Increasing Financial Inclusion in the Muslim World : Evidence from an Islamic Finance Marketing Experiment / Dean Karlan, Adam Osman, and Nour Shammout.

Format:

Book

Author/Creator:

Karlan, Dean, author.

Osman, Adam, author.

Shammout, Nour, author.

Language:

English

Subjects (All):

Microfinance.

Physical Description:

1 online resource (44 pages)

Other Title:

Increasing Financial Inclusion in the Muslim World

Place of Publication:

Washington, D.C. : World Bank, 2020.

Summary:

Low utilization of household credit in developing countries may be partially due to religious considerations. In a randomized marketing experiment in Jordan, this paper estimates the effect of sharia-compliant loan features on demand for credit. To comply with Islamic law, the sharia-compliant product uses a bank fee rather than an interest payment structure, while keeping the rest of the product features very similar. Sharia-compliance increased the application rate for loans from 18 percent to 22 percent, an increase in demand that is equivalent to a 10 percent decrease in interest rates. This study also randomly varied the price of the sharia-compliant loan and finds that less religious individuals are twice as elastic with respect to price as the more religious. By comparing reasons for refusal across treatment groups, this paper estimates that survey measures that try to assess the importance of religious objections to conventional credit overestimate the importance of this type of objection by a third.

Notes:

Description based on publisher supplied metadata and other sources.

Publisher Number:

10.1596/1813-9450-9200