High Level Of Non-performing Loans Research Articles

PENGARUH NON PERFOMING LOAN (NPL) TERHADAP RETURN ON ASSET (ROA) PADA BANK MANDIRI,TBK

This research aims to find out the influence of Non-Performing Loans (NPL) on ROA at Bank Mandiri. Correlational quantitative research is the research method used. Financial reports, profit and loss statements, balance sheets and cash flow reports for the years 2013–2022 are the research samples. For this particular case, purposive sampling was used. The relationship between the NPL variable and ROA was tested using simple linear regression, correlation coefficient, coefficient of determination, and two-square t-test. Analysis was carried out using SPSS v.22 software. In line with the high level of non-performing loans faced by banks. This is because the higher NPL level indicates that banks are not managing their credit optimally and are not providing adequate protection to their customers. As a result, the absence of principal and interest payments on credit facilities causes the bank's return on assets to decline along with the increase in the non-performing loan ratio

EXAMINING THE LINK BETWEEN BANKING SECTOR DEVELOPMENT AND ECONOMIC GROWTH: AN EMPIRICAL ANALYSIS OF ALBANIA

This research aims to examine the relationship between banking sector development and economic growth in Albania, focusing on specific indicators such as bank capital to asset ratio, non-performing loans, credit to the private sector, deposit money bank assets to GDP, inflation rate, and GDP growth. The study is grounded in the finance-growth nexus theory, which posits that financial development fosters economic growth through improved capital accumulation and resource allocation. The framework considers how banking sector health influences macroeconomic stability and growth. The research employs a quantitative approach using secondary data from credible sources such as the World Bank. The econometric model assesses the impact of banking sector indicators on economic growth in Albania over the period 2012-2021. Findings confirm that banking sector development significantly impacts economic growth in Albania. High levels of non-performing loans hinder growth, while enhanced credit to the private sector and robust bank capital ratios promote economic development. Policymakers should focus on reducing non-performing loans and strengthening the banking sector’s capital base to foster sustainable economic growth. Effective financial regulations and policies are crucial to ensuring a stable and efficient banking sector that can support long-term economic prosperity in Albania.

Does Monetary Policy Influence Non-performing Loans of Listed Commercial Banks in Kenya?

The Kenya banking sector plays a crucial role in Kenya’s economy despite the prevailing macroeconomic headwinds in the Country. The Banking Sector Industry Report of 2023 indicated that the banking sector contributed to 66% of gross domestic product as of December 2022. The high levels of non-performing loans remain a concern in the Kenya banking sector. The study sought to assess the influence of monetary policy on non-performing loans in the banking sector in Kenya. The target population is all listed commercial banks in Kenya. Using monthly secondary data from November 2019 to September 2023 obtained from the Central Bank of Kenya, the study utilized a multiple regression model to estimate the influence of monetary policy on the percentage growth of nonperforming loans of listed commercial banks in Kenya. Findings pointed out that Repo rates and Treasury bill rates do not influence non-performing loans of listed commercial banks in Kenya as measured by the gross non-performing loans ratio as exhibited by the P-values of 0.327866 and 0.577173 respectively, which is greater than 0.05. The results also implied that the central bank rate and interbank rates do influence non-performing loans of listed commercial banks in Kenya as measured by the gross non-performing loans ratio as illustrated by the P-values of 0.028844 and 0.00018 respectively, which is less than 0.05. According to the findings, the study recommends that policymakers should prioritize creating a strong financial ecosystem so that monetary policy can be utilized to regulate commercial bank interest rates. This will, in effect, serve to decrease the expansion of non-performing loans, reduce risk and entice competitors into the financial sector, enhance the capital base, increase lending to promote feasible projects, and, as a result, stimulate the country's growth.

Analysis of nonperforming loans: case of Albania

The presence of a high level of nonperforming loans has been a growing concern in the world. This problem has been present in Albania, as well, which is one of the countries with the highest level of nonperforming loans in the region. Nonperforming loans hamper economic growth and constrain the monetary policy transmission mechanism.This paper examines the role of nonperforming loans in Albania by evaluating its level throughout the years and analyzing the ways in which these trends have shaped the credit market developments in Albania in terms of lending by economic sector and geographical position. This study strives to examine nonperforming loans as a result of other macroeconomic factors: GDP, remittances and inflation. The methodology involves time series analysis, which is used to identify the possible association between non-performing loans and macroeconomic variables. Multiple regression is used as a model to identify any relationship among them. The period covered is from 2014 to 2020, and it uses quarterly data. The paper uses secondary data, obtained from the Bank of Albania, United Nations database, UNECE, INSTAT, World Bank. The results show that nonperforming loans and these variables are correlated in the long-run.

Credit support for the development of the transport complex of the national economy and its sectoral differentiation

It was established that the specific weight of bank loans granted to the transport complex of Ukraine in the overall national economy is insignificant - about 3%. The largest share of bank loans in the sectoral portfolio was issued to warehousing and auxiliary activities. The second place is occupied by ground and pipeline transport, the third place is air transport. The share of water transport is negligible. The intensity of the use of loans in foreign currency is the greatest in warehousing and auxiliary activities, much less in aviation, land and pipeline transport. It was established that the share of non-performing loans in the transport complex is quite high, but smaller than in the national economy, in the national currency it is higher compared to the national economy, and in the foreign currency it is much lower. The specific weight of non-performing loans is the largest in warehousing and auxiliary activities, average - in land and pipeline transport, insignificant - in air transport, negligible - in water transport. Analysis of loans to the transport complex in terms of banking institutions made it possible to establish their exponential distribution and high concentration. TOP-3 state-owned banking institutions account for more than half of the value of loans and almost 90% of non-performing loans. TOP-14 banking institutions present almost the entire credit portfolio of the transport complex. It has been proven that one of the reasons for the high level of non-performing loans in the transport complex is the defects in assessing the creditworthiness of borrowers in the industry. Unlike other sections, a separate discriminant model was not built for section H - Transport, warehousing, postal and courier activities. The use of a single aggregated model for the transport complex and twelve other types of economic activity distorts the assessment of the borrower's creditworthiness, since the sectoral conditions of business in them differ significantly. It is proposed to build an individual model of the integral assessment of the borrower's creditworthiness according to section H with differentiation by sub-sectors.

Banking Sector Development and Economic Growth in Nigeria

The purpose of this study is to empirically examine the relationship between banking sector development and economic growth in Nigeria. The study examined the Central Bank of Nigeria quarterly data from 1981Q1 to 2017Q4 with the E-views software package (version 9.0). The Vector Auto Regression (VAR) methodology was used to analyse the data, while Block Exogeneity Wald test was used to test the hypothesis. The specified models included stationarity tests, reduced form VAR estimate and structural analysis. The Augmented Dickey Fuller Test indicates that the study variables are stationary at first difference or I(1). The VAR roots plot in relation to unit circle indicates that our specified reduced form VAR models are stable. The Lagrange Multiplier (LM) diagnostic tests indicate that our specified VAR models are correctly specified. The results from the granger causality wald test show that, at 5% significance level, conglomerate of indicators of banking sector development; commercial bank assets, central bank assets and banking system assets, has no significant effect on economic growth. The study therefore recommends that any strategy to further develop the banking sector should focus more on the quality of its asset than its size. To this end, the focus of micro prudential policies should be on reducing the current overconcentration of bank loans to the volatile oil and gas sector. This would allow the banking sector assets to be more evenly spread among the productive sectors, which in turn, would help reduce the high level of non-performing loans that is currently plaguing the banking sector.

Non-performing loans - a threat to the fi nancial stability of Asia countries

The article deals with one of the complex problems of the functioning of the modern banking system in East and Southeast Asia — a high level of non-performing loans. The accumulation of this debt by credit institutions causes a deterioration in bank balance sheets, limiting lending to the real sector. Despite large country diff erences in this indicator, after a long course of the pandemic, it already reaches a critical level in a number of them. Due to the strong negative impact of COVID-19 on fi nancial stability, regulators are having to develop specific procedures to identify, mitigate risks, ensure adequate liquidity and maintain market confidence. As government support programs, moratoriums and loan guarantee schemes to overcome the crisis consequences of the pandemic end, banks are increasingly beginning to be aff ected by the economic recession. A number of lowincome countries in Asia are already preparing to settle or cancel debts related to COVID-19. The policy of the US Federal Reserve in the fi eld of raising interest rates exacerbates the position of Asian banks, leading to large fi nancial losses. According to experts. after the end of the pandemic, NPL ratios for the bulk of Asian banks will be between the relatively low levels recorded during the global economic crisis and the stress indicators that arose during the 1997 Asian fi nancial crisis. Hidden asset quality risks include a weaker outlook for the corporate sector, a rising share of interest moratoriums in South and Southeast Asia, losses for banks due to stress on China’s commercial real estate sector, and high household debt due to higher interest rates in South Korea.

The Role of Credit Risk Management in Performance of Commercial Banks: Analysis of Commercial banks’ Performance in Erbil

The current study aims to analyze the role of credit risk management in performance of commercial banks in Erbil. There is a high danger of insolvency and financial troubles for banks because of this method of loan origination. As shown by high levels of nonperforming loans, the KRG banking system's Commercial Bank Supervision Report found that most banks failed due to poor credit risk management. Due to the high level of non-performing loans, the profitability of the bank was damaged. The study developed five research hypotheses to measure the role of credit risk management in performance of commercial banks in Erbil. It was decided to use a quantitative approach to investigate the effect credit risk management has on the financial performance of commercial banks. 88 people from the Credit Risk Management departments of several commercial banks around the nation were selected as a convenience sample. These respondents included senior, intermediate, and practical level personnel. The study found that commercial banks with lower levels of nonperforming loans and capital adequacy ratios had higher returns on assets, indicating more effective methods of credit risk management. Total loans divided by the loan loss reserve ratio is the amount set aside for losses. The quality of a loan portfolio degrades as the ratio rises. The study recommended to improve credit risk identification, measurement, monitoring and controlling at selected commercial banks in Erbil.

Faktor-Faktor Yang Mempengaruhi Non-Performing Loan Pada Bank BUMN di Indonesia Tahun 2010-2019

The high level of NPL will also put pressure on banks to maintain their capital. The risk is that when banks strengthen their capital, this will automatically reduce the ability of banks to expand credit to the real sector which will have an impact on the country's economy. The factors that caused the NPL problem were the lack of good faith from the debtors to immediately pay off their debts at a predetermined time. Then the banking policy to maintain high credit interest rates amidst unstable economic conditions also contributed to the increase in NPL. Banking carelessness in channeling was also one of the factors driving the increase in NPLs. This study aims to determine the effect of Loan to Asset Ratio, Third Party Funds, Earning Asset Quality and Credit Interest Rates on Non-Performing Loans at BUMN Banks in Indonesia 2010-2019. This type of research is explanatory, the type of data used is quantitative by using secondary data in the form of financial reports from the four state-owned banks. This study used multiple linear regression data analysis and partial test and simultaneous test using SPSS 2.2. The results of the analysis show that simultaneously the Loan to Asset Ratio, Third Party Funds (DPK), Earning Asset Quality and Credit Interest Rates have a significant effect on Non Performing Loans (NPL). Partially Loan to Asset Ratio, Third Party Funds have a negative and significant effect on Non- Performing Loans, Earning Asset Quality has a positive and significant effect on Non-Performing Loans. Meanwhile, the Lending Rate has no effect on Non-Performing Loans.

STRATEGI KOLABORASI MODEL PENILAIAN KREDIT ALTERNATIF DIGITAL PADA LEMBAGA KEUANGAN MIKRO

Microfinance Institution (MFI) is a type of financial institutions with its considerable potential to be developed, especially established to provide services in financing products for the micro and ultra-micro segments. However, many of the MFIs actually experience difficulties in evaluating the feasibility of prospective debtors due to the absence of loan history. In addition, at the aggregate level, MFIs have a high level of non-performing loans, considering that the management only relies on social relations and closeness with prospective debtors when conducting feasibility study for loan. On the other hand, a program has been initiated by OJK since 2021 in collaboration between Financial Service Institutions and Digital Financial Providers, one of which is for MFIs with the aim of increasing productivity and efficiency by digitizing business processes. Taking into consideration to the program that has been initiated by OJK and the challenges faced by MFI industry, the aim of this study is to develop a digital alternative credit scoring strategy design with a partnership scheme in microfinance institutions. In this study, several relevant theories were used to support the analysis process, including product development strategies, external analysis (PESTEL), and internal analysis (tangible and intangible resources). As for data collection techniques Included in-depth interview and document review. The results showed that the strategy is needed in the short term (less than 1 year), medium term (1-3 years), and long term (more than 3 years) starting from matching relevant services, preparing various provisions and supporting tools needed, to institutional strengthening from the MFIs that will make an optimal collaboration to increase the role and contribution of MFIs to the economic growth in the long run.

Nonlinear Regression Model Based on Fractional Bee Colony Algorithm for Loan Time Series

High levels of nonperforming loans provide negative impacts on the growth rate of gross domestic product. Therefore, predicting the occurrence of nonperforming loans is a vital issue for the financial sector and governments. In this paper, an intelligent nonlinear model is proposed for describing the behavior of nonperforming loans. In order to find the optimal parameters of the model, a new fractional bee colony algorithm (BCA) based on fractional calculus techniques is proposed. The inputs of the nonlinear model are the loan type, approved amount, refund amount, and economic realm. The output of the regression model is that whether the current information is for a nonperforming loan or not. Consequently, the model is modified to detect the status of a loan. So, the modified model predicts the occurrence of a nonperforming loan and determines the loan status, i.e., current, overdue, and nonperforming. The proposed procedure is applied to data gathered from an economic institution in Iran. The findings of this study are helpful for the managers of banks, and financial sectors to forecast the future of the loans and, therefore, manage the budget for the upcoming loan requests.

THE IMPACT OF FINANCIAL STABILIZATION POLICIES ON THE LEVEL OF NON-PERFORMING LOANS: PROBLEMS AND CONTRADICTIONS (THE CASE OF CYPRUS)

The relevance of the article stems from the current level of non-performing loans (NPLs), which remain very high and pose risks of financial instability in Cyprus. Further reducing the high level of NPLs is one of the main strategic objectives of the Cyprus Stability Program for the period 2019-2022. The purpose of this paper is to identify problems and contradictions in the current financial stabilization policy in the banking sector of Cyprus and to help policy makers of financial policy to trace the problems and contradictions in the course of its implementation. The object of the study is the financial and, in particular, the banking sector of Cyprus, which is largely concentrated within the two systemic banks. The methodology of the study is based on theoretical and methodological analysis of the scientific literature, statistical method, observations, comparative method and analysis, as well as analytical and comparative graphs, comparative and analytical approaches. The results of this study show that the profitability of the banking sector of Cyprus is still negatively affected by a long period of low interest rates, as well as the burden of increasing provisions for bad debts. The adoption of the accounting standard (IFRS9) will lead to a further increase in the amount of provisions for impaired loans and thus have a negative impact on the profitability of banks. In addition, the decrease in the loan-to-deposit ratio was mainly due to a significant reduction in the loan portfolio of Cypriot banks. The significant decline in total lending by banks is due to the high level of non-performing loans in Cyprus, accounting for 31.8% of total loans at the end of November 2018. Moreover, about half of all NPLs are NPLs of households. The ESTIA program was created to address NPLs in Cyprus. Overall, the results of the study also show that the launch of the ESTIA program in 2019 will lead to an increase in moral hazard. Significant growth in demand for real estate in Cyprus is due to government policy and is carried out through the Citizenship for Investment program. Increased demand causes prices to rise and forms a bubble in the real estate market. In turn, the formation of a housing price bubble is one of the pre-crisis conditions.

Credit Risk and (Influencing Factors of) Non-Performing Loans

The main purpose of each banking institution is to operate profitably in order to maintain a stable and sustainable growth. However, the existence of high levels of non-performing loans (NPLs) in the banking industry negatively affects the level of private investment and limits the scope of bank credit to borrowers. It is a common consensus that the aggregate level of non-performing loans is associated with bank failure and financial erosion in both developing and developed countries. The dependent variable under investigation was the non-performing loans rate (NPL) used in a panel data model for 78 countries for the period 2007-2015. Banking performance as well as economic growth negatively and statistically significantly influence the rate of non-performing loans while the degree of accessibility to banking products and services is positively associated with the NPL rate. Another conclusion of the study would be that the degree of concentration of the banking market is not statistically significant when associated with the existence of non-performing loans.

COVID-19 implications for banks: evidence from an emerging economy.

The COVID-19 pandemic is damaging economies across the world, including financial markets and institutions in all possible dimensions. For banks in particular, the pandemic generates multifaceted crises, mostly through increases in default rates. This is likely to be worse in developing economies with poor financial market architecture. This paper utilizes Bangladesh as a case study of an emerging economy and examines the possible impacts of the pandemic on the country’s banking sector. Bangladesh’s banking sector already has a high level of non-performing loans (NPLs) and the pandemic is likely to worsen the situation. Using a state-designed stress testing model, the paper estimates the impacts of the COVID-19 pandemic on three particular dimensions—firm value, capital adequacy, and interest income—under different NPL shock scenarios. Findings suggest that all banks are likely to see a fall in risk-weighted asset values, capital adequacy ratios, and interest income at the individual bank and sectoral levels. However, estimates show that larger banks are relatively more vulnerable. The decline in all three dimensions will increase disproportionately if NPL shocks become larger. Findings further show that a 10% NPL shock could force capital adequacy of all banks to go below the minimum BASEL-III requirement, while a shock of 13% or more could turn it to zero or negative at the sectoral level. Findings call for immediate and innovative policy measures to prevent a large-scale and contagious banking crisis in Bangladesh. The paper offers lessons for other developing and emerging economies similar to Bangladesh.Electronic supplementary materialThe online version of this article (10.1007/s43546-020-00013-w) contains supplementary material, which is available to authorized users.

Albania

Albania continues to be severely affected by the aftermath of the November 2019 earthquake and the COVID-19 pandemic. The authorities responded promptly to the shocks, and macroeconomic and financial stability have so far been maintained. The economy is expected to contract sharply in 2020, followed by a gradual recovery in 2021-22. The outlook is subject to major uncertainty and rising downside risks as a second wave is gripping many countries in Europe. Albania’s capacity to repay the Fund is adequate, but risks have risen in light of the shocks. Aside from a more severe pandemic, key risks stem from elevated public deficits and debt, weaknesses in public finances, and a relatively high level of non-performing loans (NPLs) and euroization.

The role of specific heritage among Hispanic-owned banks in America

PurposeSpecific types of Hispanic-owned banks (HOBs), including those related to Brazilian, Cuban, Mexican or Puerto Rican heritage, have not be analyzed to date. There are important differences between the relevant communities, including geographic location, language barriers, population size and the importance of remittances to foreign nations. The analysis here sheds light on these differences.Design/methodology/approachHOBs with the Federal Deposit Insurance Corporation (FDIC)-designated minority-owned depository institution (MDI) designation are identified, along with bank ownership heritage. Financial data, a measure of market competition, and demographics of depositors from 2003 to 2017 are utilized in an exploratory analysis comparing banks by HOB type, with random effects regressions for the pre-collapse (2003–2006) and post-collapse (2009–2017) periods.FindingsAlthough each of the four types of HOBs serve Hispanic and poor communities, there are substantial differences. For example, Brazilian and Puerto Rican banks on the island held high levels of nonperforming loans (NPLs) post-collapse, with the Brazilian and Mexican banks expanding levels of risky commercial real estate (CRE) lending post-collapse, while the Cuban banks contracted CRE lending. Differences in terms of return on assets (ROAs), the cost of borrowed funds and the tier-1 risk-based capital ratio are also identified.Social implicationsHOBs, like Latinos in the USA, are culturally heterogeneous and likely operate in different ways depending upon the culture and economic circumstances of the communities where they operate.Originality/valueAlthough there is substantial research on MDIs, this is the first analysis which treats HOBs as culturally heterogeneous. Further research of this type is warranted.

COVID-19 Implications for Banks: the Case of An Emerging Economy

The COVID-19 pandemic is damaging economies across the world including financial markets and institutions in all possible dimensions. Particularly for banks, the pandemic generates multifaceted crisis, mostly through increases in default rates. This is likely to be worse in developing economies with poor financial market architecture. As a case of emerging economies, this paper considers Bangladesh and examines the possible impacts of the pandemic on the country’s banking sector. Bangladesh’s banking sector already has a high level of non-performing loans (NPLs) and the pandemic is likely to worsen the situation. Using a state-designed stress testing model, the paper estimates the impacts of COVID-19 pandemic on three particular dimensions – firm value, capital adequacy, and interest income under different NPL shock scenarios. Findings suggest that all banks are likely to see a fall in risk-weighted asset values, capital adequacy ratio, and interest income at the individual bank and sectoral levels. However, estimates show that larger banks are relatively more vulnerable. The decline in all three dimensions will be disproportionately larger if NPL shocks become larger. Findings further show that a 10% NPL shock could force capital adequacy of all banks to go below the minimum BASEL-III requirement, while a 13% or more shock could turn it to zero or negative at the sectoral level. Findings call for an immediate and innovative policy measures to prevent a large-scale and contagious banking crisis in Bangladesh. The paper offers lessons for other developing and emerging economies similar to Bangladesh.

Determinants of Credit Risk in the Banking Sector of Ghana: A Panel Co-integration Approach

The economic development of any nation hinges on the health of its financial system. In recent years, the health of the Ghanaian Banking sector has been affected severely as a result of high levels of non-performing loans (NPLs), which has been identified as a major threat to the overall profitability and survival of banks. To minimize the impact of NPLs on the financial sector, key stakeholders such as the government, bank officials and regulators are working hard in that regard. However, any policy response aimed at dealing with the high rate of non-performing loans first requires the understanding of the underlying determinants of NPLs. Against this backdrop, this paper apply panel co-integration techniques to investigate the determinants of credit risk (NPLs) in the banking sector of Ghana. We use NPL as a proxy to measure credit risk and assess how it is influenced by macroeconomic and bank-specific factors. A balanced panel data of 16 universal banks in Ghana from 2010 to 2016 has been analyzed using Panel co-integration techniques such as Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS). Our result shows that growth in the economy, measured by Gross Domestic Product (GDP) has significant influence on the NPLs of banks in the long-run. The results further revealed that capital adequacy, profitability and liquidity of banks are significant predictors of NPLs. However, our results suggest that bank size, inflation and interest rate have statistically insignificant influence on the NPLs of Ghanaian banks. The study recommend, among others, that whereas it is important for government and policymakers to work to improve macroeconomic outcomes, banks should also improve their capital adequacy, profitability, and efficiency position as these bank-specific interventions could significantly improve credit quality and minimize NPLs.

The effectiveness of quantitative easing: Evidence from Japan

This study contributes to current research on quantitative easing. We provide a novel analysis of the quantitative easing effectiveness as an unconventional monetary policy tool in Japan over the last two decades. The paper advances current research on quantitative easing by exploring quantitative easing through the prism of the monetary transmission mechanism. We examine the response of Japanese Regional Banks to the quantitative easing operations conducted by the Bank of Japan from the early 2000s till 2015. The analysis is performed within the framework of the bank lending channel under the unconventional monetary policy strategies. We find that small-sized regional banks underline the significant positive effect of quantitative easing on gross domestic product and inflation that works through the securities holdings and leverage preferences. Monetary authorities should pay particular attention to policies for such banks and banks with a high level of non-performing loans. Deposit growth after a quantitative easing shock is only present in large-sized banks with low NPLs holdings.

Crisis’ consequences on recapitalization and exposure for Cypriot and Greek cooperative banks

The financial crisis of 2008 transformed, in some countries, to economic and social one, created serious problems to the banking system. Capital basis and asset exposures, especially through the non-performing loans, have been the most important. Capital inadequacy caused the failure of banks that didn’t succeed to accomplish the capital requirements set by Basel II obligations. The treatment was not the same for all banks as only those considered as significant banks, for the economy, received capital aid from their state. The paper investigates through capital basis requirements and asset exposures the crisis’ consequences on Cyprus and Greek cooperative banks. The consequences were cataclysmic for the cooperative banking systems of the two countries. In Greece, the cooperative banks did not receive any state aid, leading to the bankruptcy of many of them. In Cyprus, once all the cooperative banks were merged into the central cooperative bank, the latter received state aid as it was considered as a significant bank for the national economy. Moreover, the high level of non-performing loans and the new economic environment that the crisis had caused, forced the cooperative banks to change their asset exposures structure and their credit policy.