Security design, incentives, and Islamic microfinance: Cross country evidence
journal contributionposted on 2020-02-05, 09:07 authored by Yaoyao Fan, Kose John, Hong LiuHong Liu, Luqyan Tamanni
We provide cross country evidence from microfinance institutions (MFIs) that are Sharia-compliant and their comparisons with non-Sharia-compliant MFIs. We find that, compared with non-Sharia-compliant conventional MFIs, Sharia-compliant Islamic MFIs have less credit risk but are less profitable and financially sustainable, have better poverty outreach, and are less likely to ‘mission drift’. Our results highlight the differences in religiosity and security design between these two institutions. Our study also helps practitioners and policy makers improve the understanding of the difference between conventional and Islamic MFIs.
- Business and Economics