Gold pawning as a transitional financial inclusion mechanism that bridges access, trust, and household assets

Abstract

Background: Financial inclusion has widened formal access since the global financial crisis, yet sustained use of financial services remains low among low-income households and informal sector workers. Account ownership rarely translates into effective engagement because formal instruments are poorly matched to users' economic realities and institutional trust is weak. Existing studies concentrate on microfinance and digital financial services, leaving collateral-based instruments such as gold pawning underexplored. This study examines gold pawning as an asset-based and trust-based mechanism of financial inclusion and explains its potential as an entry point in the financial inclusion cycle. Methods: A descriptive qualitative design was applied through a semi-systematic literature review of peer-reviewed articles and institutional reports published mainly between 2015 and 2025, analysed through thematic coding and narrative synthesis within the financial inclusion cycle framework. Evidence was drawn mainly from developing economies, particularly Indonesia, Malaysia, and India, where gold-backed lending is institutionally established. Findings: Gold pawning shows low entry barriers, a simple operational mechanism, and a high level of user trust, so that it functions as a provider of rapid liquidity, a means of experiential financial learning, and a channel of initial institutional linkage to the formal financial system. However, its use does not automatically drive a transition toward formal savings or productive financing, and it carries risks of asset depletion and credit dependency when unsupported by adaptive product and policy design. Conclusion: Gold pawning can act as a strategic component of sustainable financial inclusion when it is positioned complementarily within the policy trajectory rather than as a stand-alone or last-resort instrument. Novelty/Originality of this article: The contribution lies in integrating gold pawning into an asset-based and trust-based framework of financial inclusion as a transitional mechanism, a position previously overlooked in mainstream financial inclusion literature.