Of Religion and Redemption: Evidence from Default on Islamic Loans (Replaces CentER DP 2010-136)
AbstractAbstract: 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 InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2012-014.
Date of creation: 2012
Date of revision:
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Web page: http://center.uvt.nl
Loan Default; Islamic Loans; Religion; Duration Analysis;
Find related papers by JEL classification:
- A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
- Z12 - Other Special Topics - - Cultural Economics - - - Religion
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-08 (All new papers)
- NEP-CWA-2012-03-08 (Central & Western Asia)
- NEP-MFD-2012-03-08 (Microfinance)
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