Credit Growth Research Articles

Bank Credit Growth and Trust: Does Institutional Quality Matter? Evidence from the Association of Southeast Asian Nations

This study investigated whether the quality of governance, trustworthiness, and confidence impacts bank credit growth. In addition, we examined credit growth cyclicality in 10 members of the Association of Southeast Asian Nations. By employing data concerning 282 banks between 2012 and 2019, this study found that trustworthiness boosted bank credit growth. Overall, the increased quality of governance was found to increase credit growth, except for the specific indicators of voice and accountability and political stability, which were found not to influence bank credit growth. Moreover, similar to prior findings in related fields, the empirical results of this study confirmed the complementary effect of informal and formal institutions on bank credit growth. Lastly, results indicated that banks were pro-cyclical regarding credit growth. Overall, the results of this study highlighted the role of the supervisory powers of governments in boosting credit expansion, mainly during economic upturns.

The impact of risk cycles on business cycles: a historical view

We investigate the effects of financial risk cycles on business cycles, using a panel spanning 73 countries since 1900. Agents use a Bayesian learning model to form their beliefs on risk. We construct a proxy of these beliefs and show that perceived low risk encourages risk-taking, augmenting growth at the cost of accumulating financial vulnerabilities, and therefore, a reversal in growth follows. The reversal is particularly pronounced when the low-risk environment persists and credit growth is excessive. Global-risk cycles have a stronger effect on growth than local-risk cycles via their impact on capital flows, investment, and debt-issuer quality.

Determinants of Domestic Bank Credit to Private sectors in Bangladesh: An Empirical Investigation

This article examines the key determinants of domestic bank credit the private sectors receive in Bangladesh by using annual time series data over the period from 1974 to 2018. The ARDL (autoregressive distributed lag) model has been applied to identify the variables that contribute to the changes in domestic credit to private sectors from banks over time in Bangladesh. Empirical results reveal that broad money (M2), gross domestic product (GDP), real interest rate (RI), trade openness (TO), gross capital formation (GCF), and exchange rate (ER) have a significant impact on the amount of credit flowing to the private sectors from banks in Bangladesh, particularly in the long run. The findings also confirm that the long run relationship among the relevant variables is robust and stable. Any disequilibrium found in the short run seems to be eliminated with a speed of 40.96% per year. The findings of the research suggest that a stable growth of money supply, an increase in real interest rate, sustainable growth in GDP, and high degree trade openness are crucial for the growth of bank credit to private sectors. Gross capital formation and local currency depreciation, on the other hand, negatively influence bank loans to the private sector in Bangladesh. The significance of the study lies in the fact that it paves the way for a better understanding of the functionality of domestic bank credit flow in Bangladesh. The policy implications of the findings suggest that authorities pay special attention to stable money supply growth, expansionary monetary policy, and trade liberalization to strengthen the financial market in Bangladesh.

Regulatory arbitrage, shadow banking and monetary policy in China

Regulatory arbitrage is a persuasive explanation for the rapid growth in shadow bank credit. In China, the distortions caused by government support to state-owned enterprises (SOEs) and preferential lending by state-owned banks have created an environment for the development of shadow banks that lend to small and medium enterprises (SMEs). The imposition of a loan-to-deposit ratio (LDR) cap of 75% in 2009–2015 gave an additional boost to the growth of shadow bank credit by providing an incentive for conventional banks to bypass regulation and lend to SMEs via the shadow banks. The result is that shadow bank credit varied contra-cyclically to regular commercial bank credit in response to monetary policy shocks, dampening the effectiveness of monetary policy during the period of the LDR cap. This paper presents a model of the Chinese economy using a DSGE framework that accommodates a banking sector which isolates the effects of lending to SMEs by shadow banks. The model which is estimated by the method of indirect inference, allows for bank and shadow bank lending to affect the credit premium on private investment. We show that in general regular bank credit and shadow bank credit varies pro-cyclically with monetary policy but varies contra-cyclically when a LDR cap is imposed. The findings have implications for the policy of de-leveraging followed by China.

Credit behavior and financial stability in an emerging economy

One relevant issue for the management of financial stability is the monitoring of the credit market. In this sense, Basel III proposed the credit gap as the most appropriate measure to anticipate financial stability issues. However, the adoption of the credit gap has been criticized, especially for emerging markets. Through panel data analysis, this study investigates the effect of the credit gap and the credit growth rate on financial stability in Brazil, which represents a relevant emerging economy. For this purpose, we use a set of financial stability measures traditionally found in the literature: the z-score, regulatory capital and credit risk. The results suggest that the credit gap and credit growth rates are adequate metrics to indicate the sustainability of credit growth in Brazil. However, credit growth rates are more attractive, since they indicate a threshold for credit growth in the Brazilian economy concerning financial stability.

The Effects of Credit Supply Shocks on Malaysia's Economy

This study has examined the impacts of credit supply shocks and other common economicshocks (aggregate demand & supply and monetary shocks) on Malaysia's macroeconomicvariables, using the Bayesian structural vector autoregressive (SVAR) model andemploying sign restrictions. The results showed that an expansionary credit supply shockpositively affected the Malaysian economy, consistent with the existing literature. Basedon the variance decomposition finding, credit supply shocks explained a significantportion of the anticipated variation in the GDP growth, inflation, and, most importantly,credit growth in Malaysia. This study further decomposed total private non-financialcorporate loans into two components: households and non-financial firms. Unlike othereconomies that have extensively researched this subject matter (US, UK, Euro Area), thegrowth rate of households and non-financial firms differed greatly in Malaysia. The empirical findings revealed considerable distinctions between these two components, indicating that different treatments or policy formulations are required rather than employing the same policy to boost or govern Malaysia's credit market.

The Effects of Credit Supply Shocks on Malaysia's Economy

This study has examined the impacts of credit supply shocks and other common economic shocks (aggregate demand & supply and monetary shocks) on Malaysia's macroeconomic variables, using the Bayesian structural vector autoregressive (SVAR) model and employing sign restrictions. The results showed that an expansionary credit supply shock positively affected the Malaysian economy, consistent with the existing literature. Based on the variance decomposition finding, credit supply shocks explained a significant portion of the anticipated variation in the GDP growth, inflation, and, most importantly, credit growth in Malaysia. This study further decomposed total private non-financial corporate loans into two components: households and non-financial firms. Unlike other economies that have extensively researched this subject matter (US, UK, Euro Area), the growth rate of households and non-financial firms differed greatly in Malaysia. The empirical findings revealed considerable distinctions between these two components, indicating that different treatments or policy formulations are required rather than employing the same policy to boost or govern Malaysia's credit market.

Non-Performing Loans: Endogenous Constraint on the Credit–Growth Nexus

This study explores the possibility of a lag in the transmission of credit channeling and non-performing loans to economic growth in Indonesia. The autoregressive distributed lag (ARDL) model was applied to yearly data from 2003 to 2020 and endogenous constraint (EC) was used as a dynamic indicator of credit channeling and non-performance on growth. The model shows that economic growth in Indonesia is positively and significantly affected by credit channeling in years t-1 and t-3; meanwhile, non-performing loans in the current year (year t) suppress the growth. Therefore, from the perspective of the crisis phase, the first step that the monetary and fiscal authorities need to take is to tackle the increase in non-performing loans. It was also concluded that the endogenous constraint (EC) score can be used as a leading dynamic indicator in monetary and fiscal policy during the prosperity phase but is inefficient during a crisis.

Capital adjustment process and credit growth of microfinance institutions: Evidence from Sub-Saharan Africa

Capital adjustment process and credit growth of microfinance institutions: Evidence from Sub-Saharan Africa

Institutional quality and credit growth: “Sand” or “grease” effect? Evidence from microfinance institutions

Institutional quality and credit growth: “Sand” or “grease” effect? Evidence from microfinance institutions

Bank Ownership and Decline in Loan Growth due to the Pandemic

This study aims to analyze the effect of bank ownership structure on loan growth before and during the pandemic. Specifically, we developed four models to capture different loan types provided in the Indonesian banking system; working capital, investment, consumer, and total loan growth. This study used 150 observations of commercial banks for 2019 (before the pandemic) and 2020 (during the pandemic). We conducted the regression method to test hypotheses. The main finding of this study was that foreign banks’ consumer credit growth significantly lower than domestic banks. Similar findings occurred for other types of loans, and this conclusion has controlled for the adverse effects of the pandemic. This finding means that foreign banks in Indonesia are not substitutes for loan suppliers in the domestic market and tend to behave pro-cyclical. The government needs to carry out regulations to reduce the risk-accelerate nature of foreign banks in the Indonesian economy

Pengaruh Perputaran Kas, Pertumbuhan Kredit, dan Kecukupan Modal terhadap Profitabilitas pada Lembaga Perkreditan Desa (LPD) di Kota Denpasar

Effect of Cash Turn Over, Credit Growth, and Capital Adequacy on Profitability at Lembaga Perkreditan Desa (LPD) in Denpasar City. The implementation of Village Credit Institution (LPD) is aimed at improving the standard of living of the village population and supporting village development. One of LPD's efforts to support village development is by channeling funds and services owned by the LPD. The distribution of these funds and services is expected to be able to improve the LPD's financial performance so that it can gain profitability. This study aims to determine the effect of cash turnover, credit growth, and capital adequacy on the profitability of LPDs in Denpasar City. This study uses secondary data obtained from LPDs in Denpasar City, namely the financial reports of all LPDs in Denpasar City for the period 2017-2019. The data obtained were processed using multiple linear regression analysis techniques. The result shows that there are independent variables that have a positive and significant effect on profitability, namely credit growth and capital adequacy. While the cash turnover variable has a negative and significant effect on profitability.

The Effect of Macroeconomics on Non-Performing Loans with Credit Growth as an Intervening Variable at PT. Bank SUMUT

Macroeconomics in Indonesia is a system for analyzing changes in the country's economy that can affect markets, companies and society. Macroeconomics can also explain the shape of changes in economic conditions in Indonesia. The formulation of the problem in this study are: (1) Does the inflation rate, interest rate and exchange rate have a partial effect on Non Performing Loans at PT. Bank SUMUT; (2) Does Non-Performing Loan affect credit growth at PT. Bank SUMUT; (3) Does the inflation rate, interest rate and exchange rate have a partial effect on Non Performing Loans through credit growth at PT. Bank SUMUT. The type of research used in this study is a causal research method using a quantitative approach, using quantitative data carried out by classical assumption tests, multiple regression analysis, and path analysis using Eviews 10. The results show that (1) Inflation and interest rates have a positive and significant effect on Non-Performing Loans, this indicates that the higher the inflation rate and interest rates, the higher the Non-Performing Loans, while the Rupiah exchange rate has a positive but not significant effect. to Non Performing Loans, this shows that the higher the Rupiah exchange rate does not affect the Non Performing Loans; (2) Credit growth has a negative and significant effect on Non-Performing Loans, this indicates that the higher the credit growth, the lower the Non-Performing Loans; (3) The inflation rate and interest rates have a significant effect on credit growth and credit growth also has a significant effect on Non Performing Loans, so this shows that credit growth can mediate the relationship between inflation rates and interest rates on Non Performing Loans, while the exchange rate Rupiah has no effect on credit growth but credit growth has a significant effect on Non-Performing Loans, so this shows that credit growth cannot mediate the relationship between the Rupiah exchange rate and Non- Performing Loans. Keywords: Inflation Rate, Interest Rate, Rupiah Exchange Rate, Credit Growth, Non-Performing Loans..

Variability in the impacts of partisan conflict: a new perspective from bank credit

The purpose of this article is to analyse the impact of partisan conflict on bank credit, and take the global financial crisis as the time node to analyse the variability of this impact before and after the financial crisis. This article examines the impacts of partisan conflict on the bank credit by employing the US data covering the past 40 years and captures the variability in the effects of partisan conflict based on the rolling sample and time-varying parameter VAR analysis. The full sample results reveal that one standard deviation partisan conflict shock will shrink the bank credit growth rate to nonfinancial sectors, and the negative effects of partisan conflict on bank credit are more substantial after the global financial crisis. The rolling sample and time-varying parameter VAR analysis further confirm that the impacts of partisan conflict shock have varied substantially over time, where bank credit still negatively reacts to the impacts of partisan conflict in recent periods. Additionally, we estimate two extended models and support the intermediate role of economic policy uncertainty in transmitting the partisan conflict and the substitution effect of cross-border bank lending on domestic bank credit. Finally, our major results are unchanged by performing a series of robustness checks. The conclusion of this article is that partisan conflict has a significant impact on bank credit and shows obvious variability, which is more significant after the global financial crisis.

Determinants of Non-Performing Loans(NPLs):

The study was conducted to explore the determining factors of non-performing loans of the private commercial banks in Bangladesh. A panel dataset, along with a fixed effect model, was used. Consistent with empirical evidence, it has been found that an increase in GDP exerts a substantial adverse outcome on NPLs, indicating that it generally transforms into more revenue which in turn contributes to lesser NPLs. This research shows a significant negative relationship between the bank’s size and the state of NPLs. We have also found that large banks are not necessarily more efficient in scrutinizing loan customers compared to smaller banks. The empirical results show that higher-term loans stimulate higher NPLs. This article denotes a significant negative relationship between credit growth and NPLs, indicating the conservative lending procedure adopted by private commercial banks. Therefore, commercial banks with higher credit growth are likely to have lower non-performing loans. However, our evidence does not support the positive correlation between NPLs and the ratio of loans to an asset that apprehends the adversity of banks

Determinants of Non-Performing Loans(NPLs):

The study was conducted to explore the determining factors of non-performing loans of the private commercial banks in Bangladesh. A panel dataset, along with a fixed effect model, was used. Consistent with empirical evidence, it has been found that an increase in GDP exerts a substantial adverse outcome on NPLs, indicating that it generally transforms into more revenue which in turn contributes to lesser NPLs. This research shows a significant negative relationship between the bank’s size and the state of NPLs. We have also found that large banks are not necessarily more efficient in scrutinizing loan customers compared to smaller banks. The empirical results show that higher-term loans stimulate higher NPLs. This article denotes a significant negative relationship between credit growth and NPLs, indicating the conservative lending procedure adopted by private commercial banks. Therefore, commercial banks with higher credit growth are likely to have lower non-performing loans. However, our evidence does not support the positive correlation between NPLs and the ratio of loans to an asset that apprehends the adversity of banks

KINERJA KEUNGAN LEMBAGA PERKREDITAN RAKYAT SEBELUM PANDEMI COVID 19

Financial performance is important because it shows the ability of the LPD to generate profits in a period that can be used as a basis for future decision making and evaluating what has been achieved. This research was conducted with the aim of knowing the effect of non-performing loans, savings growth, deposit growth, credit growth, asset growth and operating income operating expenses on financial performance. The population in this study was conducted at the Village Credit Institution in Badung Regency from 2018 to 2019. The sample determination method used was purposive sampling, so that a total sample of 214 LPDs was obtained. The analysis technique used is multiple linear regression analysis. The results of this study indicate that non-performing loans, savings growth, deposit growth, and asset growth have no effect on financial performance, while credit growth has a positive effect on financial performance and operating expenses for operating income have a negative effect on financial performance. Further researchers can conduct research again on LPDs in Bali and add other variables such as the capital adequacy ratio.

The Relationship between Credit, Elections, and Party Ideology in Australia

Economic reforms since the 1980s resulted in weaker wage growth and the retrenchment of the welfare state. Labor’s declining share of income in conjunction with consistent asset price inflation, created an environment where the electorate increased its demand for credit to which politicians, driven by opportunistic re-election motives, respond positively. The empirical findings suggest that politicians, irrespective of their ideology, introduce policies and manipulate credit growth to maximize their re-election prospects. Moreover, the results indicate that partisan politics in Australia have become less pronounced, suggesting an ideological convergence of the two major political parties with respect to credit.

FACTORS AFFECTING BAD DEBT RATIO AT JOINT STOCK COMMERCIAL BANKS IN VIETNAM

This study analyzes factors affecting bad debt ratio at joint-stock commercial banks in Vietnam. The research collected data from reports of 26 Vietnamese joint-stock commercial banks operating continuously from 2010 to 2020. The research results show the bank size and ratio, bad debt in the previous year, and provision for credit risks had a positive effect on the bad debt ratio of banks. At the same time, the research results show that the inflation rate, unemployment rate, and exchange rate negatively affect the bad debt ratio of banks. In addition, the research results show that GDP growth, credit growth, bank profitability, and nominal interestrates show no clear impacts on the bad debt ratio of banks. From obtained results, the study proposes suggestions and recommendations to limit the bad debt ratio of banks.

Conditional impact of credit growth on macroeconomic and financial aggregates: evidence from Turkey

PurposeThe purpose of this paper is to investigate the impact of changes in credit stock on real and financial indicators in Turkey with a focus on conditional and time-varying dynamics.Design/methodology/approachIn addition to lag-augmented vector autoregression (LA-VAR) based time-varying Granger causality tests, threshold models and a research setting that identifies high/low states of credit growth based on 24-month moving averages are used to explore regime-dependent behavior. For investigating the asymmetric dynamics, the authors use a methodology that identifies good/bad news in credit growth based on 24-month moving averages and standard deviations.FindingsResults strongly suggest that the impact of changes in credit stock induces conditional responses. Moreover, we find evidence for asymmetric responses. In the case of Turkey, efforts to spur growth through credit produce a strong negative byproduct, a depreciation in the exchange rate. The authors also find that changes in credit stock have become more relevant for uncertainties in inflation and exchange rate expectations, particularly in the era after mid-2018 in which credit growth volatility has increased noticeably.Originality/valueThis study provides a comprehensive analysis of time-varying and conditional responses to a change in credit stock in a major emerging economy. Using a moving threshold based only on the available information in the analysis of state-dependency represents a new approach.