Rahn (رهن) is Arabic for the act of pledging a real or corporeal property as security for a debt (dayn/ dain) or pecuniary obligation, so that the creditor is assured of regaining the debt either directly (repayment) or indirectly (proceeds from sale of the pledged property- al-marhoon). Possession of the pledged property does not hinder the creditor from demanding repayment on the due date. For example, a contract of credit sale (sale on credit) can be enhanced with rahn so that the seller will be able to get the price (thaman) on the payment date.
In terms of possession (hiyazah), the principal types of rahn include:
- Al-rahn al-heyazi: a pledged/ collateralized property, in relation to a credit transaction, that is, or should in principle be, kept in the possession (heyazat) of the creditor.
- Al-rahn ghair al-heyazi: a pledged/ collateralized property that is left in the possession of the debtor/ pledgor though in principle, it should remain in the possession of the creditor/ pledgee.
- Al-rahn al-musta’ar: a pledged/ collateralized property can be provided by a third party, rather than the debtor. However, this solely depends on the approval and permission (no objection) of the creditor.
From the perspective of its subject-matter, rahn can be classified as:
- Rahn al-manqul: a rahn that involves a moveable property (manqul) such as machines, equipment, vehicles, etc.
- Rahn ghair al-manqul: a rahn in which an immovable property (ghair manqul) is posted as pledge or collateral. This includes buildings, plots of land, etc. Al-rahn al-aqari (mortgage) is an institutional application of rahn ghair al-manqul.
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