Bankers Perception Towards the Impact of Bank Specific Factors on Non Performing Loans in United Bank S.C.
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Date
2015-06
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Addis Ababa University
Abstract
The study tries to examine the impact of factors affecting non-performing loans in the case of United Bank S.C. one of the major components of bank’s assets is loans and advances. Failure to manage loans, which make up the lion’s share of banks assets, would likely lead to the occurrence of high level of non-performing loan. In this regard NBE sets the threshold at 5%.Hence;the broad objective of the study was to assess bank specific factors of NPL in the case of United Bank S.C. Based on this broad objective, a number of specific objectives were developed. Some of the specific objectives were to identify the relationship between non-performing loan and loan growth, interest rate, credit terms, credit policy & culture, collateral, credit monitoring & risk assessment, operational efficiency, and other related objectives. In order to undertake the research both primary and secondary data was used. Primary data was collected through structured questionnaire and interview. The total population was 252 and only 103 were taken as a sample using stratified random sampling. Secondary data were collected from Provisioning report and Audited Financial statement. The collected data were analyzed using SPSS Version 20, Narration and percentages, Correlation, logistic regression and multivariate model was used. Accordingly, the result of the study indicated that, lack of loan monitoring and follow up, rapid loan growth, poor risk assessment, loan length/period, and non-collateralized loans are some of the major causes of NPL and on the other hand, interest rate and having large number of borrowers doesn’t affect loan performance. All in all, based on the finding of the research, continuous policy revision, adopting relationship management approach, closely viewing the international practice, capacity development and training to credit operators and others were recommended.
Key words: Non-performing, Bank specific factors
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Keywords
Non-performing, Bank specific factors