Muslim Small Entrepreneurs’ Acceptance Towards Al-Rahn: A Case Study In Kelantan, Malaysia

Islamic pawnshops, or al-rahn, are Islamic financing instruments that provide quick and easy short-term funding to low-income earners. In addition, al-rahn also channel capital assistance to the community for small entrepreneurial activities. However, small entrepreneurs’ acceptance towards al-rahn is still low since al-rahn are said to be needed solely for living purposes instead of entrepreneurship. Thus, al-rahn are perceived as not achieving the real objective, which is to provide capital funding to the community for productive activities that could generate income through entrepreneurial activities on a small scale. This situation has sparked an interesting phenomenon in how Muslim small entrepreneurs accept al-rahn. This article attempts to analyse the factors that influence Muslim small entrepreneurs’ acceptance of al-rahn based on three main factors: intrinsic, extrinsic and religious compliance. This study’s methodology involved a quantitative method and used a questionnaire to obtain data from 350 small entrepreneurs around Kelantan, Malaysia. The study’s results found the religious compliance factor did not significantly affect acceptance towards al-rahn; furthermore, the intrinsic factor was more dominant than the extrinsic factor. The results indicated that al-rahn, as an Islamic institution, should not necessarily focus on promotion strategies that depend on the ‘religion’ approach alone.