Implementation of Sharia Pawnshops to Improve the Economy of the Makassar City Community

Abstract

Sharia pawnshops (gadai syariah) have grown into one of the more visible instruments of Islamic microfinance in Indonesian cities, yet how such institutions actually function on the ground, and whether their operation genuinely improves the economic condition of lower-income communities, remains insufficiently documented at the city level. This study examines the implementation of sharia pawnshops in improving the community economy of Makassar City, focusing on four aspects: the operational procedure, the implementation strategy, the impact, and the effectiveness of sharia pawnshop services. A qualitative field research design was employed, combining a normative-theological approach, a normative-juridical approach, and a case study approach. Data were obtained through observation, in-depth interviews with branch and unit heads of sharia pawnshop offices and their customers in Makassar, documentation, and secondary statistical sources, then analysed through data reduction, data display, and conclusion drawing, with credibility strengthened through source, method, and time triangulation. The findings show that the operational procedure of sharia pawnshops in Makassar is consistent with the fatwa of the National Sharia Board of the Indonesian Council of Ulama (DSN-MUI), reflected in valid rahn and ijarah contracts, a profit-sharing (mudharabah) mechanism in place of interest, and a direct-sale (jual putus) mechanism for collateral execution. The institution functions not merely as an emergency financing channel but as an instrument of economic empowerment for lower-middle-income groups, through rahn-based financing, the productive use of pledged assets, affordable ujrah fees, and financial literacy initiatives. Its impact is evident in meeting urgent household needs, sustaining micro-enterprises, stabilising family economies, and offering a lawful alternative to informal moneylenders. The study recommends a clearer institutional separation between sharia and conventional pawnshops and continued conversion of conventional units into sharia-compliant ones to widen access to ethical financing in the city.