Volume 1, Issue 1, November 2016, Page: 46-52
Access to Credits and Indebtedness: Islamic Perspective
Idris Yahaya Adamu, Department of Islamic Finance and Banking, School of Islamic Business, Universiti Utara Malaysia, Sintok Kedah, Malaysia
Ahmad Khilmy bin Abdul Rahim, Department of Islamic Finance and Banking, School of Islamic Business, Universiti Utara Malaysia, Sintok Kedah, Malaysia
Abu Bakar Hamed, Department of Islamic Finance and Banking, School of Islamic Business, Universiti Utara Malaysia, Sintok Kedah, Malaysia
Received: Dec. 6, 2016;       Accepted: Dec. 28, 2016;       Published: Jan. 20, 2017
DOI: 10.11648/j.ijafrm.20160101.17      View  2810      Downloads  72
The purpose of this paper is to describe, from Islamic perspective, Muslims’ concern on loans and indebtedness. The paper intends to enlighten working class Muslims on the consequences of taking unnecessary loans. Due to increasing access to financial services, banks and other financial institutions are increasingly offering loans to their customers. Thus, increasing unnecessary borrowings at the expense of their future well-being. The paper concentrate on Islamic perspective of over borrowing and indebtedness. Muslims are expected to live a moderate life, free of embezzlement and misery. Therefore, are called upon to avoid unnecessary expenditure and improve savings. The study contributes to literature of borrowings, by considering loans as last alternative and by necessity.
Access to Credits, Loans, Indebtedness, Muslim Consumers
To cite this article
Idris Yahaya Adamu, Ahmad Khilmy bin Abdul Rahim, Abu Bakar Hamed, Access to Credits and Indebtedness: Islamic Perspective, International Journal of Accounting, Finance and Risk Management. Vol. 1, No. 1, 2016, pp. 46-52. doi: 10.11648/j.ijafrm.20160101.17
Copyright © 2016 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Abdullah, F. (2014) Virtues and Character Development in Islamic Ethics and Positive Psychology. International Journal of Education and Social Sciences (IJESS), 1 (2), 69-77.
Ajetunmobi, M. A. (1992) ‘Modern Development in Islamic Law of Testamentary Disposition,’ Hamdard Islamicus: A Quarterly Journal of Bayt al-Hikmah, vol. xv: 77.
Allain, J. (2012), Slavery in international law: Human exploitation and traffic, Martinus Nijhoff Publishers, Leiden.
Allen, F. (1983). Credit rationing and payment incentives. The Review of Economic Studies, pp. 639-646.
Araujo, A., & Funchal, B. (2015). How much should debtors be punished in case of default? Journal of Financial Services Research, 47 (2), 229-245.
Athreya, K. (2004). Shame as it ever was: Stigma and personal bankruptcy. FRB Richmond Economic Quarterly, 90 (2), 1-19.
Bai, Y., (2014) Households Rejecting Loan Offers from Banks. If, When, and Why?
Bendjilali, B. (2000), “On the demand for consumer credit: an Islamic setting”, Research Report No. 30, IRTI, Jeddah, KSA, available at: www.irtipms.org/PubText/31.pdf (accessed July 23, 2016).
Bergerès, A. S., d'Astous, P., & Dionne, G. (2015). Is there any dependence between consumer credit line utilization and default probability on a term loan? Evidence from bank customer data. Journal of Empirical Finance, 33, 276-286.
Bertola, G., Disney, R. and Grant, C. B. (2008), The Economics of Consumer Credit, MIT Press, Cambridge, MA.
Bhutta, N., Shan, H., & Dokko, J. (2010). The depth of negative equity and mortgage default decisions.
Brown, S., & Taylor, K. (2014). Household finances and the ‘Big Five’ Personality traits. Journal of Economic Psychology, 45, 197-212.
Christman, D. E. (2000). Multiple realities: Characteristics of loan defaulters at a two-year public institution. Community college review, 27 (4), 16-32.
Clayton, M., Liñares-Zegarra, J., & Wilson, J. O. (2015). Does debt affect health? Cross country evidence on the debt-health nexus. Social science & medicine, 130, 51-58.
De Aghion, B. A., & Morduch, J. (2004). Microfinance: Where do we stand. Financial development and economic growth: explaining the links.
Dick, A. A., & Lehnert, A. (2010). Personal bankruptcy and credit market competition. The Journal of Finance, 65 (2), 655-686.
Eales, R., & Bosworth, E. (1998). Severity of loss in the event of default in small business and larger consumer loans. Journal of Lending and Credit Risk Management, 80, 58-65.
Elliehausen, G., Christopher Lundquist, E., & Staten, M. E. (2007). The impact of credit counseling on subsequent borrower behavior. Journal of Consumer Affairs, 41 (1), 1-28.
Farooq, M. O. (2015). Islamic finance and debt culture: treading the conventional path? International Journal of Social Economics, 42 (12), 1168-1195.
Fedaseyeu, V. (2015). Debt collection agencies and the supply of consumer credit. Working paper No. 13-38/R, Research department, Federal reserve bank of Philadelphia.
Flax, B. (2010), The Courage to Do Nothing: A Moral Defence of Markets and Freedom, Tate Publishing, Mustang, OK.
Gerardi, K. (2010), “'Financial literacy and subprime mortgage delinquency: evidence from a survey matched to administrative data”, Federal Reserve Bank of Atlanta Working Paper No. 2010-10, Atlanta, GA.
Gili, M., Roca, M., Basu, S., McKee, M., Stuckler, D., (2013). The mental health risks of economic crisis in Spain: evidence from primary care centres, 2006 and 2010. Eur. J. Public Health 23, 103e108.
Goud, B. (2014), “Are we tackling the Islamic finance literacy the wrong way”, Thomson Reuters Blog, available at: http://blog.thomsonreuters.com/index.php/tackling-islamic-financialilliteracy-wrong-way/ (accessed July 23, 2016).
Hankel, W. and Isaak, R. (2011), Brave New World Economy: Global Finance Threatens Our Future, John Wiley and Sons, Hoboken, NJ.
Hussin, S. R., Kassim, S., & Jamal, N. (2013). Credit card holders in Malaysia: customer characteristics and credit card usage. International Journal of Economics and Management, 7 (1), 108-122.
Iqbal, M. and Molyneux, P. (2005), Thirty Years of Islamic Banking: History, Performance and Prospects, Palgrave MacMillan, New York, NY.
Ismail, A. G., & Zali, N. A. (2015). Ethics in Relation to Islamic Finance Activities IRTI Working Paper Series (No. 1435-7).
Ismail, N. A. (2015). An Islamic-Based Human Development Index with Special Reference to Debt Indicators. Proceedings of Universiti Sains Malaysia, 139.
Kalupahana, D. (1992), A history of Buddhist philosophy: Continuities and discontinuities, University of Hawaii Press, Honolulu, HI.
Kisaka, S. E. (2014). The Impact of Attitudes towards Saving, Borrowing and Investment on the Capital Accumulation Process in Kenya: An Application of the Theory of Planned Behaviour. Research Journal of Finance and Accounting, 5 (9), 140-151.
Kohansal, M. R., & Mansoori, H. (2009) Factors affecting on loan repayment performance of farmers in Khorasan-Razavi province of Iran. Conference on International Research on Food Security, Natural Resource Management and Rural Development. University of Hamburg.
Livshits, I., MacGee, J., & Tertilt, M. (2010). Accounting for the rise in consumer bankruptcies. American Economic Journal: Macroeconomics, 2 (2), 165-193.
Livshits, I. (2015). Recent developments in consumer credit and default literature. Journal of Economic Surveys, 29 (4), 594-613.
MacGee, J. (2012): “The Rise in Consumer Credit and Bankruptcy: Cause for concern?” Commentary No. 346, C. D. Howe Institute.
Makpotche, M., Logossah, K., Amewokunu, Y., Lawson-Body, A., & Sedzro, K. (2015). Impact of Cultural Beliefs on Entrepreneurs' Intention to use Bank Loans. Journal of Applied Finance and Banking, 5 (4), 11.
Mitchener, K. J., & Weidenmier, M. D. (2010). Super sanctions and sovereign debt repayment. Journal of International Money and Finance, 29 (1), 19-36.
Mbawuni, J., & Nimako, S. G. (2015). Predicting Clients’ Intentions to Acquire Credit Facilities in Ghanaian Financial Market. International Journal of Economics and Finance, 7 (2), 63.
McHugh, S. & Ranyard, R., (2012), "Credit repayment decisions": The role of long-term consequence information, economic and psychological factors, Review of Behavioural Finance, Vol. 4 Iss 2 pp. 98–112.
Mills, D. C., & Reed III, R. R. (2008). Default risk and collateral in the absence of commitment. Available at SSRN 1148963.
Monticello. org (n. d.), “Canons of conduct”, Thomas Jefferson encyclopedia, available at: www.monticello.org/site/jefferson/canons-conduct (accessed November 11, 2016).
Muhammad bin Isma’ili al-Amir al-Yamani al-San‘anī; Subl al-Salam: Sharḥ Bulūgh al Marram min Jami‘Adillat al-Aḥkām, vol. 3 (Cairo: Dār al-Fajr li al-Turāth, 2005), 141; al Hāfiẓ Ibn Ḥajar al- Asqalānī, Bulūgh al-Marām min Adillat al-Aḥkām (Riyāḍ: Maktabah Dār al-Salām, 1993), 285, chapter 21, Bāb al-Waṣāyā, no. hadīth 951.
Olagunju, F. I., & Adeyemo, R. (2007). Determinants of repayment decision among small holder farmers in Southwestern Nigeria. Pakistan Journal of Social Sciences, 4 (5), 677-686.
Pittman, C. L. (2008). Use of social capital in borrower decision-making. Joint Center For Housing Studies, Harvard University.
Proverbs 22: 6-8, New International Version (NIV), available at: www.biblegateway.com/passage/? search¼ Proverbs+22: 6-8&version¼NIV.
Quercia, R., McCarthy, G. W., & Stegman, M. A. (1993). Mortgage default among rural, low-income borrowers.
Ranyard, R., Hinkley, L., Williamson, J., & McHugh, S. (2006). The role of mental accounting in consumer credit decision processes. Journal of Economic Psychology, 27 (4), 571-588.
Reuters (2007), “US CBO estimates $2.4 trillion long-term war costs”, Reuters, October 24, available at: www.reuters.com/article/2007/10/24/us-iraq-usa-funding-idusn24507537200710 (accessed July 15, 2016).
Roslan, A. H., & Karim, M. A. (2009). Determinants of microcredit repayment in Malaysia: The case of Agro bank. Humanity & Social Sciences Journal, 4 (1), 45-52.
Salisu, T. M. (2016). Will-making (Wasiyyah) in Islam: A Juristic Exposition. Jurnal Syariah, 24 (1).
Siddiqi, M. N. (1986). Banking without interest (Vol. 5). Islamic Foundation.
Stavins, J. (2000). Credit card borrowing, delinquency, and personal bankruptcy. New England Economic Review, 15. pp. 16-30.
Swartz, N. P. (2012). The prevention of over-indebtedness: The problem of interest and the Islamic response. African Journal of Business Management, 6 (37), 10099.
The Baudhayna, Prasna IV, Adhyaya 8, no. 11-13, www.hinduwebsite.com/sacredscripts/ hinduism/dharma/baudh3.asp.
Turunen, E., & Hiilamo, H. (2014). Health effects of indebtedness: a systematic review. BMC public health, 14 (1), 489.
Browse journals by subject