Abstract:
Islam religiosity and trust are inextricable linked since Islamic teachings promote
trustworthy behaviour. Existing literature has shown that perceived trustworthiness of a
party has positive impacts on the business-to-business relationship, especially in
financing relationships. So far, however, there has been limited discussion on the role of
religiosity and trust to support financing activities in the Islamic context. Empirical paper
number 1 examines the impact of Islam religiosity on financing availability and non-
performing financing in both Islamic and conventional banks. I contribute to the literature
by using more suitable Islam religiosity proxies at province level, namely Islamic school,
Islamic seminary school, mosque, Hajj application, and halal certificate and by finding
that Islamic and conventional banks in stronger Islam religiosity areas provide more
financing and have less non-performing financing. Empirical paper number 2 explores
the magnitude of values-based trust vis-à-vis competence-based trust on financing
availability in the context of Islamic culture, an issue that has limited discussion in current
literature. I find that values-based trust plays stronger role than competence-based trust
in Islamic culture. Finally, existing literature on trust and bank lending has not taken into
account the characteristics of financing products in their studies. The third empirical paper
discusses the role of trust on financing availability in three different Islamic financing
products, i.e., Murabaha, Ijara, and Profit-loss sharing. I find that values-based trust is
more important than competence-based trust in Ijara, but competence-based trust plays
stronger role than values-based trust in both Murabaha and Profit-loss sharing.
