Bank Specific Determinants of Non-Perfoming Loans in the Case of Ethiopian Private Commercial Banks
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Date
2021-06-13
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A.A.U
Abstract
This study aims to find out the determinants of NPLs in Ethiopian private commercial banks. The variables were picked based on findings from the past written literatures. A quantitative research approach and explanatory research design were taken on in completing this research. Data collection method adopted for the study was document review. Secondary panel data were gathered from audited annual reports of the banks and from Ethiopian national bank then the desired ratios were calculated. Multiple linear regression equation was used to make an estimate of the model using Stata version 10 software. Data was collected from 16 private banks Tables, percentages; mean and standard deviation were established to survey the data. Furthermore, Random Effect Model was used to examine bank specific determinates of non-performing loan. loan growth rate, bank size, net interest margin ratio, return on asset and loan to deposit ratio has impact on the degree of NPLs. However, the outcomes did not suggest that equity to total asset ratio activities change the level of NPLs. The study suggests that private commercial banks should focus on many factors when providing loans so as to decrease the amount of NPLs. loan to deposit ratio, net interest margin, loan Growth rate, return on asset, bank Size were critical driver of NPLs, consequently centering and inciting the establishment close by these indicators could reduce the likelihood of NPL in Ethiopian private commercial banks. Further studies are recommended by including macroeconomic and other bank specific variables additionally by increasing the sampled periods.
Key words: Loan to deposit ratio, Net interest margin, Loan growth rate, Return on asset, Bank size, Equity to asset ratio