Understanding Demand for Sharia Compliant Loans: Results of a Randomized Experiment in Jordan

Last registered on June 30, 2017
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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

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
June 30, 2017, 4:14 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country
Jordan
Region

Primary Investigator

Name
Nour Shammout
Affiliation
J-PAL
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Other Primary Investigator(s)

PI Name
Adam Osman
PI Affiliation
University Illinois at Urbana-Champaign
Contact Investigator
PI Name
Dean Karlan
PI Affiliation
Yale University
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Additional Trial Information

Status
Completed
Start date
2014-12-01
End date
2017-02-28
Keywords
Finance & Microfinance
Additional Keywords
Islamic finance; microcredit; religion; credit elasticity; marketing
JEL code(s)
D12; G21; O12; O16; Z12
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)
J-PAL Evaluation Summary

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://doi.org/10.1257/rct.2235-1.0
Former 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
Sponsors & Partners
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)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
University of Illinois at Urbana-Champaign
IRB Approval Date
2015-04-29
IRB Approval Number
15488
Analysis Plan

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
Yes
Intervention Completion Date
October 01, 2015, 12:00 +00:00
Data Collection Complete
Yes
Data Collection Completion Date
October 01, 2015, 12:00 +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, Papers & Other Materials

Relevant Paper(s)

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.
URL
https://www.povertyactionlab.org/sites/default/files/publications/4267_To-Borrow-or-Not-to-Borrow_Osman-et.al_.Feb%202017pdf.pdf

Reports & Other Materials