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

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...

Full description

Bibliographic Details
Main Authors:	Karlan, Dean, Osman, Adam, Shammout, Nour
Format:	Working Paper
Language:	English
Published:	World Bank, Washington, DC 2020
Subjects:	ISLAMIC FINANCE MICROFINANCE MICROCREDIT CREDIT ELASTICITY MARKETING
Online Access:	http://documents.worldbank.org/curated/en/816801585835678838/Increasing-Financial-Inclusion-in-the-Muslim-World-Evidence-from-an-Islamic-Finance-Marketing-Experiment http://hdl.handle.net/10986/33574

id	okr-10986-33574
recordtype	oai_dc
spelling	okr-10986-335742022-09-20T00:12:50Z Increasing Financial Inclusion in the Muslim World : Evidence from an Islamic Finance Marketing Experiment Karlan, Dean Osman, Adam Shammout, Nour ISLAMIC FINANCE MICROFINANCE MICROCREDIT CREDIT ELASTICITY MARKETING 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. 2020-04-10T15:00:12Z 2020-04-10T15:00:12Z 2020-04 Working Paper http://documents.worldbank.org/curated/en/816801585835678838/Increasing-Financial-Inclusion-in-the-Muslim-World-Evidence-from-an-Islamic-Finance-Marketing-Experiment http://hdl.handle.net/10986/33574 English Policy Research Working Paper,No. 9200 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Middle East and North Africa Middle East North Africa
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ISLAMIC FINANCE MICROFINANCE MICROCREDIT CREDIT ELASTICITY MARKETING
spellingShingle	ISLAMIC FINANCE MICROFINANCE MICROCREDIT CREDIT ELASTICITY MARKETING Karlan, Dean Osman, Adam Shammout, Nour Increasing Financial Inclusion in the Muslim World : Evidence from an Islamic Finance Marketing Experiment
geographic_facet	Middle East and North Africa Middle East North Africa
relation	Policy Research Working Paper,No. 9200
description	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.
format	Working Paper
author	Karlan, Dean Osman, Adam Shammout, Nour
author_facet	Karlan, Dean Osman, Adam Shammout, Nour
author_sort	Karlan, Dean
title	Increasing Financial Inclusion in the Muslim World : Evidence from an Islamic Finance Marketing Experiment
title_short	Increasing Financial Inclusion in the Muslim World : Evidence from an Islamic Finance Marketing Experiment
title_full	Increasing Financial Inclusion in the Muslim World : Evidence from an Islamic Finance Marketing Experiment
title_fullStr	Increasing Financial Inclusion in the Muslim World : Evidence from an Islamic Finance Marketing Experiment
title_full_unstemmed	Increasing Financial Inclusion in the Muslim World : Evidence from an Islamic Finance Marketing Experiment
title_sort	increasing financial inclusion in the muslim world : evidence from an islamic finance marketing experiment
publisher	World Bank, Washington, DC
publishDate	2020
url	http://documents.worldbank.org/curated/en/816801585835678838/Increasing-Financial-Inclusion-in-the-Muslim-World-Evidence-from-an-Islamic-Finance-Marketing-Experiment http://hdl.handle.net/10986/33574
_version_	1764479058764103680

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

Similar Items