international journal of business management
The relationship between the effective interest rate and default risk of different types of Islamic contracts in banks (Case Study: Mehr-e Eghtesad Bank, Gilan Province)
Pouya Mohammadi, Seyed Mozaffar Mirbargkar
Today, one of the main problems of banks and financial and credit institutions is their overdue debts and outstanding facilities, because paid facilities have not repaid completely by customers and a part of facilities, as debts that have not yet been collected, will remain in accounts. In this study, the relationship between the effective interest rate and default risk of different Islamic contracts in the branches of Mehr-e Eghtesad bank in Gilan Province, in the period from 20th March 2013 to 19th March 2016 was investigated. Pearson correlation coefficient and panel data technique were used to test the hypotheses. According to the results of Pearson correlation coefficient, it was clear that in none of the Islamic contracts in sample bank, there is significant relationship between effective interest rate and default risk and also, the results of panel data technique showed that there is no significant relationship between effective interest rate and default risk in different Islamic contracts in sample bank.
Key words: Effective interest rate, Default risk, Islamic contracts