This paper investigates the role of Islamic parties' rule on local development in Indonesia. Using a regression discontinuity (RD) design, we compare districts in which the Islamic coalition barely won or lost in local elections. The analysis suggests that districts ruled by Islamic parties show a lower economic performance. Exploring the mechanisms, we find that Islamic local governments display a lower local revenues, partly due to their restrictions on locally-taxed specific entertainment activities, partly to lower transfers received from the central government.