REPORT (INAS, FATIN, NURIN, WAN)

MGT 3663

BANKING
OPERATION

AND
PRACTICES

PREPARED FOR :
PUAN NOOR AISYAH BINTI OTHMAN

Kolej Profesional MARA Bandar Melaka
Jalan Hang Tuah, 75300 Melaka.

DBF 6C

KOLEJ PROFESIONAL MARA BANDAR MELAKA

BANKING OPERATIONS AND PRACTICES

(MGT 3663)
WRITTEN REPORT 15% (FLIP)
Academic Session – January 2021

NAME ID NUMBER

SHARIFAH INAS ZURAIHAN BINTI SYED BASIR BMF19-06-011
WAN NUR SYAZWINA BINTI WAN SAIDI BMF19-06-014
FATIN DAYANA BINTI HAZRAN BMF19-06-017
NURIN NABILAH BINTI ZAINON BMF19-06-018

CLASS :
DBF 6C

PREPARED FOR :
PUAN NOOR AISYAH BINTI OTHMAN

Kolej Profesional MARA Bandar Melaka
Jalan Hang Tuah, 75300 Melaka.

1|Page

TABLE OF CONTENT PAGE
3
NO. CONTENT 4
1 Acknowledgement
2 Introduction of the assignment 5-13
3 Sources of Fund:

Term Deposit-i & Fixed Deposit

4 Uses of Fund: 14-22
Ar-Rahnu & Pawnbroking

5 Supporting Documents 23-38
6 References 39
7 Appendices
40-43

2|Page

ACKNOWLEDGEMENT

Alhamdulillah, first of all we would like to thank Allah SWT as finally we were able to
finish the assignment that have been given by Banking Operation and Practices lecturer to us.
This task had been done with all afford by group members even though a little bit problem
happened among us while doing this assignment. Luckily, all the problems can settle down
and we were able to adapt properly and wisely.

Apart from that, we would like to express our gratitude to our lecturer, Puan Noor Aisyah
Othman, because our assignment would not have been completed properly without her
guidance. She always gives us encouragement and guidance on how to complete our tasks to
produce a positive outcome from the research that has been conducted.

Finally, thank you to our dear friends who have always stuck with us and worked hard
to deliver a successful assignment with all of our resources and responsibilities. We are hoping
that all of our resources will be beneficial to us and our group project. We also want to express
our gratitude to all of our classmates for their assistance in completing our group project.
They always provide us with suggestions and feedback on our projects, allowing us to improve
our work in a variety of ways.

3|Page

INTRODUCTION OF ASSIGNMENT

Islamic Banking refers to a system of banking activity that is consistent with the
principles of Shariah and its practical application through the development of Islamic
economies. Islamic banking prevents any interest-bearing deposit account because it is
prohibited in Islam and to avoid persecution against people that incapable. Therefore, Shariah
law imposed a principle of Shariah for Muslims to obey.

This report focuses on a comparison on banking operations between Islamic banks and
conventional banks in Malaysia. The main topic we will discuss is related to the uses of funds
and sources of funds between Islamic banks and conventional institutions. It provides a
summary of where the capital of fund comes from and what this capital will do.

We decided to choose Mudharabah Investment and Ar-Rahnu for Islamic while Fixed
Deposit and Pawnbroking for conventional. We have been exposed to the detailed differences
between them and we have found that Islamic banking is much better than conventional
because Islamic Banking gives justice and fairness to people while conventional banking is
guided by interest rates that is not permissible in Islam as stated in Quran in verse 275 Al
Baqarah “‫ ” َو َأ َح َّل َلَّل ها ا ْلبَ ْي َع َو َح َّر َم الرِّ َبا‬meaning that whereas Allah has permitted trading (business)
and forbidden usury.

To provide an initial overview of these two funds, Islamic and conventional, that we have
chosen, we will go over more details about each of them.

4|Page

Sources of Fund:
Term Deposit

5|Page

The act of providing a financial return in the form of money that came from project,
deposit, and investment that is usually done by an organisation or company is referred to as
sources of funds. It can be divided into two types: deposit funds and investment funds. A
term deposit is a type of deposit fund. This deposit involves transferring funds to a third party,
such as a bank for generated income. The meaning of the term is that the customer will
deposit for a set period until maturity. Following that, the bank will deposit funds into several
investment pools, which will be used to invest in Shariah-compliant businesses. In reality, the
depositor can only withdraw at the end of the maturity period.

Besides, we discussed the possibility of using Bank Rakyat as a template for Islamic
Term Deposit. This Term Deposit-i Account is governed by Malaysian laws, Shariah Advisory
Council rulings of Bank Negara Malaysia, and Shariah Committee of Bank Kerjasama Rakyat
Malaysia Berhad. When it comes to banks, they must be a little strict and have their terms
and conditions that the customers must follow. However, if a customer deposits money or
funds in a bank, the money or funds are safe because the bank will provide takaful coverage
and the amount deposited will be guaranteed.

Following that, as a comparison to term deposits, we choose Maybank as a reference
for this financing. Fixed Deposit Account is the name that has been used in this bank. It is
simple to apply for this; simply go to a Maybank branch and bring the necessary documents.
Similarly, some terms and conditions must be met before a customer can apply for a fixed
deposit in a Maybank. For example, if a customer withdraws the whole of his/her Fixed Deposit
account, the Fixed Deposit account will be considered closed. There is not much of a difference
between these two. The major differences are based on the concept and law that have been
applied. Riba, gharar, and maysir are common things in conventional banks. We have provided
tables and explanations for each feature of this product for further detail.

6|Page

Islamic DIFFERENCES Conventional
(Bank Rakyat) Sources of Funds (Maybank)
TERM DEPOSIT-i
FIXED DEPOSIT

Term Deposit-i Account is a term Definitions A fixed deposit is a form of
deposit product based on the savings account that pays a
Shariah contract of Dual set rate of interest for a set
Wakalah Tawarruq (Commodity amount of money
Murabahah). deposited for a set period
of time.

A term deposit is a fixed-term investment that involves depositing funds into a financial
institution's account. It is a form of agreement in which a customer's deposits are held at a
bank for a fixed term until maturity. Term deposits are short-term assets with maturities
ranging from one month to a few years and various minimum deposit requirements. We have
found out that Bank Rakyat and Maybank provide the same product but using a different
name which is Term Deposit Islamic and Fixed Deposit. According to Bank Rakyat, they had
provided a shariah-compliant product which is Term Deposit-i that based on Dual Wakalah
Tawarruq that pays a high rate of returns on depositor’s placement. In contrast, Maybank
provides a Fixed Deposit product where it is perhaps the conventional counterpart of the Term
Deposit-i that has a high rate of interest where it is not permissible in Islam. The main
difference between both products is, Term Deposit-i Bank Rakyat operates based on the
Shariah principle which using the Shariah Contract of Dual Wakalah Tawarruq meanwhile
Fixed Deposit Maybank Operates based on the Country’s banking laws and financial practices
that consist of interest (riba).

7|Page

Islamic DIFFERENCES Conventional
(Bank Rakyat) Features (Maybank)
• Shariah concept Tawarruq
• Competitive profit rates • High rate of interest
• Minimum deposit RM5000 (1
Month) • Loan facility
• Minimum deposit RM500 (2
to 60 months) • Encourages saving
• Member of the Bank Rakyat
offered 0.1% higher than the habits for longer period
benefits offered to the public
• Premature withdrawal is • Premature withdrawal
allowed in full.
• Partial withdrawal was not can be done over the
allowed.
counter for FDs with

certificates only.

• Partial withdrawal can

be done over the

counter

Moreover, one of the features of Term Deposit-i in Bank Rakyat is they are using the concept
of Tawarruq financing where Bank Rakyat is authorised to perform and complete Tawarruq
transactions via the commodity platform as an agent upon execution of the Wakalah contract
by the customer. The Bank will purchase commodities from commodity providers on behalf of
the customer (based on pre-agreed Wakalah Bil Ujrah) and then purchase commodities from
the customer (where the Bank acted as the customer's agent to sell based on pre-agreed
Wakalah) on a deferred Murabahah (sale at cost plus) basis. Besides, placement can be done
over the counter by cash or cheque with a minimum deposit of RM5000 if the tenure is 1
month and RM500 if the tenure is 2 months to 60 months. For example, Ahmad wants to
invest in 12 months so he could deposit at least RM500 yet if he wants to invest in 1 month,
he should deposit at least RM5000. Furthermore, as we know, conventional will charges
interest to get a profit from the customer. Maybank has a charge with the highest interest,
for example, the total amount that Ahmad needs to pay at the end of the maturity date is
RM925 (Deposit RM500) with an interest of 1.85%. For more safety, Maybank has provided a
loan facility for the customer if they have an urgent or unexpected financial needed to obtain
immediate cash. Other than that, Bank Rakyat is allowing premature withdrawal in full but no
profit will be paid to the depositor. Meanwhile, in Maybank, premature withdrawal can be
done over the counter for FDs with certificates only and no interest shall be paid on any
immediate fixed deposit premature withdrawal. Besides, partial withdrawal was not allowed

8|Page

in Bank Rakyat while Maybank allowed it and it can be done over the counter at a nearby
branch.

Islamic DIFFERENCES Conventional
(Bank Rakyat) Benefits (Maybank)

• Profit rate is determined • Higher interest rates
during opening of an account
compared to a normal
• Deposit of more than RM5000
profit is paid monthly savings account

• Takaful coverage • Protection from
• Deposit certificate may be
interest rate
used as collateral for other
shariah compliance financing fluctuations
• Automatic renewal upon
request • Protected by PIDM up

to RM250,000 for

each depositor.

Following that, the profit rate in Term Deposit-i would be the actual increase on the
original capital you earned. Unlike interest, which is provided by the bank regardless of how
much profit or loss the bank makes, the profit rate in a Term Deposit arrangement is calculated
after the fact and is merely informative. The profits you earned that according to the PSR are
divided by the original amount you deposited which shows the percentage of profit. Moreover,
when you enter a Term Deposit-i Bank Rakyat, you will get free Takaful coverage with a
minimum deposit of RM10,000. It applicable to the depositor aged 18 to 65 only and it only
covers death and permanent disability compared to the conventional investment of the
customer that results in loss, insurance will not cover the losses. For example, when Alya had
an accident that resulted in permanent disability, she could claim takaful coverage that been
provided by Bank Rakyat. Furthermore, in Bank Rakyat account may subject to automatic
renewal upon maturity whereby the Dual Wakalah Tawarruq concept is applicable upon
automatic renewal. On the other hand, the interest rate that charge by the conventional seems
higher than saving account but it will give a higher return to the parties. For Maybank, they
have defined a specific interest rate so that the customers are not surprised by sudden
changes in charges. Moreover, the Fixed Deposit in Maybank has been secured by PIDM for
the customer that deposits RM250,000 and above.

9|Page

Islamic DIFFERENCES Conventional
(Bank Rakyat) Eligibility (Maybank)

• Individual 15 years and above Document needed • Individuals 18 years
(Individual, joint or trust) and above
(personal/joint)
• Cooperatives that are
established and registered in MY • Valid MyKad for

• Government Agencies Malaysians
• Private and Government

corporate company
• Charities / Club / Association

that are established and
registered in Malaysia

• For individuals or joint accounts
MyKad

• Valid Passports for

Foreigners and

other documentary

evidence required

by authority

according to the

purpose of

visit/stay in

Malaysia

Generally, both type of term deposit has similar eligibility whereby whoever wants to deposit
fund can be individual or joint venture. However, Bank Rakyat has set the age of depositor as
15 and above but the consent of the trustee's parent or legal guardian is required if the
depositors are under the age of 18 meanwhile Maybank has set the minimum age for the
investor as 18 years old. Nevertheless, Bank Rakyat as well set a requirement that any
cooperatives, corporate, charities, clubs, and associations that want to do term deposit must
be established and registered in Malaysia. Besides, Bank Rakyat opened eligibility for
government agencies also private and government-corporate company. The same goes for
the required document for both Term Deposit-i and Fixed Deposit require a MyKad before
investing. The only difference between them is, Fixed Deposit allows foreigners to deposit

10 | P a g e

money in the condition they must have a valid passport for foreigners as well as any other
documentary evidence required by the authorities for their visit or stay in Malaysia instead of
Term Deposit-i only allow Malaysian to invest.

Islamic DIFFERENCES Conventional
(Bank Rakyat) Fees and Charges (Maybank)
• TD-i Certificate replacement
fee (RM10 Stamp Duty) • No fees

Based on the Bank Rakyat Term Deposit-i product, there is no processing fee will be
imposed upon opening of account but in the event of lost or stolen of the Certificate, the
customer has to pay a stamping fee for indemnity letter amounting to RM10. On contrary,
there are no fees associated with Fixed Deposit in Maybank.

11 | P a g e

Islamic DIFFERENCES Conventional
(Bank Rakyat) Risk (Maybank)

• Low Risk • Interest rate risk
Bank Rakyat Deposit Account-i is • Credit risk or default
a low risk fixed term investment
that helps you expand your risk
savings in the Islamic way. • Currency risk
• Liquidity risk

In Bank Rakyat, the possibility to lose some or all of your money is low because the risk
is quite low. It is not protecting against the chance of any loss, but it also means making sure
that none of the potential losses will be devastating. Different from Maybank that has a high
amount of risk where there is a strong chance for the depositor to suffer large losses from
their investment. However, there is a default risk for lenders that may arise from the borrower
because of the inability to make a payment. Furthermore, currency risk, also known as
exchange-rate risk, is caused by a change in the price of one currency in comparison to
another. Investors and businesses with properties or activities across national boundaries are
vulnerable to currency risk, which can result in unpredictably high profits and losses. Last but
not least, when the customer is unable to meet its short-term debt obligations, liquidity risk
may arise. Because of a lack of buyers or an inefficient market, the investor or entity may be
unable to convert an asset into cash without sacrificing capital and income.

12 | P a g e

Islamic DIFFERENCES Conventional
(Bank Rakyat) (Maybank)
Profit and Interest
Term Deposit Rates Tenure Interest
(Month) Account-i (month) rate
(individual)/coop
1 1.75 1 1.50
2 1.80 2 1.65
3 1.70
3 1.85 4 1.70
5 1.70
4 1.85 6 1.80
5 1.85
6 2.00

Profit calculation: Interest calculation:
Principal (RM) x Profit Rate (%) x Principle Amount x Interest
Tenure/365 days x (No. day/No. Day in a
Year)

Based on Bank Rakyat, the profit rate is fixed at the time the account is opened, and
automatic renewal is dependent on the Bank's current profit rate, which is displayed in the
Bank's branches. Profit is generally paid upon maturity date, but it could be paid monthly for
a minimum deposit of RM5,000 and a minimum tenure of six months upon request by the
depositor. For example, if Ahmad deposits RM5000 in January, he will get a profit RM49.59 at
the end of June if he requests it. On the contrary, Maybank has imposed an interest rate on
the depositor in order to gain profit. The depositor will give notice withdrawal (within 31days)
to the branch and accrued interest will be calculated daily up to the end of the ‘Notice Period’.
Based on the notice, the principal amount and accrued interest will be credited to the
customer's preferred current or savings account at the Bank on the 32nd. For example, Raju
deposit RM50,000 in his fixed deposit account. In the next month, he gives a notice period of
fixed deposit premature withdrawal to the branch on 04/02/2021. As a result, Raju will be
charging an interest rate of RM140.24 by Maybank.

13 | P a g e

Uses of Fund:
Ar-Rahnu &
Pawnbroking

14 | P a g e

Islamic commercial banks will be involved in the use of funds for either retail or corporate
financing. It is the provision of financial services via a network of outlets and distribution
centres. This service is focused on and specific to basic individual needs. Ar-Rahnu is personal
financing that is based on an Islamic retail financing fund. This is distinct from other types of
financing that involve an asset as the underlying subject matter. The purpose of this financing
is to assist individuals who require cash or liquidity for a variety of reasons such as medical,
payment debt, and others. Rahn is also known as pledged. The customer pledged a valuable
item as collateral to the bank for this financing while complying with Shariah law.

Furthermore, we have discussed the possibility of using Bank Rakyat as a reference for Ar-
Rahnu financing. This is because Bank Rakyat is one of the IFIs that provides Islamic
pawnbroking services (Ar-Rahnu), and they have their franchise. Ar-Rahnu X'Changes is the
name of this franchise. We chose to do a reference based on this franchise because they are
more focused and specific to this product. Rakyat Management Services Sdn Bhd, a subsidiary
of Bank Rakyat, was in charge of franchising these outlets nationwide. The first store opened
on December 7, 2006, and they now have 114 stores internationally. Through Ar-Rahnu or
other schemes, they provide quick cash microcredit facilities collateralized by gold or jewellery.
Bank Rakyat guarantees cooperatives the right to manage the Ar-Rahnu business as a
franchisee.

Next, because we need to differentiate between Islamic and conventional pawnbroking,
we conducted a search for any conventional bank that provides this financing and because
we are unable to locate a bank, we decide to use a pawnshop as a reference for conventional
pawning. iPajak is the name of this pawnshop. Pawnshops have existed in Malaysia since 1871
and are governed by the Pawnbrokers Act 1972. People are attracted to pawning because it
is a simpler and faster way to obtain immediate cash than a bank loan. Even though it is
simple and quick, as Muslims, we cannot pawn at pawnshops that are not Shariah-compliant.
This is due to the fact that any interest with a charge will contain riba, among other pros and
cons. We will go over each point in order to have an overview of the differences between
Islamic pawnbroking and conventional pawnbroking.

15 | P a g e

Islamic Differences Conventional
(Bank Rakyat) Uses of funds (IPajak)

AR- RAHNU Definition PAWN BROKING
Known as Islamic pawn broking, A person or company that
it is a method of providing Features provides people with secured
short-term financing to a loans using personal property as
person by pawning his or her collateral.
gold as security to banks or any
Islamic pawnshop. If customer is unable to repay
the loan at the end of the six-
The transactions are Shariah- month period, they can extend
compliant in every way. The the pawn for a further three
transactions and products are months. The customer have to
based on two shariah concepts: pay the monthly interest for the
extra month.
i. Qard Financing with no
interest.

ii. Yad Dhamanah Wadiah
iii. The items pawned as

collateral are insured.

Ar-Rahnu is one of the products offered by Islamic banks. There are three types of this
product in Bank Rakyat which is Pawn Broking-i Ar-Rahnu, Ar-Rahnu Prepaid, and Pawn
Broking-i Ar-Rahnu Genius. Ar-Rahnu is an Islamic pawnbroker that offers short-term
financing to people in need. The individual must pawn their valuable item as collateral to the
bank. At the same time, conventional pawn broking requires personal property, such as gold
or an expensive watch, to be provided as security to the pawnshop. There is no bank that
offers conventional pawn broking services. This service is only available at pawn shops. As we
all know, all transactions in an Islamic bank are Shariah-compliant. So, for these services, two
shariah concepts are used, Qard and Yad Dhamanah Wadiah. There is an explanation in the
following point. On the other hand, conventional pawning does not have a specific but there
are features to learn more about this product. This pawning is not overly strict; if the customer
is unable to pay the loan back within the tenure period, they can request that it be extended.
However, in exchange for the benefits of the shop, the customer must pay monthly interest
for an extended period.

16 | P a g e

Islamic Differences Conventional
(Bank Rakyat) (IPajak)

• Malaysian and Non- Eligibility Individuals that are at least 18
Malaysian citizens years old and have a valid
identification document (IC or
• Above 18 years’ old Passport).
• Not a bankrupt

MyKad or MyPR Documents needed Your ID card, the item(s) to be
pawned, a Certificate of
Authenticity (if applicable), and
the original purchase receipt are
all required (If has).

Following that, each loan has a set of criteria for who can and cannot apply for it. The
customer eligibility for both Bank Rakyat and iPajak is similar in that it may be Malaysian or
non-Malaysian. Loans, in general, are governed by strict laws, which state that all contracts
relating to them must be signed by people who are at least 18 years old. The difference
between Ar-Rahnu and a pawn shop is that the bank requires that the consumer seeking a
loan not be bankrupt. Bankrupt means, someone who has the highest credit records. If you
need a loan from a reputable bank for an emergency, they will need some documentation
before approving your application. Loans are critical for your business or any other reason.
When a customer obtains a loan from a pawn shop, you must also provide the documents
listed below. One of the necessary documents that must be prepared in order to complete the
leasing process in iPajak is an ID card, a certificate of authenticity, collateral items if
applicable, and the original purchase receipt. Similar to Bank Rakyat, a copy of MyKad for
citizens and MyPR for foreigners is all that is required.

17 | P a g e

Islamic Differences Conventional
(Bank Rakyat) Charges (IPajak)

• No processing fee. • The maximum interest rate
allowed by regulation is 2%
• Monthly safekeeping per month (24 percent per
annum).
charges. It is applied lower
• It is higher than a personal
than interest rates applied loan from the bank but still
much lower than the loan
at conventional institutions. sharks.

The charges are RM0.65 for • The annual percentage rate
every RM100 pledged value. is not more than 24%
• No interest charges and free
from riba.

This point has explained the concept of Qard Financing, which is free of interest and
processing fees. It is indeed free of riba. It was a concept of growth or increasing, which
forbids the crediting of interest from loans. Even at low interest rates, religious practice forbids
riba. This charge occurs when a customer pays their loan late or when a pawnbroker charges
them an additional fee every pawning. So this is exactly what happens in conventional pawn
broking. Every month, interest will be charged at a rate of about 1% to 2%. For example, if
the customer pledged an item for a loan of RM 2,500 for four months with a 2% interest rate,
the extra payment would be RM50. So, if the customer wants to redeem their item, they must
pay RM 2,550. Even though the fees have increased the payment, it is still lower than the fees
charged by loan sharks. This pawnshop will charge a maximum annual interest rate of 24
percent. In fact, this is how pawnshops earn profit from each transaction. However, Islamic
banks earn profit from safekeeping fees. This is not an additional payment, but instead an
exchange for the bank to keep hold of the item while providing funds to the customer. This is
a Yad Dhamanah Wadiah concept. Safekeeping in Bank Rakyat costs only RM 0.65 per RM100
valued item. It was lower than expected.

18 | P a g e

Islamic Differences Conventional
(Bank Rakyat) Pawning item (IPajak)

• Any type of jewelry gold • Gold and jewelry, in
excluding marhun item that particular.
in the form of religious
statue or animate beings. • Other high-value items
accepted by some pawn
• Gemstone jewelry
• Gold bar, wafer, coin or gold shops include luxury

nuggets and need to include watches, luxury bags and
purchase receipts or
certificate of authenticity. clothes, computers,
• Gold items rewarded by an
employer which the Gold smartphones, and so on.
quality is between 22 to 24
carat and the maximum
weight is 300 grams.

Maximum margin of financing is Pawning value They offer the highest possible
up to 80% of the current pawn value for customer’s
market value of the jewellery assets. Due to the real-time
market price, the price can
differ.

Customers must provide item pawning as collateral for banks and institutions as the
main condition for the concept of pawn broking. Gold and jewellery are common items that
are always used. It can be gemstone jewellery, gold bars, gold bracelets, and similar items in
Bank Rakyat. However, customers must include purchase receipts as proof of the item's value.
The gold must be of around 24 carat quality and weigh no more than 300 grams. Similarly,
iPajak accepts that type of item as well as other high-value items such as luxury watches,
laptops, and so on. Indeed, it must be of sufficient value to cover the debt amount, be present
at the time of contract, and be simple to deliver. In general, the finance margin ranges from
a minimum of RM100 to 60-70 percent of the gold's value. Furthermore, Bank Rakyat has set
a condition for the pawning value, requiring that the financing margin not exceed 80 percent

19 | P a g e

of the item's current market value. As a result, if the customer is unable to repay the loan, it
is quick and easy to sell. Unlike with a pawnshop. They can offer the customer an unlimited
loan as long as they provide collateral in the same amount as the loan. However, the price is
also following the current price.

Islamic Differences Conventional
(Bank Rakyat) (IPajak)

Amount finance must be paid Repayment Period There is no set time limit for
on the expiry of tenure. Longer repaying the loan. They do not
pawn period which is maximum have loans with a repayment
18 months. period of less than 61 days. The
maximum time from the date of
pawning is six months. However,
if the consumer requires more
time, it may be demanded.

Ar Rahnu is a relatively new microcredit instrument in Malaysia. Only gold and gold
jewellery can be pawned. The repayment period is the time between the first payment on a
loan and its maturity. For example, suppose one obtains a pawning loan with a ten-year
payback period following the first payment, which occurs on an agreed-upon date. Loan terms
range from 1-6 months and are available to both locals and foreigners, Muslims, and non-
Muslims. Borrowers can choose to repay in a lump sum or monthly installments. However,
certain institutions have their own set of rules. Borrowers must pay the principal plus a
safekeeping fee agreed upon in the agreement during the maturity date for Bank Rakyat. This
institution has set a maximum maturity date of one year and six months. In contrast to a
traditional pawn shop, there is no set time limit for repaying the loan. All of the loans provided
by iPajak have terms ranging from 2 to 6 months. If the customer wants to extend the
repayment period it can be considered by the pawn shop.

20 | P a g e

Islamic Differences Conventional
(Bank Rakyat) Benefits (IPajak)

• Offers fast and easy cash • Easy & Fast
financing up to RM350,000 Pawn shop requires you to fill
with low profit charges out a form and perform a quick
based on under the syariah assessment of your pawn items,
principle. which usually takes less than 5
minutes.
• Profit amount is calculated • No Credit History
daily. Profit Rate is Checking on CCRIS / CTOS
calculated based on the A bank loan may get rejected if
marhun's value and pawn you don’t have much credit
period history or had some bad
payment records in CCRIS or
• Transparent business deal CTOS.
and transaction is
performed in a dedicated
room with the customer
present.

Some people consider loans to be a burden because if they apply for one, it will affect
their credit records and take a long time to settle. Pawnbroking, on the other hand, provides
quick and easy cash. Bank Rakyat, for example, provides financing up to RM 350,000 with low
safekeeping fees. They only make a profit by charging a fee in exchange for taking possession
of the item. The fees will be calculated per day and will be based on the pawning item and
term period. In fact, all transactions in the bank will be communicated to the customer, such
as a reminder that their expiration date is approaching. iPajak offers a similar benefit to Bank
Rakyat in that the debt collection process takes only 5 minutes. The customer must fill out
the form and provide the pawnbroker with the item to be pawned. The benefits of pawn shops
are that they do not have to wait for a long procedure like a bank loan because bank loans
have a few processes such as looking for the criteria document and the credit record. In
comparison to iPajak, they do not waste time checking the customer's credit history. If the
customer has a debt history with other institutions before applying for this pawning, it will not
be impacted by this application.

21 | P a g e

Islamic Differences Conventional
(Bank Rakyat) Defaults of items (IPajak)

Fair and just practice in the If the pawned item is not paid
auction process. The value back, it will be auctioned off, and
amount from the auction is the credit record will not be
used as repayment of the affected. When the term expires,
unpaid loan and any balance the pawnbroker automatically
made compared to the initial acquires ownership of the item
loan amount will be returned to worth less than RM 200. If the
initial owner of auctioned item. pledge is worth more than RM
200, the pawnbroker will sell the
pawn at auction. Any surplus
from the auction bid will be
returned to the customer.

Last but not least, both institutions are similar so if the customer is unable to repay
the loan, the item will be auctioned off. And the proceeds will be used to repay the loan, with
any excess being returned to the customer. However, Islamic Bank will be fair to its customers
by not deducting any money from the sale of an item. While in conventional pawning, when
the tenure comes to an end, the pawnbroker acquires ownership of the item for less than RM
200. If not, the pawnbroker will sell and auction the item. Even though the item was auctioned
off because the customer was unable to repay the debt, it did not effect on the customer's
credit record.

22 | P a g e

SUPPORTING
DOCUMENTS

23 | P a g e

FORM IPAJAK (PAWNBROKING)
24 | P a g e

PRODUCT DISCLOSURE TERM DEPSOIT-I ACCOUNT
25 | P a g e

26 | P a g e

TERMS AND CONDITIONS TERM DEPOSIT-i
27 | P a g e

28 | P a g e

29 | P a g e

30 | P a g e

31 | P a g e

TERMS AND CONDITIONS FIXED DEPOSIT ACCOUNT MAYBANK
32 | P a g e

33 | P a g e

34 | P a g e

35 | P a g e

36 | P a g e

TERMS AND CONDITIONS AR-RAHNU
37 | P a g e

FORM IPAJAK (PAWNBROKING)
38 | P a g e

REFERENCES

Bank Rakyat. (2018). Terms and Conditions of Term Deposit-i. Retrieved from Bank Rakyat:
https://www.bankrakyat.com.my/d/personal/savings/term_deposit_i_account-
18/dwterms/TD%20Terms%20&%20Conditions%20eff%2018%20may%202020.pdf

Bank Rakyat. (2021). Info Korporat . Retrieved from Bank Rakyat :
https://www.bankrakyat.com.my/c/mengenai/info_korporat/sekilas_pandang-2

Bank Rakyat. (2021). Pawn Broking-i Ar-Rahnu. Retrieved from irakyat:
https://www.irakyat.com.my/index.php/personal/savings-deposits/term-deposit-i-account

Bank Rakyat. (2021). Pembiayaan-i / Pajak Gadai-i. Retrieved from Bank Rakyat:
https://www.bankrakyat.com.my/c/perbankan/pembiayaan_i/pajak_gadai_i-39/pawn

Bank Rakyat. (2021). Shariah Concept. Retrieved from Bank Rakyat:
https://www.bankrakyat.com.my/c/business/shariah_concept_b/shariah_concept-5

Bank Rakyat. (2021). Term Deposit-i Account. Retrieved from irakyat:
https://www.irakyat.com.my/index.php/personal/savings-deposits/term-deposit-i-account

iPajak Group. (2019). All You Need To Know About Pawn (Pajak Gadai) In Malaysia. Retrieved from
iPajak: https://ipajak.com.my/tips/how-to-pawn-pajak-di-malaysia/

Maybank2u. (2021). Fixed Deposit Account. Retrieved from Maybank2u:
https://www.maybank2u.com.my/maybank2u/malaysia/en/personal/accounts/fixed_depos
its/fixed_deposit_account.page

Maybanku2. (2021). Fixed Deposit Account Rate . Retrieved from Maybanku2:
https://www.maybank2u.com.my/maybank2u/malaysia/en/personal/rates/fixed_deposit_a
ccount_rates.page?

39 | P a g e

APPENDICES

40 | P a g e

41 | P a g e

42 | P a g e

43 | P a g e