This study highlights the characteristics of Small and Middle Entrepreneurs (SMEs) as a debtor of micro finance institution (MFI), whether as conventional or sharia type. The study was conducted by taking primary data including 30 debtors of conventional MFI and 29 debtors of Sharia MFI using a questionnaire. In the first stage, the study established several indices to measure the religiosity level using Principal Component Analysis. Additionally, game field experiments use in order to reveal the debtor’s risk preferences. At a later stage, the probit regression model used. This study found that debtors of sharia MFI is relatively more religious. There is also a fact that debtors from both types of MFI have the same risk preferences, risk lover. But debtors in sharia MFI have a relatively lower level one. So, in order to broaden the Sharia MFI inclution, the managers have to pay more attention to at least two other characteristics of SMEs; their age and the years of experience in business management.


Micro Finance Institutions, Risk Preference, Religiosity

Full Text:



Ashta, Arvind and Rosita de Selva. 2012. Religious Practice and Microcredit: Literature Review and Research Direction, Postmodern Openings, 2 (8): 33-44.

Cressy, Robert. 2000. Credit Rationing or Entrepreneurial Risk Aversion? An Alternative Explanation for the Evans and Jovanovic Finding, Economic Letters, 66 (2): 235-240.

De Meza, David, and David Webb. 1990. Risk, Adverse Selection and Capital Market Failure, The Economic Journal, 100 (399): 206-214.

Dhumale, Rahul and Amela Sapcanin. 1999. An Application of Islamic Banking Principles to Microfinance, Regional Bureau for Arab States, 1-14.

Dusuki, Asyraf. 2008. Banking for the Poor: The Role of Islamic Banking in Microfinance Initiatives, Humanomics, 24 (1): 49-66.

Dutta, Dilip and Ihab Magableh. 2006. A Socio-Economic Study of the Borrowing Process: The Case of Micro Entrepreneurs in Jordan, The University of Sydney School of Economics and Political Science, 1-20.

Ghorbani, Nima, P. J. Watson, Ahad Ghramaleki, R. J. Morris, and Ralph Hood. 2000. Muslim Attitudes Towards Religion Scale: Factors, Validity, and Complexity of Relationships with Mental Health in Iran," Mental Health, Religion, & Culture, 3: 125-132.

Holt, C.A., Laury, S.K., 2002. Risk Aversion and Incentive Effects. American Economic Review, 92 (5): 1644-1655.

Islam, Asadul, Chau Nguyen and Russell Smyth. 2014. Does Microfinance Change Informal Lending in Village Economies? Evidence from Bangladesh, Departement of Economics Discussion Paper No. 16/14. Monash University.

Leiberman, Eric. 2011. Behavioral Economics and Microfinance: A Study of Risk Preferences in Rural Africa, 1-28.

Maitreesh, Ghatak. 1999. Group Lending, Local Information and Peer Selection, Journal of Development Economics, 60 (1): 27-50.

Pearlman, Sarah. 2012. Too Vulnerable for Microfinance? Risk and Vulnerability as Determinants of Microfinance Selection in Lima, Journal of Development Studies, 48 (9): 1342-1359.

Presbitero, Andrea F. And Roberta Rabellotti. 2011. Geographical Distance and Moral Hazard in Microcredit: Evidence from Colombia. Paper presented at European Microfinance Week 2011 held 2-4 November 2011, Luxembourg

Saeed, Asif and Lutfullah Saqib. 2011. Does Microfinance molded according to Islamic Finance? Evidence from Pakistan, Interdisciplinary Journal of Contemporary Research in Business, 3 (3): 826-836.

Setiawan, Chandra and Monita Eggy Putri. 2013. Non-Performing Financing and Bank Efficiency of Islamic Banks in Indonesia, Journal of Islamic Finance and Business Research, 2 (1): 58–76

Stiglitz Joseph and Andrew Weiss. 1981. Credit Rationing in Markets with Imperfect Information, The American Economic Review, 71 (3): 393-410.

Stiglitz, Joseph. 1990. Peer Monitoring and Credit Markets, The World Bank Economic Review, 4 (3): 351-366.

Vereshchagina, Galina, and Hugo Hopenhayn. 2009. Risk Taking by Entrepreneurs, The American Economic Review, 99 (5): 1808-1830.

Weill, J, & Podpiera, J. 2008. Bad Luck or Bad Management? Emerging Banking Market Experience, Journal of Financial Stability, 4: 135-155.

World Bank. 2013. The New Microfinance Handbook: A Financial Market System Perspectives, New York.

DOI: http://dx.doi.org/10.15548/maqdis.v1i2.41


  • There are currently no refbacks.

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.


View My Stats