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Abstract
This paper investigates the major determinants of non-performing loans in the MINT (Mexico, Indonesia, Nigeria and Turkey) economies. Identifying major determinants of non-performing loans, which are observed to be growing in these countries in recent time, will also guide policy and forecasting future levels that will be useful for pre-emptive policies and actions. It uses static panel data and dynamic panel model analyses. Evidence suggests that in the four economies, capital adequacy ratio, liquidity ratio, total bank credit andreturn on assets are significant bank-specific determinants of non-performing loans. Also, while the return on assets, liquidity ratio and capital adequacy ratioshow a negative and significant relationship with non-performing loans, nominal exchange rate, money supply growth rate, total bank credit and lending rate show positive and very significant relationships with non-performing loans. Finally, corruption, an institutional variable, shows a very strong positive relationship with non-performing loans.
Highlights
The acronym ‘MINT’, which was first coined by British economist Jim O’Neill, former chairman of Goldman Sachs Asset Management, represents Mexico, Indonesia, Nigeria and Turkey
The study has empirically studied the determinants of non-performing loans in the MINT economies
The study confirms that bank capital adequacy ratio, return on assets, returnon equity, bank liquidity, total credit, lending rate, exchange rate, money supply growth rate, corruption and Gross Domestic Product (GDP) levels are important determinants of non-performing loans in the MINT economies
Summary
Background: The acronym ‘MINT’, which was first coined by British economist Jim O’Neill, former chairman of Goldman Sachs Asset Management, represents Mexico, Indonesia, Nigeria and Turkey. O’Neill (2014), after the September 2001 terror attacks, had the conviction that Europe and the United States (US) were confronted with economic decline. In his opinion, developing countries could benefit enormously from globalisation and fire-up the global economy. Common and major drivers of the prospects for the MINT economies include young and expanding populations In theory, this is expected to lead to a persistent boost to domestic consumption, contrary to the demography of countries such as China with an ageing population. Mexico benefits from increasing demand for exports from the US in recent years, Indonesia in Asia is in contiguity with the likes of China and Australia, Nigeria even though in West Africa can be a pivot of Africa’s economy, while Turkey in the European Union, is positioned as an access point into Asia and Africa (Akpan, Isihak & Asongu,2014)
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