Recently I've been receiving some enquiries on a strategy that's being used by some of the gold investors to create cashflow on the gold investment known as Ar Rahnu.
In this post, I'll attempt to share some of the understandings that I have towards this scheme.
It is designed to adhere to Islamic laws where borrowers pay a safekeeping fee, as opposed to a compounding interest rate.
It appears to be more cost-competitive than personal loans, which typically charge flat interest rates of 9% to 12% a year.
The Islamic pawnbroking scheme charges a monthly safe-keeping fee of $0.
50 - $0.
75 for every RM100 worth of gold.
This equals to an interest rate of 0.
5% to 0.
75% a month, or 6% to 9% a year.
Most importantly, there is a high chance of loan being approved because this scheme is backed by gold.
This means that you will receive RM6,500 of cash.
Step 2 - Do take note that there is a monthly safekeeping fee.
Let's assume that the monthly safekeeping fee is 0.
75%.
That means that there is a safekeeping fee of RM0.
75 for every RM100 worth of gold value.
This equates your monthly safekeeping fee to be RM75.
Step 3 - Ar Rahnu's financing tenure is typically fixed at 6 months, although customers are allowed to renew it in multiples of 6 months.
Therefore, by the end of 6 months, you will incur a total safe-keeping fee of RM450.
At the end of the tenure, your gold will be returned to you as you pay your principal and the safekeeping fee.
However, if the price of gold has increased during the auction, the excess balance (after deducting the principal and safekeeping) will be refunded to you.
Do take note that if you fail to pay your principal and the safekeeping fee, the bank has the right to auction off your gold.
Go to Agrobank or Bank Rakyat to understand better how Ar Rahnu works!
In this post, I'll attempt to share some of the understandings that I have towards this scheme.
What Ar Rahnu is all about?An Islamic Pawnbroking system which allows borrowers to use gold coins or jewellery as collateral.
It is designed to adhere to Islamic laws where borrowers pay a safekeeping fee, as opposed to a compounding interest rate.
Why would anyone go for Ar Rahnu?It is useful for those who need a small loan of at least RM100.
It appears to be more cost-competitive than personal loans, which typically charge flat interest rates of 9% to 12% a year.
The Islamic pawnbroking scheme charges a monthly safe-keeping fee of $0.
50 - $0.
75 for every RM100 worth of gold.
This equals to an interest rate of 0.
5% to 0.
75% a month, or 6% to 9% a year.
Most importantly, there is a high chance of loan being approved because this scheme is backed by gold.
How Ar Rahnu Works?Step 1 - Let's assume that you offer the bank RM100,000 worth of gold jewellery as collateral with a margin of financing of 65%.
This means that you will receive RM6,500 of cash.
Step 2 - Do take note that there is a monthly safekeeping fee.
Let's assume that the monthly safekeeping fee is 0.
75%.
That means that there is a safekeeping fee of RM0.
75 for every RM100 worth of gold value.
This equates your monthly safekeeping fee to be RM75.
Step 3 - Ar Rahnu's financing tenure is typically fixed at 6 months, although customers are allowed to renew it in multiples of 6 months.
Therefore, by the end of 6 months, you will incur a total safe-keeping fee of RM450.
At the end of the tenure, your gold will be returned to you as you pay your principal and the safekeeping fee.
However, if the price of gold has increased during the auction, the excess balance (after deducting the principal and safekeeping) will be refunded to you.
Do take note that if you fail to pay your principal and the safekeeping fee, the bank has the right to auction off your gold.
Which Bank Offers Ar Rahnu?So far, there are 2 local banks that offers the Islamic pawnbroking scheme in Malaysia.
Go to Agrobank or Bank Rakyat to understand better how Ar Rahnu works!