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<p>The paper investigates why certain firms voluntarily limit the use of debt. We analyse data from a World Bank survey of Pakistani enterprises that allows us to distinguish between debt aversion motivated by religious believes and borrower discouragement due to economic or procedural reasons. Using multinomial logit regression, we find that religious debt aversion is significant in a religious society but can be affected by non-religious factors. In particular, firms perceiving unfair competition are less likely to be discouraged from applying for bank loans by religious believes. These findings underscore the religious dimension of credit and highlight the importance of financial products that are adapted to the needs of religious borrowers.</p>

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Religious debt aversion and competition: evidence from Pakistan

  • 期刊论文

  • 发表日期：

    2025年12月6日

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  • Hiep Manh Nguyen,
  • Hang Thu Nguyen,
  • Michael Troege

摘要

The paper investigates why certain firms voluntarily limit the use of debt. We analyse data from a World Bank survey of Pakistani enterprises that allows us to distinguish between debt aversion motivated by religious believes and borrower discouragement due to economic or procedural reasons. Using multinomial logit regression, we find that religious debt aversion is significant in a religious society but can be affected by non-religious factors. In particular, firms perceiving unfair competition are less likely to be discouraged from applying for bank loans by religious believes. These findings underscore the religious dimension of credit and highlight the importance of financial products that are adapted to the needs of religious borrowers.