Bridging Theory and Practice: Hybrid Contracts in Islamic Pawnbroking and DSN-MUI Fatwas

The necessity for studies on Islamic pawnbroking is evident in the pursuit of understanding the Islamic economy and finance as a potential alternative for communities seeking access to capital and other resources. The present study focuses on the analysis of the conformity of contract practices in Islamic pawnbroking institutions with the fatwa of the National Sharia Council of the Majelis Ulama Indonesia (DSN-MUI) with a hybrid contract approach. The research method employed is the normative juridical method, which involves examining the application of Islamic legal principles at two different levels: the methodological level (ushul fiqh) and the level of fiqh rules and products (fiqh). The primary data for this research are DSN-MUI fatwas, documents on pawnbroking agreements in Islamic Financial Institutions, and interviews with management in the Islamic pawnbroking industry. The findings indicate that the practice of pawnbroking in Islamic financial institutions is not in violation of the DSN-MUI fatwa. However, Islamic financial institutions require adjustments to their operational implementation. This has given rise to novel terms such as mu’nah contract administration, mu’nah discount, and tearing mu’nah, which are not explicitly regulated in the DSN-MUI fatwa. This study recommends that the provisions concerning mu’nah contract administration, mu’nah discount, and the concept of tearing in determining mu’nah should be incorporated into the DSN-MUI fatwa.