Impact of Credit Risk on the Performance of Commercial Banks in Ethiopia (original) (raw)
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The effect of credit risk on financial performance of commercial banks in Ethiopia
2018
This study attempts to reveal the relationship between credit risk and financial performance of commercial banks in Ethiopia. In order to investigate these study quantitative research approach is employed based on documentary analysis. A panel data from six selected commercial banks covering the ten-year period (2007-2016) is analyzed within the fixed effects model on regression analysis and using E-view8 software. The study used one dependent variable return on asset (ROA), four independent variables that are: nonperforming loan to total loan and advance ratio (NPLTLA), loan provision to total loan and advance ratio (LPTLA), total loan and advance to total deposit ratio (TLATD) and the ratio of non-performing loan to loan provision (NPLLP) as measures of credit risk. Both descriptive statistics and regression analysis specifically fixed effects model were used to analyze the relationships of the depended variable with explanatory variables. The regression result show that non-perfo...
THE EFFECT OF CREDIT RISK MANAGEMENT ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN ETHIOPIA
Jilin Daxue Xuebao (Gongxueban)/Journal of Jilin University (Engineering and Technology Edition), 2023
This study looks into how credit risk management affects the financial performance of commercial banks in Ethiopia. The research used a multiple regression model using secondary data spanning ten years from 2012 to 2021. Ten commercial banks that are active in Ethiopia are included in the dataset. The Ethiopian national bank provided the secondary data. Non-Performing Loans (NPLs), Capital Adequacy Ratio (CAR), Loan Loss Provision Ratio (LLPR), and Loan and Advance to Deposit Ratio were utilized as credit risk indicators while Return on Equity (ROE) was used as a stand-in for financial performance indicators. The study's conclusions showed that non-performing loans and the capital adequacy ratio have a negative, significant effect on ROE. The relationship between Loan Loss Provision Ratio and ROE is negative but insignificant statistically, while the ratio of loans and advances to deposits significantly improves ROE. This work could bridge a gap in the literature and act as a springboard for more research on related subjects.
2017
This paper examines the impact level of credit risk management towards the profitability of commercial banks in Ethiopia in general .It argues that credit risk management has significant impact on profitability of banks of our country. To examine its impact level the researcher uses multiple regression models by taking 10 years ROE (dependent variable),ROA(dependant variable), NPLR,LLPR,LTDR and CAR (independent variables) from each bank and in addition to that questioner also distributed to the authorized bodies in the risk management position of each bank. The researcher took five banks purposively that have ten year and above life span in Ethiopia, those are Commercial bank of Ethiopia, Dashen bank, Awash international bank, Banks of Abyssinia, and Wegagen Bank. Here You have to include a short summary of your conclusion and Recommendation.
Effect of Credit Risk Management on Business Performance of Banks Operating in Ethiopia
The main aim of this study was to identify the effect of credit risk management on profitability (business performance) of selected commercial banks of Ethiopia based on secondary data sources over the period of 2010-2021 G.C. The study employed a quantitative research approach with an explanatory research design. The result of regression analysis of the random effect model was applied to investigate the effect of explanatory variables on profitability.The finding of this study showed that capital adequacy has a positive and statistically significant effect on the financial performance of commercial banks in Ethiopia. Besides, variables like a loan to deposit ratio and loan provision ratio have a positive and statistically significant effect on the profitability of commercial banks. In opposite direction, non-performing loans, loan to total asset ratio, and cost per loan have a negative and statistically significant effect on ROA respectively.Apart from contributing to the body of existing literature on the effect of credit risk management on the financial performance of the banking sector, the study gives a guideline to both public and private banks in the world in general and Ethiopia in particular. It indicated that the financial performance of commercial banks can be improved by improving the credit risk management system.This study contributes by supporting that credit risk parameters such as loan to deposit ratio, loan provision, non-performing loan, loan to total asset ratio and cost per loan have a statistically significant effect on ROA respectively.
Credit Risk Management and Profitability of Commercial Banks in Ethiopia
2011
This paper examines the impact level of credit risk management towards the profitability of commercial banks in Ethiopia in general .it argues that credit risk management has significant impact on profitability of banks of our country. To examine its impact level the researcher uses multiple regression models by taking 10 years ROE (dependent variable), NPLR and CAR (independent variables) from each bank and in addition to that questioner was also distributed to the authorized bodies in the risk management position of each bank. The researcher took seven banks purposively that have ten year and above life span in Ethiopia, those are Commercial bank of Ethiopia ,Nib international bank ,Dashen bank ,Awash international bank ,Banks of Abyssinia, Wegagen Bank and United Bank . Key words: Credit Risk Management, Banks Profitability
The impact of credit risk on profitability performance of commercial banks in Ethiopia
African Journal of Business Management, 2015
The objective of the study was to empirically examine the impact of credit risk on profitability of commercial banks in Ethiopia. For the purpose secondary data collected from 8 sample commercial banks for a 12 year period (2003-2004) were collected from annual reports of respective banks and National Bank of Ethiopia. The data were analyzed using a descriptive statics and panel data regression model and the result showed that credit risk measures: non-performing loan, loan loss provisions and capital adequacy have a significant impact on the profitability of commercial banks in Ethiopia. The study suggested a need for enhancing credit risk management to maintain the prevailing profitability of commercial banks in Ethiopia.
The Impact of Credit Risk Management on the Performance of Private Commercial Banks in Ethiopia
Journal of economics and sustainable development, 2017
The objective of study was to assess the impact of credit risk management on the performance of private commercial banks in Ethiopia. The sample in this study consisted of six private commercial banks for a 14 period (2000 to 2013) were collected from audited financial statement of respective banks and National Bank of Ethiopia. The collected data were analyzed by using panel data regression model and the result showed that credit risk management measures: capital adequacy ratio, total loan ratio, non- performing ratio, bank size and liquidity ratio have a significant impact on the performance(ROA and ROE) of Private commercial banks.The study recommended that the banks’ credit risk management should give due attentionon capital adequacy and management of loan portfoliosin order to minimize the high incidence of non-performing loansand their negative effect on profitability of commercial banks. Keywords : Credit Risk Management, performance, private Commercial Banks in Ethiopia.
Determinants of Credit Risk in Ethiopian Private Commercial Banks
2015
Optimal portfolio diversifications, establishing a comprehensive credit limit and loan pricing system as well as Credit risk management strategy, policy and procedu res without a clear picture of Credit risk drivers is just considered as putting money on fire. Therefore, analyzing the lin k between the bank specific factors and credit risk indictor is indispensably required using a panel data set over the period of 2006-2012. The three Panel data estim ation method, pooled OLS regression, fixed effect and random effect mode l, w re used for extracting good result and F-test ascertained the appropriateness of Pooled OLS regression model. Its result revealed that the credit growth and return on equity had statistically significant negative impact on Credit risk indicator of the large Ethiopian private comm ercial banks. However, inefficiency, and deposit rate had statistically in significant positive influence on the Credit risk i nd cator. It means that inefficient bank as well as th...
Credit Risk Determinants in Selected Ethiopian Commercial Banks: A Panel Data Analysis
Journal of Risk and Financial Management
The study aims to investigate the factors that contribute to credit risk in Ethiopian commercial banks, considering both macroeconomic and bank-specific factors. The research utilized multiple regression models, a quantitative research approach, and explanatory research designs. A purposive sample technique was used to select 10 commercial banks for the study, and secondary data from audited financial reports were analyzed. The findings of the study reveal a significant positive relationship between credit risk and several variables, including bank size, profitability, efficiency, capital adequacy, and inflation. Conversely, there is an inverse relationship between credit risk and both loan growth and currency rates. Surprisingly, the study found that neither GDP nor interest rates have a significant impact on credit risk. Based on these findings, the study provides recommendations for Ethiopian commercial banks. It suggests maintaining adequate levels of capital, avoiding business ...