Management Of Non-performing Loans Research Articles

Effectiveness of Credit Terms on Management of Non-Performing Loans in Kenyan Commercial Banks

This study sought to establish the effectiveness of Credit Terms on Management of Non-Performing Loans in Kenyan Commercial Banks. The specific objective was to establish how credit term was effective in managing non-performing loans by reviewing credit period, credit limit, interest rates and default term within the corporate, business and personal segments of commercial banks in Kenya. The study was guided by both the Theory of Information Asymmetry and Credit Scorecard theories. An explanatory research design was adopted employing both simple random and stratified sampling techniques. The sample comprised 222 credit officers employed in the 41 commercial banks in Kenya. Structured questionnaires were applied to the credit officers in the collection of primary data. Cronbach’s alpha and factor analysis were applied in testing both the reliability and validity of the research instruments. A multiple regression model using SPSS (Version 23) was used in the analysis of the obtained data and to test the hypotheses. The study identified that credit terms (ꞵ= .570) had a positive and significant effect on management of nonperforming loans. In regard to this new knowledge, the study recommends that credit terms be adopted by the management of commercial banks and policymakers. This will help the banks increase their profitability, enhance their growth and cope with the intense competition within the banking industry.

ANALISIS KINERJA INDUSTRI PERBANKAN NASIONAL PASCA COVID-19

<p align="justify">The purpose of scientific writing is to analyze the performance of the banking industry, related to liquidity performance, credit disbursement and processing of non-performing loans, management of third party funds (DPK), profitability or ROA, and post-Covid-19 banking capital or CAR. The research sample used is a conventional commercial bank (BUK). The data used is secondary data taken from OJK. As a result, overall banking performance after the Covid-19 crisis has been satisfactory. As an individual result, post-Covid-19 banking liquidity is very good, credit disbursement performance has returned to normal and the management of non-performing loans is consistently in a safe position. Meanwhile, the performance of third party fund management also greatly improved. In addition, bank profitability has recovered to the level it was before the Covid-19 crisis and banking capital or CAR during the post-Covid-19 crisis has remained strong to finance the elimination of problem loans.<strong></strong></p><p><strong>Key words:</strong> Liquidity, Credit, NPL, DPK, ROA and CAR.</p>

Effectiveness of Credit Appraisal on management Non-Performing Loans in Kenyan Commercial Banks

The purpose of this study was to determine the effectiveness of credit appraisal on management of Non-Performing Loans in Kenyan Commercial Banks. The specific objectives were to determine the effect of borrower’s income, credit rating, credit history and collateral issued on the management of non-performing loans recorded in corporate, business and personal sections of Kenyan Commercial Banks. The study was guided by the Theory of Information Asymmetry and Credit Scorecard Theories. An explanatory research design was adopted, using simple random and stratified sampling techniques in the collection of data. Data was collected from a sample size of 222 credit officers working in 41 commercial Banks in Kenya by use of self-administered questionnaires. Cronbach alpha and factor analysis were applied to test the reliability and validity of the research instruments respectively. A multiple regression model using SPSS (version 23) was used to analyze the obtained data and test the hypotheses. The findings revealed that credit appraisal (ꞵ= .302) had a positive and significant effect on the management of Non-performing Loans. Based on the new findings, the management of commercial banks and policymakers should develop effective credit appraisal strategies, policies and techniques that make borrowing affordable hence attracting credit-worthy borrowers to the banks.

СУЧАСНІ ПІДХОДИ ДО УПРАВЛІННЯ ПРОБЛЕМНИМИ КРЕДИТАМИ В БАНКАХ

The management of non-performing loans is one of the most urgent issues of the banking system during the years of Ukraine's independence. This issue has become especially relevant in recent years, because of the crisis in the economic and financial systems. The article highlights the main factors that became the reasons for appearing of problem loans. Among such factors, external factors were identified, the primary source of which is macroeconomic instability, as well as imbalances in the banking system and internal factors related to cooperation with borrowers. It was found that the measures taken by the NBU to reduce the level of problem loans in the banking system led to a significant recovery of banks, but still, however, in terms of state banks, relevant issues of such exposure take place (after the nationalization of Pryvatbank), which was due to the questionable financing to related parties. The article reveals the content and describes the main measures to reduce the volume of problem loans, which are most often apply in the practice of foreign countries, including loan restructuring, debt write-off, sale of non-performing loan portfolio and other legal measures. It has been found that increasing uncertainty in the economy and financial system leads to the need to find new approaches to managing problem loans in banks. The process of significant changes in approaches to non-performing loans management in leading European countries can be divided in three stages, which were described in this article. During the first stage, the key role in reducing the amount of bad debts of banks in the post-crisis period were played by public authorities, by improving existing and introducing new regulatory requirements. In particular, the participation of third-party service companies and strategic partnerships, as well as the creation of service platforms has become widespread. The second stage was defined by a wide range of private solutions. The third stage is underway. The ultimate goal of such changes should be development of a full-fledged ecosystem of problem loans, which will include the development of private partnerships, state participation as a strategic support for these processes and the use of a wide range of digital solutions.

MINIMIZATION OF PROBLEM LOANS IN BANKS: ECONOMIC AND LEGAL ASPECT OF STATE REGULATION

Abstract. The authors of the article have studied the problem of managing non-performing loans within loan portfolios. It has been substantiated that Ukraine as a developing country is in such socio-economic conditions of development that increase credit risks for banks. Numerous studies of the determinants for the formation of loans portfolios in countries with different levels of economic development demonstrate that developing countries are prone to negative consequences that lead to insolvency of debtors in case of a drop in the GDP, inflation, legal uncertainty, political crises, etc. The lack of long-term experience of banks in solving problems of increasing the share of non-performing loans in banks’ portfolios demonstrates that minimization of such assets requires regulation at the level of the banking system, but not a separate bank. Based on statistical data, it has been demonstrated that the minimization of problem loans of banks gained significant positive dynamics only after the National Bank of Ukraine regulated the process of managing distressed assets by adopting a regulatory act. Detailing the process of legal regulation of managing distressed assets allowed banks to structure and organize the work of their divisions in accordance with the normatively defined life cycle of distressed asset in such a way that all measures taken by them affect the efficiency of their work. Using permits, prohibitions and obligations as legal means of regulating relations between banks and their debtors, those relations have become predictable, allowing banks to control the process of managing non-performing loans and make timely decisions on the use of tools to minimize the share of distressed assets of the bank. The wide choice and consistency of applying financial and legal instruments in the process of managing non-performing loans allows banks to maximize the contractual settlement of debt and address to the competent authorities for the application of state coercion to debtors. Direct prohibitions, which are provided in the procedure of writing-off impaired assets, prevent corruption manifestations in this process. However, the authors have argued that the practice of 2008—2019 in terms of managing non-performing loans of banks demonstrated that the effectiveness of this process directly depends on government regulation. If the economic preconditions for the formation of problem loans depend on various factors of objective and subjective nature, then the management of non-performing loans directly depends on the existing legal models in the state for solving this problem. The autonomy of banks and their right to independently determine their strategies for managing distressed assets does not provide the desired efficiency without the imperative intervention of the central bank. Thus, the state regulation of the life cycle of distressed assets has demonstrated its effectiveness, and thus confirmed the need for regulatory influence on the processes of minimizing non-performing loans in Ukrainian banks. Keywords: non-performing loans, distressed assets, agreement-based regulation, state influence, state coercion, legal regulation. GEL Classification G18, G21, G34, K12, K42 Formulas: 0; fig.: 2; tabl.: 0; bibl.: 12.

Effectiveness of Loans or Financing and Portfolio Management with Problems or Non-Performing Loans The Impact on Asset Growth in Islamic Banks in Indonesia

The study was conducted to see whether there was a significant impact of credit or financing and portfolio management of problem loans or non-performing loans on asset growth in Islamic banks in Indonesia in 2009-2018, either partially or simultaneously. This type of research is descriptive quantitative using secondary data types obtained from the published financial reports of three major banks in Indonesia, namely Bank Muamalat Indonesia or BMI, Bank Rakyat Indonesia Syariah or BRI Syariah and Bank Syariah Mandiri or BSM from the Bank's third Annual Report, from 2009 until 2018. The data analysis method uses classical assumption test techniques and Linear Regression Analysis techniques, Correlation Coefficient test, partial Hypothesis test (t test), simultaneous test (F test) and Determination Coefficient test with Credit or Financing Effectiveness variables (X1 ) and Portfolio Management of Non Performing Loans is a variable (X2) and Asset Growth the Islamic Banks in Indonesia as a variable (Y). Tests conducted using the Eviews application version 10. Then the results of the study with the multiple regression equation PA = 37.424.6 + 1.364393 EK_P + 3.289641 NPL with the value of Fcount (595.2748)> from Ftable (2,3003) significance or probability (α) 0.000 <0.05. Simultaneously Effectiveness of Credit or Financing and Portfolio Management of Non Performing Loans simultaneously have an impact on Asset Growth in Islamic Banks in Indonesia. The Adjusted R-Square (R2) value of 0.976182 shows that the contribution of the EK_P and NPL variables to the PA variable is 97.6182% while 2.3818% is seen by other factors.

Management of non-performing loans by Bhutanese commercial banks

This paper include four commercial banks of Bhutan to find out the impact of NPAs on profitability indicators of banks. The secondary data are collected from annual reports of the banks, recovered from the respective bank sites and the staff of the banks with regard to data on the various internal determinants. The study used the estimated ratios, and calculated ratios from annual reports of four commercial banks of Bhutan namely Bank of Bhutan, Bhutan National Bank, Druk Panjab National Bank, and Tashi Bank over the period of 2010 to 2015. To measure and analyses the data money related ratios, regression analysis, analysis of variances (ANOVA) used. This investigation uncovers that private sector bank has lower non-performing loans than public sector banks.

Management of non-performing loans by Bhutanese commercial banks

This paper include four commercial banks of Bhutan to find out the impact of NPAs on profitability indicators of banks. The secondary data are collected from annual reports of the banks, recovered from the respective bank sites and the staff of the banks with regard to data on the various internal determinants. The study used the estimated ratios, and calculated ratios from annual reports of four commercial banks of Bhutan namely Bank of Bhutan, Bhutan National Bank, Druk Panjab National Bank, and Tashi Bank over the period of 2010 to 2015. To measure and analyses the data money related ratios, regression analysis, analysis of variances (ANOVA) used. This investigation uncovers that private sector bank has lower non-performing loans than public sector banks.

Factors Affecting for Loan Defaults with Special Reference to State Commercial Banks

Financial system stability is one of the key fundamentals upon which economic growth is based. Most developing countries’ financial system is dominated by the banking sector. Commercial banks constitute the anchor of the growth of other sectors by providing them access to credit facilities in the form of loans consequently, the soundness of the banking industry is an essential consideration for financial system stability. Though there were many research studies published in the banking sector for enhancing customer loyalty, there is limited consideration to identify reasons for non-performing loans in the banking sector in Sri Lanka. Thus this study was conducted to assess factors affecting loan defaults in addressing the aforementioned gap. The quantitative research approach was adopted for the study. A survey was conducted with professionals engaged in two state-owned commercial banks using a self-administrative questionnaire. A convenient sampling procedure was used to obtain 164 responses from customers. Correlation and multiple regressions were used to investigate the relationship between dependent and independent variables. The finding of the study shows that economic factors, and institutional factors to the causes of loan default. The research proved that institutional factors and economic factors impacted loan defaults. The findings of the study suggest to the bank managers, loan officers, recovery officers, and other staff members to pay attention to credit terms, monitoring, inflation rates, and the income of the customers when they grant loans for new customers. The findings of this study will aid the management to improve their management of non-performing loans, encourage bank managers to participate more in policy formulation at the micro and macro levels as far as bad debt management is concerned, and also to diversify bank's investment portfolios.

Analysis of Non-Performing Loans (NPL) among Microfinance Institutions (MFIs) in Ghana: Evidence from the Kasoa Municipality

The contributions of Micro-Finance Institutions (MFIs) to the Ghanaian economy can never be overemphasised. However, most of these institutions are faced with various challenges including non-payment of loans which constantly affect their operations and subsequently survival. As such, the study hinged on determining the non-performing loan (NPL) situations of Micro-Finance Institutions (MFIs) in Ghana focusing on four firms within the Kasoa metropolis, Central Region. The principal objective of the study was to determine the non-performing loan situations of 4 MFIs. The study adopted the both quantitative and qualitative approach and obtained a sample from 10 MFIs using the convenient (haphazard) sampling technique. The respondents comprised a branch manager, an executive director and two credit managers from each MFI. The data gathered were analysed using descriptive tools such as frequency table, bar charts and pie chart. The data was also analysed using narrations. Primary data collection instruments, specifically questionnaires were employed to gather data from the respondents. The study revealed the categories of loans existing in MFIs as well as those usually applied for, the factors accounting for non-performing loans, management of non-performing loans, sources of incomes and profits, impact of NPL on firms’ operations. The study concluded that NPLs is a challenge for MFIs especially those in Kasoa metropolis. Recommendations made were that, The MFIs should make conscious efforts to pursue the implementation of the existing safeguards as it will help address the NPL situation, Clients granted loans should be monitored to ensure that loans are used for intended purposes, Training programs should be organised to adequately equip staff that engage in granting and recovery of loans, There should be good client profiling to identify the economic conditions of clients, this will aid the charging of appropriate interest rate that will enhance loan repayment.

Analisis Sistem Akuntansi Pemberian Kredit Gadai dalam Mencegah terjadinya Kredit Macet terhadap UMKM pada PT. Pegadaian (Persero) Unit Pelayanan Syariah Cikijing

This study aims to find out the accounting system and procedure of providing mortgage loans for Micro Small Medium Enterprises (MSMEs) and to know how to prevent the occurrence of bad loans at PT. Pegadaian (Persero) Cikijing Sharia Service Unit. This research uses descriptive research type, using qualitative research method. The data used in this research are primary data and secondary data. With data collection techniques through field studies (field research) is done by way of documentation and interviews with the Head of Branch Office PT. Pegadaian (Persero) Cikijing Sharia Service Unit. The data obtained through documentation and interviews first processed using software application program that is Microsoft Office then presented in the form of description and data table. The results showed that the accounting system and procedure of receiving mortgage loans for MSMEs or Ar-rum in PT. Pegadaian (Persero) Cikijing Sharia Service Unit has been run well. Starting from the application stage by the prospective customer, the completeness check phase of the requirements, the stage of assessment, approval or termination stage, and the contract stage and fund disbursement. To prevent the occurrence of bad credit using 4C analysis method Character (character), Capacity (capability), Capital (capital), and Collateral (guarantee). Efforts and management of non-performing loans are conducted by way of Somasi, insurance claims against problem loans, withdrawal of guarantee goods and the execution of collateral goods.

ARE LAC COOPERATIVE AND COMMERCIAL BANKS SO DIFFERENT IN THEIR MANAGEMENT OF NON‐PERFORMING LOANS?

ABSTRACTThis paper assesses technical efficiency in the management of non‐performing loans (NPLs) in the Latin American and Caribbean (LAC) banking industry. To that end, Data Envelopment Analysis techniques are employed with data from the years 2013 to 2016 on a sample of 307 LAC cooperative and commercial banks. Our main contribution to existing literature is that differences of efficiency between cooperative banks and commercial banks are assessed as the result of the different capacities of their managers – managerial efficiency – and the so‐called programme efficiency, which represents differences in the technology used by these two categories of entities. Our principal result suggests that the technology used by cooperative banks in the management of NPLs is more efficient than the technology of commercial banks.

Approaching Non-Performing Loans from a Macroprudential Angle

The emergence and accumulation of non-performing loans (NPLs) on banks’ balance sheets is commonly considered a microprudential issue. NPLs come to the attention of macroprudential authorities when they weaken a significant part of the financial system, threatening its stability or impairing one or more of its core functions, such as the provision of credit to the real economy. On a conceptual level, various imperfections may call for policy actions on the management of NPLs. These include unaddressed externalities, economies of scale and coordination failures, institutional distortions (stemming from the accounting, regulatory and tax treatment of NPLs or the judicial and market structures needed for their efficient resolution) and moral hazard vis-a-vis the providers of the banks’ safety net.

Group-Decisions, Economic Policy and the Resolution of Non-Performing Loans

Non-performing Loans (NPLs) have international ramifications because many banks operate in several countries and NPL-resolution related laws enacted in their home countries affect their foreign operations. While the management of Non-performing Loans (NPLs) remains a major problem around the world and requires long term preventive measures, Asset Management Corporations (AMCs) which are an afterthought (sometimes politically-motivated and usually introduced after non-performing loan - NPL - rates have exceeded permissible levels), have been created in various countries to help resolve NPLs and associated banking crisis. There have been mixed reviews of the effectiveness of AMCs and other methods of resolution of bank crisis in general; and AMCs can amplify financial instability and systemic risk problems in national banking systems. Within the context of the operations of Asset Management Corporation of Nigeria (AMCON), this article explains the following: i) accounting disclosure, “Bank Opacity” and behavioral problems may contribute to increases in earnings management and systemic risk; ii) there have may been a symbiotic relationship between the liquidity of Nigerian Banks’ shares/GDRs and institutionalized earnings management and corporate governance deficiencies on one hand, and AMCONs’ activities ii) AMCON has failed in its purpose and its business model has increased systemic risk and financial instability; iv) the AMCON business model caused other social and economic problems – such as Inefficient Cross-Subsidization (among banks and industries), Valuation-losses, Distortion of Borrowers’ Willingness-To-Resolve and Moral Hazard, and increased earnings management in various industries in Nigeria; v) the interaction of industry-level, firm-level and institutional-level corporate governance factors can affect banks’ reactions to AMCs’ activities. The article also proposes testable hypothesis, new theories of group-decisions and antitrust, and feasible solutions to problems caused by NPLs, AMCs in general (and AMCON in particular) and the Corporate Governance and antitrust deficiencies discussed herein.

Discriminant Analysis of Zero Recovery for China's NPL

Classification of whether recovery of non-performing loans (NPL) is zero or positive is not only important in management of non-performing loans, but also is essential for estimating recovery rate and implementing the new Basel Capital Accord. Based on the largest database of NPL's recovering information in China, this paper tries to establish discriminant models to predict the loan with zero recovery. We first use Step-wise discrimination method to select variables; then give an in-depth analysis on why the selected variables are important factors influencing whether a loan is zero or positive recovery rate. Using the selected variables, we establish two-type discriminant models to classify the NPLs. Empirical results show that both models achieve high prediction accuracy, and the characteristics of obligors are the most important factors in determining whether a NPL is positively recovered or zero recovered.

Management of Non-Performing Loans in Eastern Europe

The objective of the study is twofold. First, the paper aims to provide a critical analysis of the various methods used in resolving banking crises in Central and Eastern Europe Countries (CEEs). Secondly, it offers an estimate of what would have been the optimal way of resolving crises in state-owned commercial banks (SOBs) and small and medium sized commercial banks (SMBs) in the Czech Republic, Hungary, and Poland. The analysis shows bad loans clean up have turned out to be awkward. A delay in restructuring increased costs and required a stronger response. Examining the experience of these three countries, no firm conclusion can be drawn about the optimal crisis resolution in the banking sector in transition. Looking back, we could argue about the essential elements of an optimal resolution, though Hungary has adopted a quasi-optimal crisis resolution.