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Debt Taking And Charity-Giving Among Low-Income Households: Strengthening Resilience In Islamic Perspective

Author

Listed:
  • Laily Dwi Arsyianti

    (Bogor Agricultural University and PhD Candidate, IIUM IIBF)

  • Salina Kassim

    (IIUM Institute of Islamic Banking and Finance)

  • Adewale Abideen Adeyemi

    (IIUM Institute of Islamic Banking and Finance)

Abstract

Households’ financial problem was perceived to be solved by taking other source of fund such as debt. In Islam, taking debt should be considered as the last resource when other sources were not available. Islam gives solution for those who have financial problems. Giving just small amount of money would give barakah to the giver. Charity-giving is not privilege for the wealthy, but also for those in dire conditions. This paper attempts to explore whether low-income households’ perception on consecutive debt influences their perception on regular charity giving, especially to achieve stipulated outcomes, i.e. households’ financial resilience. Structural Equation Modelling (SEM) is employed to analyse 1780 data from respondents across six areas in Indonesia. Low-income households perceived consecutive debt taking to have negative relationship with regular charity-giving and positive relationship with outcomes (households’ financial condition and lifestyle satisfaction). Meanwhile, regular charity giving has negative relationship with the outcomes when consecutive debt taking intervene the relationship. Financial education and selection of financing institution have been proven to correlate with variables that influence both regular charity-giving and consecutive debt-taking behaviours. As a recommendation, charity education or sharing values should be included in the current financial education program. Formal financial institutions and social finance institution should also encourage supervision and continuously give financial education to social funds receivers.

Suggested Citation

  • Laily Dwi Arsyianti & Salina Kassim & Adewale Abideen Adeyemi, 2018. "Debt Taking And Charity-Giving Among Low-Income Households: Strengthening Resilience In Islamic Perspective," Journal of Islamic Monetary Economics and Finance, Bank Indonesia, vol. 4(1), pages 1-22, August.
    • Handle: RePEc:idn:jimfjn:v:4:y:2018:i:1a:p:1-22
    DOI: https://doi.org/10.21098/jimf.v4i1.739
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    References listed on IDEAS

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    More about this item

    Keywords

    Debt-taking; Charity-giving; Low-income Households;
    All these keywords.

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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