Rahn
A pledge: an asset held as collateral for a debt, which can be sold to repay it if the debtor defaults.
Rahn is a contract in which a pledgor pledges an asset as collateral to a pledgee to secure a liability or obligation. Bank Negara Malaysia's glossary names the pledgor as the rahin, the collateral as the marhun and the secured obligation as the marhun bih. If the debtor defaults, the collateral can be sold and the proceeds used to settle the debt, with any surplus returned to the owner.
Sources
This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.
Related terms
KafalahA guarantee: a guarantor joins the guaranteed party in assuming a specified liability.HawalahTransfer of a debt: the obligation to pay moves from the original debtor to another party who accepts it.Collateralised murabahahA murabaha placement secured by collateral such as sukuk, used as an Islamic alternative to a repo.