Implementing Tawarruq in Digital Ar-Rahnu

A Review of Opportunities, Challenges and Shariah Perspectives

Abstract

The incorporation of tawarruq mechanisms within digital ar-rahnu systems signifies a pivotal transformation in the architecture of Shariah-compliant financial services. This mini-review critically investigates the convergence between tawarruq-based financing frameworks and emerging digital technologies namely artificial intelligence (AI), mobile applications, and blockchain infrastructure through the lenses of operational potential, regulatory complexity and Shariah alignment. Technological advancements such as ChatGPT and other AI-driven models are evaluated for their capacity to streamline operational efficiency, facilitate automated Shariah compliance screening and enhance consumer interaction. However, the implementation of these tools also introduces critical concerns related to citation reliability, jurisprudential depth and adherence to Islamic legal ethics. Major challenges encompass disparities in digital literacy, the commodification of personal data under surveillance capitalism, and threats to digital sovereignty. On the contrary, digital innovations like decentralized autonomous organizations (DAOs) and inclusive blockchain-based financial platforms offer promising avenues for expanding access to Islamic financial services. The review further assesses the efficacy of AI-generated content in Islamic finance, recognizing its value in preliminary knowledge dissemination while highlighting its deficiencies in scholarly rigor. This paper contributes to the evolving discourse on digital Islamic finance by emphasizing the necessity of rigorous Shariah governance to ensure ethical and effective integration of technology in tawarruq-driven financial instruments.