“Islamic religiosity and entrepreneurial risk taking” the influence of gender, education and income: the case of Saudi Arabia

Abstract

The Kingdom of Saudi Arabia, as one of the most dominant Islamic countries, faces major difficulties in divesting its economy, creating employment opportunities and maximising involvement in entrepreneurship. One explanation offered for the Kingdom’s economic underdevelopment is that Islam is intrinsically anti-developmental and that Islamic law (Shar’aiah) is one of the foremost obstacles to economic development. The aim of this research is to examine the influence of religion on some aspects of economic performance from an Islamic perspective. While copious literature has been written in developed countries identifying the elements that influence economic development, very little is known about the characteristics and the role of religion in the Islamic world. This thesis draws on the existing literature on the psychology of economics to explore the relationship between Shar’aiah and two aspects of economic growth, namely risk-taking propensity and individual income, in the context of Saudi Arabia.

The research is presented in the form of three component studies. The first explores whether Shar’aiah has an influence on Muslims’ risk-taking propensity, a neglected area in the economic and social sciences literature. Gender and education have received intensive research attention in this literature, to which the second study contributes by examining the roles of gender and educational attainment in the relationship between religion and risk taking. The third study then seeks to elucidate the interrelationships among Islamic religiosity, risk-taking propensity and Muslims’ income.

Following the positivist paradigm, a quantitative approach was taken to collect data on religiosity and risk-taking propensity amongst Muslim adherents in Saudi Arabia. The key finding is that religion has a significant U-shaped effect on Muslims’ attitudes towards taking risky decisions. In particular, the results suggest a U-shaped relationship between Islamic religiosity and risk-taking propensity, whereby highly religious and non-religious Muslims are more tolerant towards risky decisions than those of moderate religiosity. Gender and education were also found to influence the religiosity-risk taking relationship. There was a significant U-shaped relationship between Islamic religiosity and risk-taking propensity amongst men and non-university educated Muslims. Finally, there was a positive association between Muslims’ income and their risk propensity as affected by Islamic religiosity. These empirical findings provide evidence of the effects of Islamic religiosity on the relationship between risk taking and income.

The general conclusion of this thesis is that Islam is not, as has been hypothesised, detrimental to the economic growth of Islamic countries. The thesis makes a novel contribution by deepening understanding within an Islamic context of the influence of religion on a characteristic of the economic process, risk taking, and on one of its outcomes, individuals’ monthly income. Finally, it generates new avenues of research on the intersection between religion and economic development.

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ORCID for Jagannadha Tamvada: orcid.org/0000-0002-1225-3174

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