Determinants of Commercial Banks’ Lending performance: The Case of Private Commercial Banks in Ethiopia
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Date
2017-06
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Addis Ababa University
Abstract
The main aim of this study was to identify and examining the macroeconomic and bank-specific
factors that determine private commercial banks’ lending performance in Ethiopia. In order to
achieve this objective, data was collected from eight private commercial banks in Ethiopia
operating over the period from 2007 to 2016. Four bank-specific (bank size, customer deposit,
nonperforming loan and advance and liquidity) and three macroeconomic (cash reserve
requirement, interest rate and gross domestic product) variables were analyzed by using the
random effect regression model. The study revealed that bank size, cash reserve requirement and
interest rate had positive and significant impact; while nonperforming loan and advance and
interest rate had negative and significant impact on private commercial banks’ lending
performance in Ethiopia. However, customer deposit and gross domestic product had no
statistically significant impact on private commercial banks’ lending performance in Ethiopia.
The study suggests that the private commercial banks operating in Ethiopia should work towards
minimizing their nonperforming loans and advances to improve their lending performance;
should give due attention on pricing of their loan and advance and consider the macroeconomic
environment while developing their strategies.
Description
A Thesis Submitted In Partial Fulfillment of the Requirements for the Degree of
Master of Business Administration
Keywords
Lending, Loan and Advance, Private Commercial Banks