The Effect of Delay Fine on Reducing Delay in Repayment of Loan; Study of Melat Bank’s Branches in Mazandaran

Document Type : Scientific paper

Authors

1 PhD student, Islamic Azad University, Firoozkuh Branch

2 Faculty member of Islamic َAzad ,University, Firoozkuh branch, Firoozkuh, Iran

3 Faculty member of Islamic Azad University, Firoozkuh Branch, Firoozkuh, Iran

4 Faculty member of Islamic Azad University, Firoozkuh Branch, Foroozkuh, Iran

Abstract

Vajholtezam-e-Banki is the amount of money more than the amount of the loan which is defined in Islamic Banking as the fine for defaulting on a loan payment. The purpose of this study is to analyze the effect of delay fine on the probability of delay in repayment of loans. In order to do so, 19999 costumer in Melat Bank’s branches in the Mazandaran province between 2012 and 2018 were studied. The number of branches amounts to 68. The model devised in this study is a one way Panel – Probit. One dimension of the data will be the individuals and the other dimension will be the branches and the time dimension is not included in the model. The results suggest that there is a significant negative relationship between the fine and delay in repayment. Also, the estimations suggest the decreasing effect of income, salary reduction, dividend of payments, and history of delay on repayment. The results of this study are suitable to be devised as a policy complement in other banks and branches in order to take appropriate policy measures for the purpose of decreasing delay in repayment of loans. Also, the findings of the study indicate that this banking concept is in line with Islamic teachings.

Keywords

References

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Macroeconomics Research Letter
Volume 14, Issue 28
April 2020
Pages 115-141

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History

  • Receive Date: 29 April 2019
  • Revise Date: 29 May 2019
  • Accept Date: 27 July 2019

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