Does Religiosity Affect Financing Activity? Evidence from Indonesia

Abstract

This study examines the role of religiosity at province level in Indonesia on the financing activities in both Islamic and conventional banks. Covering the period from 2013-2018, this study uses five different measures of religiosity namely: Islamic school, hajj application, Islamic seminary school, Mosque, and certified halal products at province level. The results show that Islamic and conventional banks in stronger religiosity area provide more financing. However, the impact of religiosity is less pronounced for non-performing financing. The results are still qualitatively valid after taking into account the issues of omitted variables, i.e., un-observable beliefs, ideas, and attitude, and reverse causality between religiosity and total amount of financing at province level.

Keywords: Islamic Bank, Conventional Bank, Financing, Non-Performing Finance, Religiosity