Determinants of Non Performing Loans: Evidence from Sri Lanka

Kumarasinghe, Pivithuru Janak

doi:10.17722/ijme.v9i2.367

Cited by 3 publications

(3 citation statements)

References 2 publications

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“…Other studies use the capital ratio (capital-to-assets) or its amount of capital as internal determinants of bank risk, (Fungacova & Weill, 2012;Horvath, Seidler, & Weill, 2014;Tan, 2016). The relationship between a bank's capital and its NPLs go in opposite directions; that is, an increase a bank's NPLs would negatively influence the value of its assets and, thus, the earnings that reflect on its capital, (Kumarasinghe, 2017).…”

Section: Hypothesis Developmentmentioning

confidence: 99%

The causal relationship between SME sustainability and banks’ risk

Shihadeh

Gamage

Hannoon

2019

Economic Research-Ekonomska Istraživanja

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This study aims to examine the influence of banks' credit to SMEs on non-performing loans. Many studies find that access to financial sources has become an obstacle to the growth and sustainability of SMEs. This study uses theoretical and empirical approaches to support the study's hypothesis. Data are presented for 15 banks in Palestine, covering the period 2006 to 2016.The study uses empirical techniques regarding to examine the relationship between the variables. Evidence shows that encouraging banks to lend more money to SMEs through the use of a guarantee fund could decrease their risk. Thus, enhancing credit to SMEs could improve the growth and sustainability of these firms. The study recommending policymakers and bank's managers could develop their strategies according to SME's needing. Therefore, enhancing the growth in these firms and reducing the bank's risk. Furthermore, adopting the guarantee funds in developing countries could decrease the bank's risk, thus lending more to SME. The value of this paper comes from the importance of SME in the economic growth and development sustainability. Therefore, there is a need to convince banks to enhance SME credit through a guarantee fund and that extending this type of credit would positively influence banks' activities.

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Section: Hypothesis Developmentmentioning

confidence: 99%

The causal relationship between SME sustainability and banks’ risk

Shihadeh

Gamage

Hannoon

2019

Economic Research-Ekonomska Istraživanja

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“…Some studies have also focused on identifying the economic factors affecting non-performing loans, such as Khemraj and Pasha (2009); Espinoza and Prasad (2010); Adebola et al (2011); Hsing (2014); Dimitrios et al (2016); Kumarasinghe (2017); Malimi (2017); Adusei (2018). Khemraj and Pasha (2009) identified the determinants of nonperforming loans in Ghana's banking sector.…”

Section: Previous Studiesmentioning

confidence: 99%

“…Also, the unemployment rate, real interest rate and personal taxes had a positive impact on these loans. Kumarasinghe (2017) finds out that among six economic determinants, GDP growth rate and export growth are important in determining the level of troubled loans in Sri Lankan banking sector. The study revealed that the relationship of GDP with non-performing loans was positive and inconsistent with the majority of empirical results in previous literature.…”

Section: Previous Studiesmentioning

confidence: 99%

Relationship between Macroeconomic Variables and their Impact on Non-Performing Loans in Jordanian Banks

Qwader

2019

Asian Economic and Financial Review

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This study aims at showing the impact of macroeconomic variables such as GDP, unemployment rate, interest rates, remittances of workers abroad and external grants on non-performing loans in Jordanian banks. To achieve the objectives of the study and to test its hypothesis, the Autoregressive Distributed-lagged model (ARDL) was used. The study found that there is a long-term equilibrium relationship between these variables of the study. It also found that there is an inverse relationship with a significant effect on the long and short term for both external grants, GDP (Gross Domestic Product) and interest rates on non-performing loans in Jordanian banks. On the other hand, the study concluded that there is no impact on the long and short run for both remittances of workers abroad and the rate of unemployment on nonperforming loans in Jordanian banks because these variables are not significant. The study recommends the Jordanian government to adopt policies and programs aiming at the reduction of the cost of borrowing to cut down NPAs, to promote the development of local investments and explore new international markets to attract Jordanian labor. Contribution/ Originality: This study is going to be one of very few studies that have investigated the impact of economic factors on non-performing loan, especially in an emerging state like Jordan where economy relies heavily on external grants and remittances. This study will therefore prove a scientific addition to the field of financial and economic research.

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Impact of Non-Performing Loans on Saudi Bank Profitability

Zyood*¹

2022

IJEF

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Non-performing loans (NPLs) have become increasingly worrying to the Saudi banking sector. Sanctioned loans have a repayment schedule, including principal and interest amounts. Excessive defaults on loans leads to a liquidity crisis throughout the banking sector, and can even cause bank failure. As a result, banks have to cover non-performing loans and maintain reserves under the instructions of the Saudi Arabia Central Bank, which severely affects profitability. This study analyzes the comparative position of non-performing loans in the Saudi banking sector over the period 2009-2017 to determine causes and impacts on bank profitability, using data from annual reports. The study variables are profitability (ROA and ROE) as the dependent variable, and non-performing loans ratio (NPLR) as the independent variable. The data was analyzed by correlation, regression, and analysis of variance (ANOVA) using SPSS. The empirical results represent that NBLR has a negative influence on the dependent variable.

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Determinants of Non Performing Loans: Evidence from Sri Lanka

Abstract: Abstract-

Cited by 3 publications

References 2 publications

The causal relationship between SME sustainability and banks’ risk

The causal relationship between SME sustainability and banks’ risk

Relationship between Macroeconomic Variables and their Impact on Non-Performing Loans in Jordanian Banks

Impact of Non-Performing Loans on Saudi Bank Profitability

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