Understanding Demand for Sharia Compliant Loans: Results of a Randomized Experiment in Jordan
Last registered on June 30, 2017

Pre-Trial

Trial Information
General Information
Title
Understanding Demand for Sharia Compliant Loans: Results of a Randomized Experiment in Jordan
RCT ID
AEARCTR-0002235
Initial registration date
June 29, 2017
Last updated
June 30, 2017 4:14 PM EDT
Location(s)
Region
Primary Investigator
Affiliation
J-PAL
Other Primary Investigator(s)
PI Affiliation
University Illinois at Urbana-Champaign
PI Affiliation
Yale University
Additional Trial Information
Status
Completed
Start date
2014-12-01
End date
2017-02-28
Secondary IDs
Abstract
Low utilization of credit in developing countries may be partially due to societal norms. We consider one such case in Jordan and compare the demand for a new, sharia-compliant product to a non-compliant product. To comply with the Islamic prohibition on paying or receiving interest, the sharia-compliant product uses a bank fee rather than interest payment structure, while keeping the economics of the product the same as a comparable conventional loan. We find that in this largely Muslim country, consumers offered a sharia-compliant loan increase their application rate from 18% to 22%. We also randomly varied the price of the sharia-compliant product, and find that the less religious individuals in our sample are twice as elastic with respect to price as those who are more religious. We find no evidence of differences between those who apply for the conventional loan and those that apply for the sharia-compliant loan on observable demographics, suggesting that this new product successfully increases utilization of formal financial services without necessarily pulling in more risky individuals.
External Link(s)
Registration Citation
Citation
Karlan, Dean, Adam Osman and Nour Shammout. 2017. "Understanding Demand for Sharia Compliant Loans: Results of a Randomized Experiment in Jordan." AEA RCT Registry. June 30. https://www.socialscienceregistry.org/trials/2235/history/19092
Experimental Details
Interventions
Intervention(s)
Intervention Start Date
2014-12-01
Intervention End Date
2015-10-01
Primary Outcomes
Primary Outcomes (end points)
demand for sharia-compliant loans; loan amount requested; composition of borrowers
Primary Outcomes (explanation)
Secondary Outcomes
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
Individuals were randomly assigned to eight different groups. The first group, serving as the control, were offered a conventional loan to finance household asset purchases from “the Jordan Microfinance Company,” the legal name of Tamweelcom. The remaining seven treatments offered a sharia-compliant loan in some form. The first treatment pitch is a simple mirror of the conventional loan pitch while the second, third, and fourth treatment groups were offered a similar sharia-compliant loan, but the marketing pitch also included a statement about the religious authority that approved the product. The remaining three treatment groups were offered the choice between a conventional loan or a sharia compliant loan with no mention of an authorizing entity.
Experimental Design Details
Randomization Method
Computer randomization (tablet)
Randomization Unit
Individual
Was the treatment clustered?
No
Experiment Characteristics
Sample size: planned number of clusters
N/A
Sample size: planned number of observations
6,037 individuals
Sample size (or number of clusters) by treatment arms
827 individuals in the control group
5,210 individuals in one of seven treatment groups
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
University of Illinois at Urbana-Champaign
IRB Approval Date
2015-04-29
IRB Approval Number
15488
Post-Trial
Post Trial Information
Study Withdrawal
Intervention
Is the intervention completed?
Yes
Intervention Completion Date
October 01, 2015, 12:00 AM +00:00
Is data collection complete?
Yes
Data Collection Completion Date
October 01, 2015, 12:00 AM +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
N/A
Was attrition correlated with treatment status?
No
Final Sample Size: Total Number of Observations
6,037 individuals
Final Sample Size (or Number of Clusters) by Treatment Arms
827 individuals in the control group 5,210 individuals in one of seven treatment groups
Data Publication
Data Publication
Is public data available?
No
Program Files
Program Files
Reports and Papers
Preliminary Reports
Relevant Papers
Abstract
Citation
Karlan, Dean, Adam Osman, and Nour Shammout. "To Borrow or Not to Borrow: Religious Norms and the Elasticity of Demand for Credit." Working Paper, February 2017.