IOSR Journal Of Humanities And Social Science (IOSR-JHSS) Volume 22, Issue 6, Ver. 5 (June. 2017) PP 40-48 e-ISSN: 2279-0837, p-ISSN: 2279-0845. www.iosrjournals.org DOI: 10.9790/0837-2206054048 www.iosrjournals.org 40 | Page Gold Pawning in Syariah Banking: An Economic Analysis Darwis Harahap IAIN Padangsidimpuan, Indonesia Email: darwis05@yahoo.com Abstract : Gold Pawning in Syariah Banking: An Economic Analysis. Gold Pawning practices in Syariah Banking may create speculative actions due to the volatility of gold prices in markets. The objective of this research is to conduct stress testing whether losses are experienced by the customers while having gold investements or known as berkebun emas. Stress testing is a testing method conducted based on gold farming simulations of the cumulative gold pawning data (qardh) of Indonesian Syariah Banking collected from March 2004 to May 2015. The results of stress testing on gold farming simulations conducted within 131 months show that customers gain profits only within 48 months while the rest 83 months they suffer from losses. It can be concuded that the gold pawning practices are not in accordance with maslahah (public interest) but, in the contrary, contain gharar (deceptive uncertainty). Thus, further studies are highly required to conduct in meeting the syariah. Keywords - Rahn, Stress Testing, Maslahah I. INTRODUCTION Gold investment is an investment considered meeting the syariah. Not only does gold provide higher profits, its value tends to be stable and increases every year. However, in a certain period, it may also experience decreases. This gold transaction is considered as an investment which has already met the syariah as in the Holy Qur’an, it is stated that gold (dinar) and silver (dirham) may be used as currency.Although gold investment is considered as an investment based on syariah, in facts, it tends to be in contradiction with syariah values. A hadith, narrated by Bukhori and Nasa’I, mentions that the Prophet forbids gold exchanges to avoid riba’ fadhl. In addition, other hadiths also forbid non-cash or installment gold purchases (murabahah). Gold may only be used as a currency.Due to Indonesian Syariah banks’ funding products, there are two types of gold funding products, including gold pawning (rahn) and gold installment (murabahah). Gold pawning (rahn) is a gold pawning form made by customers who need cash. Meanwhile, gold installment (murabahah) is a gold purchasing method made by installments. However, not all Syariah banks have the gold funding product (rahn) such as in Bank Muamalat Indonesia Plc. Gold pawning practices (rahn) are intended to fulfill costumers’ daily needs which are urgent, yet require a simple and quick process. The gold pawning implementation procedural sources explain that Syariah banks estimate the highest value of the gold is maximally 85% to 90% and minimally 50% of the gold price. The pawning period is only within 4 months and may be extended. If the basic pawned gold payments have not been fully completed, other payments should be made as those initially made on gold pawning (rahn) and also the monthly payments (ujroh). Other expenses required to make include costs for goods’ administration and insurance when funding is disbursed. Maintenance costs are calculated in every 15 days and paid on the initial payments completion, including the administration fee. The loans which can be made are ranging from Rp. 500,000 to Rp. 250,000,000 [1]. When analyzed, the gold pawning practices may provide opportunities for speculates to gain profits. Pawning is intended to fulfill people’s basic needs, yet the loan tolerance up to Rp. 250,000,000 may provide opportunities for speculative actions. In addition, the pawning period may be extended after four months while waiting for the gold price increases in the future. One illustration is that when an individual pawns his/her piece of gold and receives the loan, he/she may use it to buy another piece of gold and then he/she pawns it once again, and so forth. An individual may repetedly pawn his/her pieces of gold by only having a piece of gold as his/her capital at the beginning. He/she may sell the powned pieces of gold when the gold prices are increasing. This practice is then called a gold farming. On the other hand, these speculative actions may harm both customers and the banks since gold price tends to fluctuate, ups and downs. For example, when the gold price increases in market, the customers will sell their gold and surely will gain profits, but when the gold price decreases, the customers will keep their gold at Syariah banks waiting for the gold price increase in market. In facts, the customers will never return their loan since the value of their pawned gold is higher than the customers’ gold price.