Exploring the influence of digital gold pawn services on financial inclusion through the lens of Islamic finance

Abstract

Background: The rise of financial technology (fintech) has improved public access to financial services, with digital gold pawnbroking emerging as a significant Sharia-compliant innovation. These services combine Islamic financial principles with digital convenience to offer low- to middle-income communities secure, ethical and accessible financing options. Methods: This quantitative explanatory study collected data from 240 Pegadaian Syariah digital gold service users in Aceh, Indonesia. The data were analysed using partial least squares–structural equation modelling (PLS-SEM) to examine the effects of digitalisation, Islamic financial literacy, religiosity and customer trust on socioeconomic conditions and financial inclusion. Findings: The results show that Islamic financial literacy has the strongest influence on socioeconomic conditions, which significantly mediate the effects of religiosity, digitalisation and literacy on financial inclusion. Digitalisation and customer trust were also found to have a positive effect on socioeconomic conditions and financial inclusion, whereas religiosity was found to influence financial inclusion indirectly through improved socioeconomic status. Together, literacy, trust, and technology strengthen household economic capacity, enabling greater participation in Sharia-compliant financial services. Conclusion: The study demonstrates that improving Islamic financial literacy and trust in digital Sharia services is crucial for enhancing socioeconomic conditions and expanding financial inclusion. In this study, socioeconomic conditions refer to improvements in household income stability, financial management capability, access to productive capital, and overall economic resilience. Strengthening these aspects enables households to manage risks, meet short-term liquidity needs, and participate more actively in formal Sharia-compliant financial systems. Novelty/Originality of this article: This study provides novel empirical evidence that digital Sharia-based financial services promote inclusive economic development by integrating literacy, trust, religiosity and technological innovation. This offers a comprehensive model for financial inclusion in regions with strong Islamic practices.