Religion, Social Desirability Bias and Financial Inclusion: Evidence from a List Experiment on Islamic (Micro-)Finance

37 Pages Posted: 27 Dec 2021

See all articles by Syedah Ahmad

Syedah Ahmad

University of Groningen - Faculty of Economics and Business

Robert Lensink

University of Groningen - Department of Economics, Econometrics and Finance; Wageningen University and Research (WUR) - Development Economics Group

Annika Mueller

University of Groningen - Faculty of Economics and Business

Abstract

In recent years, academic and policy research has placed increasing focus on the study of the attitudes of the Muslim poor towards Islamic and non-Islamic (micro-)finance to inform financial inclusion strategies. Survey questions are a common way to measure these attitudes and have been included into large-scale surveys such as the Global Findex. However, survey-based measures that ask about non-Islamic finance in an Islamic context may be affected by social desirability bias. In this paper, we propose an effective and scalable solution to this issue. We conduct the first list experiment designed to measure attitudes towards the usage of non-Islamic financial products and services, with 2,145 poor Muslims from Multan, Pakistan. Our list experiment uncovers that 37 percent of our sample use non-Islamic finance, almost twice as many as respond affirmatively to a similar direct survey question. Using our rich survey data on demographics, socio-economic factors and religiosity, we are further able to document substantial heterogeneity in the usage of non-Islamic finance and in the magnitudes of underreporting this usage in the direct survey question. We conclude by discussing the significance of our results in terms of (policy) implications and for the measurement of the demand for Islamic finance.

Keywords: List Experiment, Islamic (Micro-)Finance, Social Desirability Bias, Field experiment, Pakistan

Suggested Citation

Ahmad, Syedah and Lensink, Robert and Mueller, Annika, Religion, Social Desirability Bias and Financial Inclusion: Evidence from a List Experiment on Islamic (Micro-)Finance. Available at SSRN: https://ssrn.com/abstract=3969177 or http://dx.doi.org/10.2139/ssrn.3969177

Syedah Ahmad

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

Robert Lensink (Contact Author)

University of Groningen - Department of Economics, Econometrics and Finance ( email )

P.O. Box 800
9700 AH Groningen
Netherlands

Wageningen University and Research (WUR) - Development Economics Group ( email )

Hollandseweg 1
WAGENINGEN, 6706 KN
Netherlands

Annika Mueller

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

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