Allah has commanded that debts be documented in writing. He, the Exalted, says: “O you who believe, when you contract a debt for a specified term, record it in writing … and if you are on a journey and cannot find a scribe, then a retained pledge may suffice.” (Q 2:282–283)

Such guidance is part of Allah’s mercy to His servants, directing them to what secures their welfare.

For a pledge to be valid, the amount, type, and description of the collateral must be known, and the pledgor must be legally competent, either the actual owner of the pledged item or someone duly authorized to dispose of it.

A person may lawfully pledge his own property as security for another person’s debt.

The pledged object must be something that can lawfully be sold, so that the debt can in fact be satisfied from it.

Stipulating a pledge is permissible both within the very contract and after the contract has been concluded, in keeping with the verse just cited: “and if you are on a journey and cannot find a scribe, then a retained pledge may suffice.” Allah, exalted be He, has made collateral an alternative to written documentation, and writing itself takes place only after the liability has arisen.

The pledge becomes binding only on the pledgor, for the benefit lies with the other party; therefore it is obligatory from his side. It is not binding on the pledgee, who is free to cancel it, since the benefit accrues exclusively to him.

It is also permissible for a person to pledge his undivided share in property that he co-owns with others, because, once the debt falls due, he may sell his share and discharge the liability from its price.