Macroeconomic and bank-specific determinants of non-performing loans in sub-Saharan Africa (original) (raw)
Related papers
How Do Bank-Specific Factors Impact Non-Performing Loans: Evidence from G20 Countries
Journal of Central Banking Theory and Practice
Banking is important for the stability and success of the economy. The success of the banking system on financial intermediation in developing countries is directly affected by non-performing loans (NPLs). Many factors can be treated as NPL determinants. Accordingly, the factors that explain NPLs contain very important information for banks. To this end, the study is an attempt to examine various banking factors that affect NPLs with respect to developing economies. In this study, the bank-specific and macroeconomic factors affecting the NPL rates were analysed through the dynamic panel data analysis. Analyses were made using described G20 countries between 1998 and 2017. The results indicate that the lagged value of NPLs, return on equity, credit growth and credit costs have a significant positive relationship with NPLs, while capital adequacy and GDP have a negative association with NPLs. The results confirm that if the bank-specific conditions change, the credit quality and bank ...
Central Bank of Nigeria Journal of Applied Statistics, 2019
This study examines Non-Performing Loan (NPL) and its effects on the stability of Nigerian banks with national and international operational licenses from 2014:Q2 to 2017:Q2. A "restricted" dynamic GMM is employed to estimate the macroeconomic and bank specific drivers of NPL for each licensed category. Z-Score is constructed to proxy banking stability, and its response to shocks NPLs is examined in a panel vector autoregressive framework. The results reveal that drivers of NPLs vary across the two categories of banks, but, weighted average lending rate is a vital macroeconomic driver of NPLs for both. The results also confirm the moral hazard hypothesis and risk-return tradeoff of efficient market theory. Furthermore, international banks withstand NPLs shocks in the long run, despite temporary flux in the short horizon, while the stability of national banks is susceptible to NPLs shocks in the long run. The study recommends that weighted average lending rate, anchored on ...
World Review of Entrepreneurship, Management and Sustainable Development, 2021
We used Panel ARDL and Panel NARDL to investigate the macroeconomic and bank-specific determinants of Non-Performing Loan (NPL) in the West African Monetary Zone (WAMZ) for the period 2003 to 2018. We found that both bank-specific and macro-economic determinants jointly influence NPLs in varying degrees. There is also empirical evidence that NPL adjusts more non-linearly/asymmetrically to the dynamics of the bank-specific and macro-economic determinants than it does linearly. This discovery will guide in rebalancing the policy direction in loan and credit administration from just a linear direction to a combination of linear and nonlinear perspectives especially in the WAMZ.
NON-PERFORMING LOANS, INTEREST EFFECT AND BANK PERFORMANCE IN SUB SAHARAN AFRICAN ECONOMIES
Nigeria Journal of Business Administration , 2021
Nonperforming loans posed a great threat to the performance of banks in emerging economies. This study seeks to examine the effect of nonperforming loans on the banks' performance in Sub-Saharan Africa region. A total of fifty (50) listed banks were drawn across six Sub-Saharan African countries that include Nigeria, Ghana, South Africa, Zambia, Kenya, and Tanzania within 9 years period (2010-2018). The study employs a two-step system generalized method of moment as the technique of analysis and inference. Findings from the study revealed a significant negative association between NPLs and bank performance within the region. Bank management and regulators are advised to work hard toward ensuring that banks keep minimum NPLs in order not to threaten the liquidity position of the banks.
MANAS Sosyal Araştırmalar Dergisi, 2021
NPL could be treated as a critical issue in the financial systems of countries of which have bank-based infrastructures since NPL restrict the credit providing capacity of banks. Hence, necessary financing sources for economic growth and development could not be provided. In this context, the study aims to research the drivers of NPL in selected 23 countries. 4 independent drivers and yearly data between 2006 and 2018 are analyzed by using heterogeneous panel analysis. The empirical findings reveal that (i) credits, gross domestic products (GDP), and savings have statistically significant negative effect whereas foreign exchange rates (FER) have a statistically insignificant positive effect on NPL for the overall panel; (ii) 1% increase in credits reduces NPL by approximately 2%; (iii); FER have statistically significant effects in some countries at the country base; (iv) negative coefficients for credits, savings, and GDP are consistent in both overall panel and country base.
Advances in Management and Applied Economics, 2013
The main goal of every banking institution is to operate profitably in order to maintain stability and sustainable growth. However, the existence of high levels of non-performing loans (NPLs) in the banking industry negatively affects the level of private investment, impair a bank’s ability to settle its liabilities when they fall due and constrain the scope of bank credit to borrowers. External and internal economic environments are viewed as critical drivers for nonperforming loans. In this regard, the main goal of this study was to investigate the link between NPLs and bank-specific and macroeconomic factors, and establish the extent to which these factors affect the occurrence of nonperforming loans in commercial banks in Kenya. The dependent variable under investigation was nonperforming loans while independent variables included macroeconomic and bank specific factors. The macroeconomic factors included; real GDP, GDP per capita, lending interest rates, inflation, government...
Determinants of Credit Risk in the Banking system in Sub-Saharan Africa
RePEc: Research Papers in Economics, 2018
This paper investigates the macroeconomic determinants of credit risk in the banking system of 22 Sub-Saharan African economies. We measure credit risk as the ratio of non-performing loans to total gross loans (NPLs) and employ dynamic panel data methods over the period 2000-2016. Using a variety of specifications, the results show that an increase in real GDP growth rate has a statistically and economically significant reducing effect on the ratio of non-performing loans to total gross loans. Furthermore, inflation rate, domestic credit to private sector by banks as a percent of GDP, trade openness, VIX as a proxy of global volatility, and the 2008/2009 global financial crisis, all have positive and significant impact on NPLs.
A Retrospective Study of Non-Performing Loans of the Ghana Banking Sector between 1998 and 2019
Theoretical Economics Letters
This study was conducted as a retrospective analysis of the determinants of Ghana's Non-Performing Loans (NPLs) using historical time series annual data covering the period of 1998-2013 with an extension to 2019 on NPLs to Total Gross Loans (%). A rising NPLs in a bank portfolio is a pressing issue to bank managers and regulators. The ex-post facto research design was used for this study. Using the Seemingly Unrelated Regression model and Principal Component Analysis, the study found money supply, financial development, and macroeconomics variables to be significant determinants of NPL, except real income. NPL is a significant factor used by regulators to determine financial stability and bank asset quality. The study recommends policies targeted at influencing NPLs and the need for regulators to ensure good corporate governance by the banks to avoid bank failure.
Key Determinants of Non-performing Loans: New Evidence from a Global Sample
Open Economies Review, 2015
Using a novel panel data set we study the macroeconomic determinants of non-performing loans (NPLs) across 75 countries during the past decade. According to our dynamic panel estimates, the following variables are found to significantly affect NPL ratios: real GDP growth, share prices, the exchange rate, and the lending interest rate. In the case of exchange rates, the direction of the effect depends on the extent of foreign exchange lending to unhedged borrowers which is particularly high in countries with pegged or managed exchange rates. In the case of share prices, the impact is found to be larger in countries which have a large stock market relative to GDP. These results are robust to alternative econometric specifications.