Islamic Pawn Broking industry, known as Ar Rahnu, have since received tremendous support in the Malaysian market, especially amongst micro, small and medium entrepreneurs. The pioneer of Ar Rahnu in Malaysia was Muassasah Gadaian Islam Terengganu (MGIT) introduced in 1992. This paper aims to provide a review on the development of Ar Rahnu and discuss on the application of Ar Rahnu in Bank Rakyat Malaysia Berhad. The study employs the previous studies and engages an interview session with the staff of Ar Rahnu Bank Rakyat. In the early stage of Ar-Rahnu establishment, the demand was influenced by the Muslim societies to obtain financing based on the Shariah principle. Simultaneously, with the effort of the Malaysian government to promote the development of Islamic pawn broking industry, the demand for Ar-Rahnu services increase continuously. The industry has tremendously contributed to the Muslim economy because it plays an important role as a means of community service that fulfil the desperate needs of low income families. It also acts as a source of capital to small businesses that provides quick and easy source of financing as compared to loans from commercial banks. More importantly, this paper also attempts to highlight on the existing challenges of Ar Rahnu, with respect to its growth and development