Increasing Financial Inclusion in the Muslim World: Evidence from an Islamic Finance Marketing Experiment

Dean Karlan, Adam Osman and Nour Shammout

The World Bank Economic Review, 2021, vol. 35, issue 2, 376-397

Abstract: 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.

Keywords: Islamic finance; microcredit; religion; credit elasticity; marketing (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1093/wber/lhaa010 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Increasing Financial Inclusion in the Muslim World: Evidence from an Islamic Finance Marketing Experiment (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:wbecrv:v:35:y:2021:i:2:p:376-397.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The World Bank Economic Review is currently edited by Eric Edmonds and Nina Pavcnik

More articles in The World Bank Economic Review from World Bank Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().