Do Islamic rural banks consider Islamic morality in assessing credit applications?

Purpose: This study aims to investigate whether Islamic morality is considered by Islamic rural banks in credit application assessments. Design/methodology/approach: To achieve the objective, the authors conduct an exploratory analysis of data gathered through document analysis, focus group discussions and interviews with Islamic rural banks stakeholders. Additionally, the authors conduct a survey to validate the findings. Findings: The authors find that while Islamic rural banks conduct conventional credit analysis using 5Cs (character, capacity, collateral, capital and conditions), the banks also consider Islamic morality in their credit decisions. They emphasise several indicators such as reputation for keeping promises to customers, to suppliers, to neighbours and the Islamic character (akhlaq) of the credit applicants. Overall, the authors conclude that Islamic rural banks consider Islamic morality in their credit assessments. Originality/value: To the best of the authors knowledge, this is the first study using a mixed method of quantitative and qualitative approach to investigate how Islamic rural banks assess the credit applications. In particular, this study examines whether Islamic rural banks consider Islamic morality in their credit decisions.