Intellectual property rights as credit guarantee in banking: A legal review in Indonesia

The increasing reliance on intangible assets in the digital economy has intensified interest in using Intellectual Property Rights (IPR) as collateral in banking. This issue is particularly relevant for start-ups and small and medium-sized enterprises (SMEs), which face structural constraints due to limited tangible assets. Despite the formal recognition of certain IPR—such as copyrights and trademarks—as fiduciary collateral under Indonesian law, their practical application remains marginal. This study investigates the legal feasibility, institutional challenges, and regulatory gaps in the use of IPR as credit collateral in Indonesia, while also examining its potential integration within Islamic banking frameworks. Employing a normative legal method combined with comparative analysis and a law-and-economics approach, the study reveals three key constraints: the absence of standardized valuation mechanisms, regulatory fragmentation, and limited institutional capacity in risk assessment and enforcement. In addition, the inherent volatility of IPR value and exposure to legal disputes further undermine its bankability. This article contributes by advancing a coherent regulatory and institutional model for IPR-based financing, emphasizing legal harmonization, valuation standardization, and risk mitigation. It also demonstrates the compatibility of IPR collateral with Sharia principles, positioning it as a viable instrument for inclusive, innovation-driven financing in emerging economies.