Of religion and redemption

Evidence from default on Islamic loans

L.T.M. Baele, Moazzam Farooq, S.R.G. Ongena

Research output: Contribution to journalArticleScientificpeer-review

95 Downloads (Pure)

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
Pages (from-to)141-159
JournalJournal of Banking and Finance
Volume44
DOIs
Publication statusPublished - Jul 2014

Fingerprint

Loans
Default rate
Network effects
Political parties
Pakistan
Individual effects
Vote

Keywords

  • Loan Default
  • Islamic Loans
  • Religion
  • Duration Analysis

Cite this

Baele, L.T.M. ; Farooq, Moazzam ; Ongena, S.R.G. / Of religion and redemption : Evidence from default on Islamic loans. In: Journal of Banking and Finance. 2014 ; Vol. 44. pp. 141-159.
@article{b5dfdceaddd7425f861881f402441182,
title = "Of religion and redemption: Evidence from default on Islamic loans",
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.",
keywords = "Loan Default, Islamic Loans, Religion, Duration Analysis",
author = "L.T.M. Baele and Moazzam Farooq and S.R.G. Ongena",
year = "2014",
month = "7",
doi = "10.1016/j.jbankfin.2014.03.005",
language = "English",
volume = "44",
pages = "141--159",
journal = "Journal of Banking and Finance",
issn = "0378-4266",
publisher = "Elsevier Science BV",

}

Of religion and redemption : Evidence from default on Islamic loans. / Baele, L.T.M.; Farooq, Moazzam ; Ongena, S.R.G.

In: Journal of Banking and Finance, Vol. 44, 07.2014, p. 141-159.

Research output: Contribution to journalArticleScientificpeer-review

TY - JOUR

T1 - Of religion and redemption

T2 - Evidence from default on Islamic loans

AU - Baele, L.T.M.

AU - Farooq, Moazzam

AU - Ongena, S.R.G.

PY - 2014/7

Y1 - 2014/7

N2 - 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.

AB - 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.

KW - Loan Default

KW - Islamic Loans

KW - Religion

KW - Duration Analysis

U2 - 10.1016/j.jbankfin.2014.03.005

DO - 10.1016/j.jbankfin.2014.03.005

M3 - Article

VL - 44

SP - 141

EP - 159

JO - Journal of Banking and Finance

JF - Journal of Banking and Finance

SN - 0378-4266

ER -