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Of Religion and Redemption: Evidence from Default on Islamic Loans (Replaces CentER DP 2010-136)

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  • Baele, L.
  • Farooq, M.
  • Ongena, S.

    (Tilburg University, Center for Economic Research)

Abstract

Abstract: We compare default rates on conventional and Islamic loans using a comprehensive monthly dataset from Pakistan that follows more than 150,000 loans over the period 2006:04 to 2008:12. We find robust evidence that the default rate on Islamic loans is less than half the default rate on conventional loans. Islamic loans are less likely to default during Ramadan and in big cities if the share of votes to religious-political parties increases, suggesting that religion – either through individual piousness or network effects – may play a role in determining loan default.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2012-014.

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Date of creation: 2012
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Handle: RePEc:dgr:kubcen:2012014

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Web page: http://center.uvt.nl

Related research

Keywords: Loan Default; Islamic Loans; Religion; Duration Analysis;

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