AN INVESTIGATION OF BANKS’ NON-PERFORMING LOANS – A STUDY OF MICROFINANCE BANKS FROM MICROECONOMIC AND MACROECONOMIC PERSPECTIVE TOWARDS SUSTAINABILITY & FINANCIAL INCLUSION

Abstract

Banks’ failure and financial crises are consequences of non-performing loans, and it is of great importance when it comes to microfinance banking system because it is more than mere loan repayment problems. Rather, it is an important determining factor of their failure or survival in market. The purpose of this study is to examine the impact of bank specific (micro-level factors) as well as macro-economic factors on NPLs to understand their impact and effect on microfinance banks. Microfinance banking sector has significant contribution in terms of financial inclusion in an economy. Sustainable Development Goal number 8 calls for expanding financial services to people (typically low-income) which encourages economic growth. This research employs published secondary data from 2011-2020 of micro-economic and macro-economic factors as independent variables and NPLs as dependent variable. The present study applies regression analysis to determine the explanatory power of the independent variables in explicating the NPLs. The findings of this empirical research contribute in guiding bankers to develop better understanding of their performance in terms of efficiency, riskiness, profitability and further it facilitates investors to take precision decisions.