Document Type : Research Paper
Authors
1 assistant professor .allameh tabatabaie uoniversity
2 .
3 Associate Professor, Faculty of Economics, Allameh Tabataba’i University
4 PhD Student in Islamic Economics, Faculty of Economics, Allameh Tabataba’i University
Abstract
By considering the different importance of collateral variable in Islamic and in conventional banking, theoretical and experimental studies show that the necessary convergence in the credit relationship between bank and customer has not been achieved. In this article, in addition to the explaining feasibility of studying and accepting empirical role of collateral in commercial profit - loss sharing contracts, we have studied the dual role of collateral as screening and motivation tool in banking relations. We have also used credit data of Bank Refah Kargaran with application of Logit estimation to test our hypotheses regarding the role of collateral. Based on our results, the hypothesis that borrowers with lower risk have provided safer collateral, has been confirmed. This result shows the existence of adverse selection phenomenon. So, low-risk individuals tend to send signals of their quality and reveal their situation to banks. In addition, other economic and social variables of contract could use the potential of signaling and contribute to reduce the role of collateral. In the data under consideration, except for the variable of account history-interest rate, this hypothesis was rejected and other economic and social variables have failed to have the expected impact.
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