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

L. Baele, M. Farooq, S. Ongena

Research output: Working paperDiscussion paperOther research output

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.
Original languageEnglish
Place of PublicationTilburg
PublisherFinance
Number of pages72
Volume2012-014
Publication statusPublished - 2012

Publication series

NameCentER Discussion Paper
Volume2012-014

Keywords

  • Loan Default
  • Islamic Loans
  • Religion
  • Duration Analysis

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