The advantage for using this
type of question is that it allows for elaboration in a
response, thus providing insight on the respondents‟
ideas, actions and beliefs (Miller et al., 2005: 251).
Nevertheless, for coding, open-ended responses and
making comparisons between respondents‟ responses
is much more difficult.
For the questionnaires in this study, all of the
questions were designed as the close ended type.
4.4 UNIT OF ANALYSIS
According to (Sekaran, 2006), population refers to the entire group of
people, event, or things of interest that the researcher wishes to
investigate. In this research, the target population is the customer of
Bank Rakyat in Kuching. All of them are from various people and have
been using the products and services of Bank Rakyat. The research
analysis will be using reviews. The frequency distribution is going to
be used to determine and explain the respondent demographic factors

55
that include in resultant of data collection. It is used to report the
number of responses to each question (Aaker, Kumar & Day, 1995). It
would produce frequency counts and percentages.
The perception towards Ar-Rahnu by the respondents is measured to
produce the result of the findings. Cross-tabulation analysis is to
determine the relationship between two different variables. In this
study, demographic variable were being used to identify the strength
of the relationship between the quality service, marketing and the level
of customer awareness.
4.5 PROCEDURE FOR DATA ANALYSIS AND INTERPRETATION
SPSS 17.0 is used to analyze data, to test hypotheses developed and
to achieve the objectives of the study.
The regression statistical tests shall be carried out by the researcher
that includes:
i. Descriptive Analysis
ii. Reliability test.
iii. Cross-Tabulation Analysis
iv. Correlation Coefficient.
This model of analysis is done to determine the relationship between
several independent variables and a dependent variable that is
interval scaled. Empirical Model can be used to explain the correlation
between the dependent and independent variables.
According to Sekaran (2006), normally they have three objectives in
data analysis and that is getting the feel of data, testing the goodness
of data, and the hypothesis developed for the researcher. Data
collected will be analyzed by frequency distribution, cross tabulation,

56
correlation and regression to determine statistical evaluation. SPSS
will be used as the tool for data analysis.
Descriptive statistics are used to explore the data collected, and to
summarize also describe those data. Descriptive statistics might be
particularly useful if one just wants to make a general observation
about the data collected, for example number of males and females,
and the range and average, (mean) age, and average of length of
residence in a community. Another statistic such as standard deviation
and variance give more information about the distribution of each
variable. In this study, there are two techniques of data analysis and
they are:
4.5.1 Frequency Distribution
A frequency distribution is a display of the frequency of
occurrence of each score value. It provides visual displays
throughout, histograms, bar charts, pie charts and others about
gender, working experience, salary and others. The purpose
using this is to know how the dependent and independent
variables are related to each other in this research.
4.5.2 Descriptive Analysis
Descriptive statistics computed include the means, standard
deviations, and rank orders of the customer population’s
response on the principal independent, and dependent
variables. Descriptive analysis is used to measure how varied
the respondents are in answering each item in the
questionnaires. The researchers use descriptive or summary
statistics to describe or summarise the data, so that the reader

57
can construct a mental picture of the data and the people,
events or objects they relate to.
4.5.3 Reliability (Cronbach’s Alpha)
A very common measure of reliability in the research literature
is Cronbach’s Alpha. It is used to access the internal
consistency reliability of several items or scores that the
researcher wants to add together to get a summary scale
score.
Alpha is based on correlation matrix and it interpreted similarly
to another measure of reliability; Alpha should be positive and
usually greater than 0.70 in order to provide good support for
internal consistency reliability.
The reliability to measure is established by testing both
consistency and stability. Cronbach Alpha is a reliability
coefficient that indicates how well the items in a set are
positively correlated to one another. The closer Cronbach’s
Alpha is to 1, the higher the internal consistency reliability.
4.5.4 Cross-Tabulation Analysis
According to (Sekaran, 2006), population refers to the entire
group of people, event, or things of interest that the researcher
wishes to investigate. In this research, the target population is
the customer of Bank Rakyat in Kuching. All of them are from
various people and have been using the products and services
of Bank Rakyat. The research analysis will be using SPSS.
The frequency distribution is going to be used to determine
and explain the respondent demographic factors that include in
resultant of data collection. It is used to report the number of

58
responses to each question (Aaker, Kumar & Day, 1995). It
would produce frequency counts and percentages.
The perception towards Ar-Rahnu by the respondents is
measured to produce the result of the findings. Cross-
tabulation analysis is to determine the relationship between
two different variables. In this study, demographic variable
were being used to identify the strength of the relationship
between the quality service, marketing and the level of
customer awareness.
To determine whether a systematic association exists, the
probability of obtaining a value of chi-square as large as or
larger than the one calculated from the cross-tabulation is
estimated. An important characteristic of the chi-square
statistic is the number of degrees of freedom (df) associated
with it. That is,
df = (r -1) x (c-1).
The null hypothesis (H0) of no association between the two
variables will be rejected only when the calculated value of the
test statistic is greater than the critical value of the chi-square
distribution with the appropriate degrees of freedom,

59
The expected frequency for each cell can be calculated
by using a simple formula:
fe =nr nc
where;
nr = total number in the row
nc = total number in the column
n = total sample size
4.5.5 The Coefficient Of Correlation
It is a statistical measure to indicate the relationship between
dependent and independent variables. The value of correlation
coefficient (R) can be range from +1.0 to -1.0. The arithmetic
sign associated with the correlation coefficient.
ΣXY –[ (ΣX) (ΣY) /n ]
P = ________________________
[ ΣX² – (Σx²/n)] [ ΣY²- (ΣY²/n) ]
Do Not Reject H0 Reject H0
Critical value

60
Where;
n = number of pairs of x and y value in the sample
x = independent variable
y = dependent variable
r = 0, no linear correlation at all
r =+1, a perfect positively linear correlation
r =-1, a perfect negatively linear correlation
Coefficient of Determination (R²)
The proportion of variance in Y explained by X (vice versa) can
be calculated by squaring the correlation coefficient (R²).
Therefore, it means that how many percent of the variance in
the both variables.
4.5.6 Hypothesis Testing
This is an analysis of the variance that compares the means of
only groups. This study used independent sample t-test as its
equivalent to a one-way analysis of variance with only two
groups. The data used for a sample to estimate values of
proportion. It is used to test this sample whether it supports the
hypothesis or if it makes the hypothesis highly improbable
which also known as hypothesis testing. A t-value that is close
to 0 indicates that two means are very similar and will result in
a large significance value. At t-value that is far from 0, in either
positive or negative direction, will result in small significance
level, indicating a difference in the means.

61
4.5.7 Hypotheses Of Study
Hypotheses 1: Syari’ah View to Customer Perception.
H0: There is no significant relationship between Syari’ah
view and customer perception on Bank Rakyat’s Ar-
Rahnu Product in Kuching, Samarahan and Serian.
Ha: There is a positive and significant relationship between
Syari’ah view and customer perception on Bank
Rakyat’s Ar-Rahnu Product in Kuching, Samarahan and
Serian.
Hypotheses 2: Pledge Asset to Customer Perception
H0: There is no significant relationship between pledge
asset and customer perception on Bank Rakyat’s Ar-
pledge asset and customer perception on Bank
Rakyat’s Ar-Rahnu Product in Kuching, Samarahan
and Serian.
Hypotheses 3: Pricing System to Customer Perception.
H0: There is no significant relationship between pricing
system and customer perception on Bank Rakyat’s Ar-
pricing system and customer perception on Bank
and Serian.

62
Hypotheses 4: Advertisement to Customer Perception
H0: There is no significant relationship between
advertisement and customer perception on Bank
and Serian.
advertisement and customer perception on Bank
and Serian.
Hypotheses 5: Customer Service to Customer Perception
H0: There is no significant relationship between customer
service and customer perception on Bank Rakyat’s Ar-
customer service and customer perception on Bank
Rakyat’s Ar-Rahnu Product in Kuching, Samarahan and
Serian.
Hypotheses 6: Locality to Customer Perception
H0: There is no significant relationship between locality and
customer perception on Bank Rakyat’s Ar-Rahnu
Product in Kuching, Samarahan and Serian.
locality and customer perception on Bank Rakyat’s Ar-

63
CHAPTER FIVE
DATA ANALYSIS AND FINDINGS
5.0 INTRODUCTION
This chapter presents the analysis and findings of the study. The first part of
the questionnaire will cover the demographic background of the respondents
where frequency table based on the seven demographic factors included.
This is to identify the major respondent during the study had been conducted.
5.1 PROFILE OF THE RESPONDENTS
A total of 300 questionnaires were distributed to the target
respondents from selected Bank Rakyat which is Simpang Tiga
Branch, Kota Samarahan Branch, Matang Jaya Branch, Kota
Padawan Branch & Kedai Ar-Rahnu X’Change Satok. 285 were
deemed usable (valid and completed), yielding a response rate of
95%. The respondents’ demographic profile is summarized in Table
5.1.

64
Table 5.1: Respondent’s Demographic Profile
DEMOGRAPHIC PROFILE NO. OF RESPONDENT (%)
1. Age 20 – 30 years
31 – 40 years
41 – 50 years
51 – 60 years
61 – 70 years
71 years and above
63
60
57
62
39
4
22.1
21.1
20.0
21.8
13.7
1.4
2. Gender Male
Female
165
120
57.9
42.1
3. Marital Status Single
Married
Divorced
Widower
136
139
9
1
47.7
48.8
3.2
0.4
4. Race Malay
Chinese
Indian
Native/Indigenous
Others
128
53
10
67
27
44.9
18.6
3.5
23.5
9.5
5. Employment
Status
Government
Private
Pensioner
Unemployed
Hawker
Own Business
Housewife
Student
Others
38
45
20
29
115
25
11
1
1
13.3
15.8
7.0
10.2
40.4
8.8
3.9
0.4
0.4
6. Average Monthly
Income
RM 101 – RM 500
RM 501 – RM1000
RM1001 – RM1500
RM1501 – RM2000
RM2001 – RM2500
RM2501 – RM3000
RM3001 – RM3500
RM3501 – RM4000
RM4001 – RM5000
RM5001 and above
35
39
27
33
82
41
14
9
3
2
12.3
13.7
9.5
11.6
28.8
14.4
4.9
3.2
1.1
0.7
7. Type of
Transactions or
Services
Deposits/Savings
Loans
Other Banking Services
Ar-Rahnu/Islamic Pawn
119
101
30
35
41.8
35.4
10.5
12.3
Out of 285 respondents who responded to the questionnaire, 22.1% of
them were aged between 20 to 30 years old, 21.8% respondents were
between 51 to 60 years old, 60 respondents were between 31 to 40
years old and 20.0% respondents were between 41 to 50 years old.
Most of the respondents or 57.9% were male. A total of 139 or 48.8%
of respondents were married and 136 or 47.7% of respondents were

65
not married. Most of the respondents who have visited Bank Rakyat
were Malays at the response rate of 44.9%, 23.5% were Natives or
Indigenous, 18.6% were Chinese and 3.5% were Indians. In terms of
employment status, 40.4% of the respondents were hawkers, 15.8%
were working in the private sectors, 13.3% were government servants
and 10.2% were unemployed. 28.8% of the respondents was earned
their monthly income between RM2001 to RM2500, 14.4% were
earned between RM2501 to RM3000, 13.7% were earned between
RM501 to RM1000 respectively and only 1.8% of the respondents
were earned above RM4001. Most of the respondents which were
78.2% visited Bank Rakyat premises for deposits or savings and loan
services, whereas only 22.8% were getting Ar-Rahnu and other
banking services.
5.2 DESCRIPTIVE ANALYSIS
Descriptive statistics give numerical and graphical procedures to
summarize a collection of data in a clear and understandable way. It
also helps the researcher to simplify large amounts of data in a
sensible way. Each descriptive statistic reduces lots of data into
simpler summary. There are two basic methods, numerical and
graphical. Using the numerical approach, the researcher computes
statistics such as the mean and standard deviation. These statistics
convey information about the average. The plots contain detailed
information about the distribution. Numerical approaches are more
precise and objective (Seema Jaggi, 2003). There are three major
characteristics of a single variable to look at and there are distribution,
central tendency and dispersion.

66
There are seven parts in the questionnaires with 42 items. The
responds of the respondents in this questionnaire analyzed using the
descriptive statistics by computing the mean and standard deviation.
The mean is a most popular statistic for summarizing data and it can
be used for interval and ratio data. Standard Deviation is the most
generally useful measure of dispersion. It is harder to calculate than
the range or variation ratio, but generally provides a more accurate
measure of the spread of scores. Table 5.2 shows the statistics of
each items responded by the respondents to the questionnaire.
Table 5.2: Descriptive Analysis of the Items in the Questionnaires
Part 1 : Syari’ah Views
Items
N
Mean
Std.
DeviationValid Missing
Ar-Rahnu Scheme operates according to Islamic
law and principles.
285 0 5.01 0.79
Ar-Rahnu Scheme is based on the Quran and
Sunnah as the source of its business.
285 0 5.01 0.82
Ar-Rahnu Scheme is interest free (riba). 285 0 5.04 0.77
Transactions made are free from any uncertainties
(gharar) or doubtful transactions.
285 0 4.87 0.86
Bank Rakyat has been known as one of the
established Ar-Rahnu/Islamic Pawn System’s
provider.
285 0 5.05 0.84
Bank Rakyat has sufficiently promote Ar-Rahnu
products and services to the public.
285 0 4.78 0.92
TOTAL 285 0 4.96 0.83
Part 2 : Pledge Asset Factor
Items
N
Mean
Std.
I agreed that only gold can be taken as a pledge
asset.
285 0 4.92 0.87
I agreed that other items or jewelries such as
diamonds, watches and etc. can be accepted as a
pledge asset.
285 0 4.95 0.86
I agreed that my golds are in safe keeping and
secured by Bank Rakyat.
285 0 5.07 0.77

67
I can understand the formula given and illustrated
by the Bank Rakyat personnel in terms of safe-
keeping charge.
285 0 4.93 0.86
I agreed with the time frame or period of payback
(6 months) given by Bank Rakyat to redeem the
gold.
285 0 5.04 0.83
I agreed that all notices or reminders due to the
loan(Ar-Rahnu) are given to me in well accepted
time frame.
285 0 5.16 0.73
TOTAL 285 0 5.01 0.82
Part 3 : Pricing System
Items
N
Mean
Std.
Bank Rakyat Ar-Rahnu Scheme implements a
lower service charge compared to conventional
pawn Scheme.
285 0 5.10 0.74
Bank Rakyat Ar-Rahnu Scheme set a fair price for
the low income owners.
285 0 5.12 0.78
Bank Rakyat Ar-Rahnu Scheme set a better pawn
price compared to conventional pawn Scheme.
285 0 5.02 0.75
Bank Rakyat Ar-Rahnu Scheme practice an ibra’
concept or discount for earlier redemption.
285 0 4.97 0.81
I was so confident with the valuation on the gold
price done by Bank Rakyat.
285 0 5.00 0.77
I can understand the formula given and illustrated
by the Bank Rakyat personnel in terms of safe-
keeping charge.
285 0 5.03 0.75
TOTAL 285 0 5.04 0.77
Part 4 : Locality
Items
N
Mean
Std.
Bank Rakyat Ar-Rahnu branches are easy to find
in Kuching, Samarahan & Serian.
285 0 4.75 0.94
Bank Rakyat Ar-Rahnu is near to public
transportation centre.
285 0 5.00 0.78
Bank Rakyat Ar-Rahnu is near to shopping mall
and business centre.
285 0 4.98 0.81
Bank Rakyat Ar-Rahnu is near to residential area. 285 0 5.08 0.77
Bank Rakyat Ar-Rahnu is near to workplace. 285 0 4.52 1.03
Bank Rakyat Ar-Rahnu has an availability of
parking space nearby.
285 0 4.54 0.97
TOTAL 285 0 4.81 0.88
Part 5 : Advertisement
Items
N
Mean
Std.

The Customer Perception of Ar Rahnu Islamic Pawn System by Bank Rakyat in Kuching, Samarahan and Serian, Sarawak.

The Customer Perception of Ar Rahnu Islamic Pawn System by Bank Rakyat in Kuching, Samarahan and Serian, Sarawak.

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