The Effect of Religious Prohibitions on Economic Behavior
78 Pages Posted: 25 May 2019
Date Written: April 29, 2019
We conducted a multi-country experiment on whether a reminder of the Islamic prohibition on interest induces lenders to choose Profit-Loss Sharing arrangements (PLS) as an alternative. We find that 1) Muslims are more likely to choose PLS than non-Muslims; 2) they do so when interest rates are high, and 3) the reminder of the prohibition increases the use of PLS by Muslims (particularly if highly religious and/or female). The evidence also suggests that the subjects' reaction to the reminder is more in the spirit of the law (be charitable to borrowers) than in the letter of the law (choose PLS).
JEL Classification: C90, D00, D64, D91, O10, Z12
Suggested Citation: Suggested Citation