The Effect of Non-performing Loans of Commercial Bank of Ethiopia on the Financial Performance of the Bank: Special Emphasis Given to Three Government Selected Priority Sector Loans
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Date
2019-06
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Addis Ababa University
Abstract
This study attempts to reveal the impact of non-performing loans of three government selected priority sector loans on financial performance of commercial bank of Ethiopia. In order to investigate these study quantitative research approach is employed based on documentary analysis. The study used one dependent variable return on asset (ROA), three independent variables that are: nonperforming loans of Agricultural, Manufacturing and Export loans to total of AGRI,, MFG & EXPO loan provision of for doubtful loans of AGRI, MFG & EXPO businesses loans and advance NPL loans of AGRI, MFG & EXPO Loans ratio and CAR as measures financial performance of commercial bank of Ethiopia. A quantitative approach is employed for the required data collection and a sample of ten resent consecutive years is selected. The data is then analyzed using descriptive, correlation and regression techniques through SPSS software package. The regression result shows that non-performing loan to total loan and advance ratio, loan loss provision to non-performing loan to non-performing loans of AME loans show negative and significant effect at 5% significance level on financial performance of commercial bank of Ethiopia. Capital adequacy ratio shows positive relation in line with the research hypothesis but as to the significance it is not found significant as per the research hypothesis. Finally the research concluded that none performing has significant effect on financial performance of commercial bank of Ethiopia. Hence, the study recommends that National Bank of Ethiopia should issue procedure Commercial Bank of Ethiopia should enhance its capacity in credit analysis and loan administration especially on these three government selected three priorities given sectors of businesses loans
Description
A Thesis Submitted in Partial Fulfillment of the Requirements for the Degree of Master of Science in Accounting and Finance
Keywords
Bank, Financial performance, Non performing loans