Why do large firms go for Islamic loans?

Weill, Laurent and Godlewski, Christophe,(2012), Why do large firms go for Islamic loans? , BOFIT Discussion Papers, UNSPECIFIED

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This paper examines motivations for large firms to choose an Islamic loan over a conven-tional loan. This investigation helps understanding the causes of the expansion of Islamic finance activities. We employ a dataset of Islamic and conventional syndicated loans from countries from the Middle East and from Southeast Asia for the period 2001-2009, testing determinants for the choice of an Islamic loan at the facility, firm, and country level. We find that loan characteristics do not influence the choice of an Islamic loan, suggesting that borrowers asking for an Islamic loan are not rationed in terms of maturity and amount. The quality of the borrower does not lead to influence the choice of an Islamic loan, meaning that Islamic loans are not associated with a different default risk than conventional loans. We identify three country-level determinants as potential driving forces expanding the preference for Islamic loans. The strongest determinant is religiosity, i.e. the share of Mus-lim population in a country, but the quality of institutions and level of financial develop-ment also play substantial roles.
Keywords : Islamic banks, loans., UNSPECIFIED
Journal or Publication Title: BOFIT Discussion Papers
Volume: 7
Item Type: Article
Subjects: Ekonomi Islam
Depositing User: Users 15 not found.
Date Deposited: 18 Dec 2019 10:32
Last Modified: 18 Dec 2019 10:32
URI: https://repofeb.undip.ac.id/id/eprint/317

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