DefinePK

Abstract

Rahn Literally means to detain something. From shariah’s point of view, Rahn is the security that can be lawfully employed for the satisfaction of claim in respect of a debt. In Rahn, real or corporeal property of material value is pledged as security of debt. This is a contract that protects the rights of parties entering into a financial agreement. On the one hand, it enables the debtor to get a loan to fulfill his financial needs by providing security to the Creditor against the debt. On the other hand, this contract protects the right of the creditor and saves him to incur a financial loss as a result of default of the debtor in repayment of debt. In the modern banking system, where the major role of a bank is to disburse loans to the customers or to enter into credit transactions with them, the significance of Rahn contracts has increased. Therefore, there is a need to examine the rules and conditions of the Rahn contract in respect of its modern applications. This article proceeds with a discussion on the basic concept, rules, and conditions of the Rahn contract in different Fiqh schools of thought. The second part focuses on the modern applications of the Rahn contract. The last part of this study consists of the conclusion and findings of this article. The study found that it is allowed to pledge shares and ownership documents to use them as collateral in a debit transactions. Moreover, it is also allowed for the creditor to ask for an insured item or good to secure his debt.