Strengthening Islamic Pawning (Rahn): Sharia compliance, contemporary riba, social inclusivity, and governance challenges

Abstract

Background: The rapid expansion of Islamic pawn (rahn) institutions over the past two decades has raised questions about whether their practices genuinely reflect the justice-oriented principles underlying rahn. This study critically examines the gap between the normative foundations of rahn and its contemporary institutional implementation. Methods: This research employs a qualitative socio-legal approach supported by document analysis. It evaluates Shariah compliance, cost structures, inclusivity patterns, and governance characteristics shaping Islamic pawn operations. Regulatory frameworks, fatwas, and institutional practices are systematically analyzed to assess the alignment between normative ideals and operational realities. Findings: The findings indicate that Islamic pawn services demonstrate formal compliance with existing fatwas and regulations; however, such adherence remains largely procedural. Core ethical values—justice, transparency, and social protection—are insufficiently internalized. The study identifies the emergence of “implicit riba” embedded in cost structures that resemble interest-based mechanisms, raising conceptual and ethical concerns. Access to financing remains limited due to asset-based requirements and administrative barriers, leading to hidden exclusion of vulnerable groups. Institutional dualism also encourages isomorphic convergence with conventional pawn models, gradually weakening the normative distinctiveness of rahn. Conclusion: While institutionally compliant, Islamic pawn practices require substantive reform to better embody the ethical objectives of rahn. Strengthening governance, transparency, and social inclusivity is essential to ensure authentic Shariah-based implementation. Novelty/Originality of this article: This study advances the discourse on Shariah governance by linking normative Islamic legal principles with institutional realities. It proposes an integrated conceptual model encompassing normative, operational, social, and institutional dimensions, offering strategic guidance for developing a more authentic and socially responsive rahn framework.