Commercial Bank Loans Research Articles

Small and Medium Scale Business Financing and Its Effect on the Nigerian Economy: 1992 – 2021

This study investigated the effect of small and medium scale business financing on the Nigerian economy. The ex-post facto research design was adopted and the dependent and independent variables were observed over the period, 1992 to 2021. The nature of data was secondary, sourced from the Central Bank of Nigeria Statistical Bulletin. The data were tested using the Eview statistical software adopting the Ordinary Least Square (OLS) method on the regression model adopted. The signs and significance of the regression coefficients was relied upon in explaining the nature and influence of the independent variable on the dependent variable as to determine both magnitude and direction of impact. The aprior expectation was that SME financing positively and significantly affect the Nigerian economy. The hypotheses were tested at 0.05 (5%) level of significance. Findings from the study showed that commercial bank loan to small and medium scale enterprises have positive and significant impact on GDP. Similarly, commercial bank loan to private sector has positive and significant impact on GDP. Hence, the study concludes that small and medium scale business financing has positive and significant impact on the Nigerian economy. Hence, it implies that SMEs financing contributes to economic growth in Nigeria. The study therefore recommends that the Federal Government of Nigeria through the Central Bank of Nigeria should prioritize financial inclusiveness in the small and medium scale sector of the economy to enhance availability and accessibility of investable funds in the sector.

Commercial Bank Loan Risk and Prevention

Under the environment of China's market economy, the healthy and stable development of commercial banks is an important guarantee for the healthy operation of the social and economic system. As an important part of the financial management system, credit management of commercial banks is not only related to the sound development of commercial banks, but also has a direct impact on the stability of the whole society. At the same time, risk factors in financial activities are always following, and if there is no reasonable avoidance and prevention of financial risks, it will affect and threaten the survival of financial institutions. In such a situation, commercial banks should attach great importance to the prevention and control of loan risks, establish reasonable control strategies based on the actual situation, optimize the risk management system, continuously improve the level of risk management and control, ensure that the healthy operation of the financial system has good depth and breadth, and lay a solid foundation for the sustainable development of commercial banks. This paper discusses the risk and prevention of commercial bank loans from the aspects of the concept and characteristics of commercial bank loan risk, the current problems in the risk management and control of commercial bank loans, and the countermeasures to the risk management and control of commercial bank loans, so as to provide reference for promoting the healthy development of the financial industry and standardizing the management of financial enterprises.

Research on Credit Risk Evaluation In Commercial Banks In China

Credit loans of Chinese commercial banks have been increasing; however, the risk of loan default is also rising rapidly, and Chinese commercial banks have been paying more and more attention to the management of credit risk, and that leads to the commercial banks’ exploration of the credit risk evaluation. Moreover, data mining and mathematical statistics techniques are applied in credit rating, risk monitoring, and prediction of customer default risk.

Bank Lending Rates and Nonperforming Loans of Listed Commercial Banks in Kenya

The rise in non-performing loans in Kenyan commercial banks over the past ten years has created instability in the financial industry. Due to their impact on borrowers' ability to repay the loans, high-interest rates are a contributing factor to non-performing loans. The interest rate on loans has an implicit cost that is inherent to bank credit and has an impact on loan defaults. In this sense, a large percentage of non-performing loans (NPLs) in Kenya’s Commercial banks has continued to impede economic expansion due to high default rates experienced by many banks making them unable to advance new loans. The study investigated the influence of bank lending rates on nonperforming loans in listed commercial banks in Kenya using secondary monthly data from November 2019 when the interest capping was repelled to September 2023. Secondary data was obtained from the Central Bank of Kenya Monthly Statistical Bulletin. Inferential statistics using regression analysis was utilized to analyze the data. The regression model results showed that bank lending rates had a positive and statistically significant effect on non-performing loans of listed commercial banks in Kenya as illustrated by a P-value of 0.0000000054, which is less than 0.05. The results implied that lending rates do influence non-performing loans of listed commercial banks in Kenya as measured by the gross non-performing loans ratio. Policymakers in Kenya need to control lending rates to reduce the rising rates of non-performing loans.

The impact of credit reforms on bank loans and firm leverage around the world

AbstractThis study examines how credit reforms impact commercial bank loans and nonfinancial firms' debt. Using two international samples for commercial banks and nonfinancial firms from 2004 to 2019, we find that global information‐sharing reforms encourage banks to increase corporate loans, thus improving firm debt financing, particularly in countries with weak creditor rights. Legal rights reforms significantly boost corporate bank loans in emerging countries and enhance firms' debt financing in developed countries. Our findings suggest credit reforms positively impact firms' financing; however, their effects on debt financing supply and demand vary by economic development level and the strength of creditor rights.

Impact of Corporate Governance on Non-Performing Loans of Commercial Banks in Bangladesh

The paperinvestigates the nexus between corporate governance and the levels of non-performing loans (NPL) of commercial banks in Bangladesh based on the sample of 10 private commercial banks for 10 years covering from 2012 to 2021. A number of econometric models such as pooled OLS, fixed effect, random effect, cross-sectional GLS, and one- step system GMM approach were employed in our analyses. From the observed estimated coefficients, the availing of credit rating from the three renowned credit rating agencies had a significant negative impact on non-performing loans under pooled OLS, GLS, and random effect. Board size had a significant negative relationship under GLS while bank size had a significant positive influence. Institutional ownership had a significant negative influence and government ownership had a significant positive influence under the fixed effect model. From the estimated coefficients observed from the one-step system GMM, only director’s ownership is significantly lessening non-performing loans, while board meetings and stock-exchange listed banks had a significant positive impact. All other coefficient values under the one- step GMM estimation except for government ownership and employment of big four affiliated auditors as external auditor was found to adhere to our hypothesized impact.

Yếu tố tác động đến tỷ lệ nợ xấu của nhóm ngân hàng thương mại có cổ phiếu giao dịch trên sàn chứng khoán Việt Nam

This study explores micro and macro factors affecting the NPL ratio of Vietnamese commercial banks in 2015- 2022, including the period negatively affected by the COVID-19 pandemic. The research data was collected from 25 commercial banks whose shares were traded on all three stock exchanges in Vietnam. This dataset helps readers have a more comprehensive view of the factors affecting non performing loan ratio of the group of banks, with total assets accounting for nearly 80% of the total assets of 32 commercial banks operating in Vietnam. Based on the development and testing of a linear regression model, the study has contributed to demonstrating the positive impact of marginal interest income ratio, credit risk provision on lousy debt ratio, and the negative impact of return on equity and credit growth rates on non-performing loans of commercial banks studied in the period 2015- 2022

AN INVESTIGATION OF MACROECONOMIC FACTORS ON NON-PERFORMING LOANS: A STUDY BASED ON COMMERCIAL BANKS OF PAKISTAN

Following privatisation, Pakistan's banking industry grew and is now one of the main drivers of the country's economy. Nonetheless, the sector is vulnerable to a number of hazards, the most important of which is credit risk. This risk appears when borrowers fail to make their loan payments on schedule, which leads to non-performing loans. In order to maintain their operational, liquidity, and profitability position, banks must manage these loans. This study looks into how the nation's economic circumstances, inflation, and interest rates affect non performing loans. Time-series data analysis is used, and secondary data covering the last ten years (2008–2017) is used. The study looks at the link between the independent and dependent variables using a multivariate linear regression model. Non-performing loans are the dependent variable, whereas interest rates, inflation, and the nation's economic status (as indicated by GDP) are the independent factors. The study found that the non-performing loans of Pakistani commercial banks are significantly influenced by all three variables. On the other hand, there is an inverse relationship between inflation, GDP, and NPL, whereas there is a direct association between interest rates and NPL. The study's findings will assist Pakistan's banking industry in lowering the percentage of non performing loans.

The Impact of Macroeconomic Factors on Non-Performing Loans of Commercial Banks: An Empirical Study Based on 2022 Provincial-level Data in China

The level of macroeconomic development varies, resulting in different non-performing loan ratios for commercial banks. Based on the relevant data of macroeconomic indicators from 31 provinces and cities in China in 2022, this paper empirically studies the relationship between regional gross domestic product (GDP), average urban employment salaries, the proportion of the tertiary industry, per capita consumer expenditure, the number of recipients of unemployment insurance, and the number of recipients of old-age insurance, and the non-performing loan ratio using a multiple regression model. A general model is established and tested to determine the final model. The empirical research results indicate that the proportion of the tertiary industry and the number of recipients of unemployment insurance have a positive impact on non-performing loans, while average urban employment salaries, regional GDP, and the non-performing loan ratio have a negative impact. Finally, based on the conclusions drawn from this study, relevant policy recommendations are proposed to provide guidance for commercial banks in China to mitigate the risks of non-performing loans.

Factors Affecting Non-Performing Loans of Commercial Banks in Malaysia

With the economy’s growth, the banking industry expands, and the competitiveness intensifies with the increased number of banks. Nevertheless, its non-payment also leads to huge losses for banks and the country. One of the critical determinants of the banking sector's performance is the loans advanced to get the profit. Therefore, the loans and their repayments are used as the comparison. Specifically, banks note their repayments seriously, and those default loans are declared non-performing loans (NPLs). Thus, NPL indicates a country’s banking system’s health. This study investigates the factors influencing Non-Performing Loans (NPLs) in the commercial banking sector of Malaysia from 2012 to 2021. NPLs are considered a crucial indicator of the banking system's health and the overall economic health of a country. The study examines the relationship between bank-specific and macroeconomic factors and their impact on NPLs. The bank-specific factors analyzed are loan-to-deposit ratios, capital adequacy ratios, and bank size. In contrast, macroeconomic factors are unemployment, inflation, and gross domestic product. Data were collected from published annual reports, the World Bank website, and DataStream navigators for ten years from 2012 to 2021, involving 26 commercial banks in Malaysia. Data analysis includes Descriptive Analysis, Correlation, Multicollinearity, and Multiple Regression Analysis using SPSS version 20 software. The result indicates that loan-to-deposit ratio, bank size, unemployment rate, and gross domestic product significantly impact the NPLs in the Malaysian Commercial Banks industry. Meanwhile, the capital adequacy ratio and inflation rate did not affect the NPLs in Malaysia.

Decision Analysis on Operation of Commercial Banks Based on the Application of Credit CDS

Affected by the new crown epidemic, it is difficult for Chinese small and medium-sized enterprises to ensure the normal operation of the industrial chain in terms of business operation and development, which may lead to the inability to repay their loans in commercial banks in time, triggering credit default incidents. CDS is a new credit derivative instrument, which can alleviate the default risk held by creditors to a certain extent and enhance the trust of both borrowers and lenders. This paper tries to apply the CDS mechanism to the Chinese market, using the TOPSIS model to score some companies, and explore what types of corporate loans commercial banks need to use CDS products for risk mitigation. It is found that enterprises with poor profitability, small development prospects, high credit risk and weak solvency need to pay special attention to bank loans.

Assessing Effectiveness of Structural Monetary Policy in China

Abstract Structural monetary policy (SMP)—differentiated policy action targeting specific economic activity— has become more frequently applied by major central banks lately, although the practice of developmental central banking has been in existence for quite some time. The effectiveness of such structural monetary policy, however, has not been adequately evaluated. In this paper, we attempt to provide a comprehensive analysis of SMP introduced by the People's Bank of China and also to offer a broad framework for thinking about SMP. We first document the brief history and main components of China's SMP and estimate the narrow- and broad-measures of SMP accounting for 17.9 percent and 27.9 percent of base money, respectively, at the end of 2022. We then discuss two key factors determining success of SMP: bank credit flows to the targeted area and risk implications for banks. By applying the difference-in-difference and panel data analysis approaches using a monthly data set of city commercial bank loans, we evaluate the impacts of targeted required reserve ratio (RRR) cuts in 2019 and 2020 on small- and medium-sized enterprise lending. No statistically significant impact is found, whether in the short run or in the long run, and whether for medium-sized enterprises or for micro and small businesses). We conclude that, as no statistically significant impact of targeted RRRs are found, SMP's effectiveness, if exists at all, might be temporary; when facing impaired monetary policy transmission, it is important to conduct careful analysis of its effectiveness and sustainability.

The effect of monetary policy shocks on industrial output in Afghanistan

Purpose- This study examines the impact of monetary policy shocks on industrial output in Afghanistan. Quarterly secondary data were collected for the period from 2003 to 2021 from various official sources such as the Statistical Bulletin of the Central Bank of Afghanistan, the International Monetary Fund, and the World Bank. Methodology- This study used a three-stage procedure. The first stage involved testing the stability of the variables to be included in the model. The second stage involves selecting the optimal lag length using various lag length criteria. Finally, the Vector Error Correction (VECM) model was used to determine if there were any short-run correlations or dynamics among the variables. The study also conducted some post-tests to confirm the validity and robustness of the regression model. Findings- The results of the long-run vector error correction model show that there is a long-run causality running from monetary policy rate, broad money supply, inflation, exchange rate, and a commercial bank loan to the industrial sector. So, there was a speed of adjustment from the short-run to the long-run equilibrium. However, the Wald test confirmed that the short-run causality runs from the explanatory variables to the dependent variable. Commercial bank credit to the industrial sector was found to cause a change in industrial production in all six lag periods. The results were further supported by the Granger causality test. Shocks in commercial bank lending to the industrial sector were found to have no significant effect on industrial output. However, the performance of the industrial sector was the main cause of the flow of commercial banks' credit to the industrial sector. Conclusion- The study recommends that monetary policy should proceed with extreme caution in managing the exchange rate. The study also recommends that the Central Bank of Afghanistan should encourage commercial banks to offer credit to the industrial sector at low-interest rates. Keywords: Monetary policy shocks, industrial output, Vector Error Correction Model (VECM), Granger Causality Test, Afghanistan. JEL Codes: E52, E32, L60

Assessing the relation between financial performance and long-term bank loan interest rates for healthcare providers in the Netherlands: a panel data analysis

The Dutch health system is financed predominantly by commercial bank loans, especially after the market-oriented reform in 2006, when government investment guarantees were abandoned. Commercial capital markets were envisaged to improve efficient capital allocation and management. We analyzed the effects of commercial bank loans on interest rates, investments and allocative efficiency in the Dutch healthcare sector. We aimed to explain variation in interest rates by financial performance of healthcare providers, hypothesizing that the reform reduced interest rates for financially well-performing providers. Using financial data from publicly available annual reports, we explored the effect of financial performance on long-term loan interest rates through pooled linear regressions. Our data showed that financial reserves have steadily increased, although profitability margins have declined since 2011–2013 (depending on the sector). While nominal interest rates have generally declined since 2006, the risk surplus on healthcare loans has steadily increased. Furthermore, we observed no significant relation between the financial performance of healthcare providers and interest rates on capital loans. Maintaining additional financial reserves provided no apparent benefit to capital costs. This suggests that healthcare providers may consider whether financial reserves should be maintained at current levels or can better be used for direct investments. Moreover, healthcare policymakers should evaluate whether the increase in risk surplus combined with an apparent lack of reward for financial scrutiny is a desired outcome of the reform.

Financial Intermediation and Economic Growth in Nigeria

The aim of this study is to examine the relationship between financial intermediation 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 show that financial intermediation measures such as bank deposit, commercial bank loans to rural customers, commercial bank deposits from rural customers and gross national savings jointly have no causal effect on real GDP growth, but individually, only the effect of bank deposit ratio is significant. The study therefore recommends that the Central Bank of Nigeria should persuade deposit money banks to reduce the current interest rate margin by reducing the lending rate and increasing the deposit rates. This would significantly reduce the current high financial exclusion rate as cost of borrowing would decrease while the level of domestic savings would increase. Keywords: Financial Intermediation, Real Gross National Savings, Commercial Bank Deposit from Rural Customers, Commercial Bank Loan to Rural Customers, Bank Deposit and Economic Growth

A Study on Risk Management of Commercial Banks’ Home Mortgage Loans Based on Risk Management Framework

Abstract In the wave of global urbanization, the rapid development of the real estate industry has greatly driven the growth of personal housing loans of commercial banks, and personal housing loans have become a very important part of the loan business of commercial banks, especially in the business operations of many smaller urban commercial banks, where personal housing loan business is an important source of profit. However, the personal housing loan business is facing increasing risk management challenges against the multiple backgrounds of the current epidemic environment, the overall tightening of mortgage policies, and the accelerated advancement of market-based interest rates. For most urban commercial banks, personal housing loan risk control should be based on the local market, combined with the actual development of the enterprise itself, comprehensive internal and external environmental conditions to establish a perfect risk control mechanism and timely improvement of the existing management problems is a top priority. This paper takes Bank H as an example to study the risk management of personal housing loans, exploring the basic performance of Bank H in terms of personal housing loan risks, analyzing the factors affecting its housing loan risks, and the current problems in the management of personal housing loan risks. A linear regression model is also constructed to analyze the causes of Bank H’s housing loan risk, the factors affecting personal housing loan risk, and the characteristics of Bank H’s housing loan risk. The experimental results of this paper show that through risk control management of the 10 indicators selected, Bank H’s annual housing non-performing loan ratio declined by 19.392% and was effectively curbed. It is inferred that effective financial risk management decisions can be an important tool for risk management in averting the risks associated with commercial bank housing loans. Therefore, a sound post-loan risk management mechanism for personal housing loans is essential and the only way to improve the resilience of commercial banks.

Explaining Non-Performing Loans of Commercial Banks in Malaysia

This study examines the influence of bank size, capital adequacy, profitability and liquidity on non-performing loans (NPLs). The growing risk of non-performing loans leading to banks’ potential losses motivates this study to be conducted. This study includes commercial banks in the Main Market of Bursa Malaysia from 2010 to 2021. To test the hypotheses, this study employs a Fixed Effect model. The results show that bank size and capital adequacy have a significant and negative relationship with non-performing loans, indicating that banks with larger and higher capital adequacy have lower NPLs. Generally, this study found a limited number of commercial banks listed in the Malaysian market, providing a smaller sample. Nonetheless, the results of this study may benefit commercial banks in the significant factors to prevent the occurrence of non-performing loans.

Crop insurance's impact on commercial bank loan volumes: Theory and evidence

AbstractCrop insurance protects lenders by increasing the likelihood of loan repayment when revenue declines. We develop a theoretical mode that explains the role of crop insurance in agricultural lending and how impacts may be different for lenders that are not specialized in agricultural lending. We then test whether the total volume of production credit extended by commercial banks at the county level increases in response to crop insurance availability and whether the level of the response is related to bank specialization in agriculture. We use a novel difference‐in‐differences strategy based on some counties having a higher share of agricultural production that was not covered by Federal crop insurance in the 1990s. Crop insurance has a robust relationship with increased loan volumes during this period, especially in counties with fewer banks specialized in agriculture.

Banking Support in Economic Sector Affected by Covid-19 To Support Acceleration of Economic Growth and Overcome the Long-Term Impact

Indonesia's economic growth contracted 0.7% because it was influenced by the Covid-19 pandemic, this study examines the potential and contribution of banks in improving Indonesia's economic conditions during the pandemic. The banking sector is one sector that greatly influences the rate of economic growth of a country and banking has great potential to develop more rapidly in Indonesia. This study uses quantitative methods and uses panel data with a sample of 18 business sectors in Indonesia with a time span of 2018 to 2021. The variables in this study are GDP, Loan Interest Rates and Commercial Bank Loans with this calculation using the EViews 9 analysis tool by testing hypothesis and classical assumption test, it is hoped that the variables used in the study support banking in the economic sector affected by COVID-19 and have an insignificant effect and have a positive relationship in supporting the acceleration of economic growth and overcoming the prolonged impact.

Capital Regulatory Policy and Non Performing Loans of Commercial Banks in Nigeria

An efficient and sound financial system is crucial to enhancing sustainable economic growth in any country, as it provides a balance between those who have funds to invest and those in need of these funds. The creation of credit is a source of revenue for banks just as it makes up the majority of bank’s assets. This is however a very risky outcome, as there is the risk of insolvency if less return is earned from its credit portfolio. The interest gotten from risk assets contributes significantly to interest income of banks, and about 85% of banks total income, thus exposing banking business to credit risk. When banks are exposed to high credit risk, it could lead to loans becoming non-performing and putting banks at high risk. Thus, regulatory policies are established to enable banks and other financial institutions have enough protection when carrying out their functions. In lieu of these, this study is carried out to examine the effect of capital regulatory policies on non-performing loans of commercial banks in Nigeria. Data on a sample of 15 commercial banks quoted on the Nigerian Exchange Group as at 31st December 2021 were analyzed using the panel regression models. The results showed a positive and significant effect between capital regulatory policies and non-performing loans of commercial banks. The study also showed that banks in Nigeria were able to survive high rate of non-performing loans because they were able to take the policies set out by the regulatory bodies into consideration. Based on the findings, the study advised the need for commercial banks to strictly adhere to the capital regulatory policies of government to be able to operate efficiently and effectively in a harsh economy like Nigeria.