Major
International and Development Economics
Research Abstract
This research design creates a framework in which the risk preferences and Islamic religiosity of Jordanian borrowers can be estimated. Specifically, this study highlights the different characteristics of conventional and Islamic microfinance borrowers. Although there is extensive literature on the topics of conventional microfinance and Islamic finance individually, few studies examine the intersection of these two concepts. For this study, field research was conducted in conjunction with the National Microfinance Bank (NMB) and the Development and Employment Fund (DEF) in Jordan. Overall, 143 conventional and 78 Islamic borrowers were surveyed, for a total sample of 221 borrowers. To estimate the determinants of taking up an Islamic microfinance loan, a linear probability model is utilized. Moreover, to create an index for measuring risk preferences and religiosity, both principal component analysis and summary index are utilized. Theories behind Islamic microfinance inherently suggest that it will appeal to risk-averse and more religious individuals. Contrary to theoretical propositions, the results indicate that Islamic borrowers tend to have risk-seeking preferences. The results also show that that Islamic borrowers are more religious than conventional borrowers.
Faculty Mentor/Advisor
Elizabeth Katz
Risk, Religion, and Islamic Microfinance
This research design creates a framework in which the risk preferences and Islamic religiosity of Jordanian borrowers can be estimated. Specifically, this study highlights the different characteristics of conventional and Islamic microfinance borrowers. Although there is extensive literature on the topics of conventional microfinance and Islamic finance individually, few studies examine the intersection of these two concepts. For this study, field research was conducted in conjunction with the National Microfinance Bank (NMB) and the Development and Employment Fund (DEF) in Jordan. Overall, 143 conventional and 78 Islamic borrowers were surveyed, for a total sample of 221 borrowers. To estimate the determinants of taking up an Islamic microfinance loan, a linear probability model is utilized. Moreover, to create an index for measuring risk preferences and religiosity, both principal component analysis and summary index are utilized. Theories behind Islamic microfinance inherently suggest that it will appeal to risk-averse and more religious individuals. Contrary to theoretical propositions, the results indicate that Islamic borrowers tend to have risk-seeking preferences. The results also show that that Islamic borrowers are more religious than conventional borrowers.
