Equity financing and debt-based financing: Evidence from Islamic microfinance institutions in Indonesia

Bayu Fianto, Christopher Gan, Baiding Hu and Jamal Roudaki

Pacific-Basin Finance Journal, 2018, vol. 52, issue C, 163-172

Abstract: This paper investigates the impact of Islamic microfinance on rural households' welfare in Indonesia. Using a survey questionnaire, this study explores two group of financing in Islamic microfinance, equity and debt-based financing. A two-year panel dataset and a double difference-in-difference approach are used to examine the impact of the two Islamic microfinance groups on rural household in Indonesia. The study also evaluates shari'a compliance based on the national shari'a board of Indonesia. The study results indicate that both financing groups exhibit a positive and significant impact on rural households' income, but equity financing performed better than debt-based financing. Moreover, the shari'a compliance evaluation indicates that clients received financing that is comparable with the national shari'a board of Indonesia.

Keywords: Equity financing; Debt-based financing; Difference-in-difference; Shari'a compliance; Islamic microfinance; Indonesia (search for similar items in EconPapers)
JEL-codes: G23 O17 R20 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:52:y:2018:i:c:p:163-172

DOI: 10.1016/j.pacfin.2017.09.010

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