Title: Does the problem of non-performing loans differ in a religious and a secular economy? An investigation of the nexus between financial sector development, institutional variables and non-performing loans

Authors: Aamir Aijaz Syed

Addresses: Institute of Management Commerce and Economics, Shri Ramswaroop Memorial University, Lucknow, Uttar Pradesh, India

Abstract: The influence of financial inclusion and financial sector advancement on non-performing loans has been extensively explored. However, the literature has ignored the role of religiosity and secularism in understanding the above relationship. The current study assists to fill this void by exploring the above relationship using regression, interaction analysis, correlation and generalised method of moment propounded by Hansen, 1982 covering the period from 2000 to 2020. The findings reveal that religious perception negatively influences financial inclusion and financial sector development. In addition, through interaction analysis, it creates a positive impact on the nonperforming loans of the religious country. Contrary, secularism assists in reducing nonperforming loans by creating a positive influence on the financial sector development and financial inclusion. Moreover, the study substantiates a negative relationship between government stability and religious perception which also contribute to the nonperforming loan of a religious country, contrary to a positive relationship between government stability and secularism. The present study offers several useful recommendations.

Keywords: non-performing loans; religiosity; secularism; financial sector development; financial inclusion.

DOI: 10.1504/IJDIPE.2024.142538

International Journal of Diplomacy and Economy, 2024 Vol.10 No.2, pp.114 - 137

Received: 24 Apr 2023
Accepted: 07 Aug 2023
Published online: 08 Nov 2024 *

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