Financial inclusion and economic well-being: Evidence from Islamic Pawnbroking (Ar-Rahn) in Malaysia

Azila Abdul Razak and Mehmet Asutay

Research in International Business and Finance, 2022, vol. 59, issue C

Abstract: This study examines the impact of financial inclusion by means of Islamic pawnbroking or ar-rahn financing facility on improving the economic wellbeing of the clients in Malaysia. The data set, consisting of primary data assembled through questionnaire surveys conducted in 2010 and 2016, which were analysed by employing structural equation modelling (SEM). The findings demonstrate that financial inclusion through patronising ar-rahn significantly improves the wellbeing of the clients. The usage of ar-rahn financing for production purpose related economic activity is significant in enhancing individual wellbeing resulting in micro balancing and improving the financial and socio-economic development. This study concludes that ar-rahn helps to overcome voluntary financial exclusion due to Shari’ah compliance in the face of the social failure of Islamic banking, which then contributes to the clients' lives in their everydayness who may have non-liquid small assets kept for security purpose. As a policy recommendation, this study suggests that policymakers and ar-rahn institutions should play a proactive role in improving the outreach of ar-rahn services and providing the necessary regulative environment, as they also contribute to women’s empowerment.

Keywords: Islamic pawnbroking (ar-rahn); Financial inclusion; Economic wellbeing; Societal wellbeing (search for similar items in EconPapers)
JEL-codes: G21 G23 G51 I31 O17 P46 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:59:y:2022:i:c:s0275531921001781

DOI: 10.1016/j.ribaf.2021.101557

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