Determinants of the credit risk in developing countries: a case of Kosovo banking sector

Shkodra, Jehona; Ismajli, Hysen

doi:10.21511/bbs.12(4).2017.08

Cited by 12 publications

(6 citation statements)

References 12 publications

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“…That is, if there is an increase in Loan Loss Provision, assuming that the other variables are constant, it will be followed by an increase in Credit Risk of 1.460215 with a significant 0.0000 < 0.05. This result is consistent with the research conducted by Fitriana and Arifianto [7], Suhartini and Anwar [8], and Shkodra and Ismajli [16] with the results of the study showing Loan Loss Provision has a significant effect on NPF. Then it can be concluded if the Loss Provision Loan has increased or decreased, then it will affect the credit risk for Islamic banking in Indonesia and Malaysia for the period 2011-2017.…”

Section: B Discussion Of Hypothesis 2 Test Resultssupporting

confidence: 93%

Employee Education Background on Credit Risk Defining Factors of Islamic Banking in Indonesia and Malaysia

A.P¹,

Leon²

2021

Proceedings of the 4th International Conference on Research of Educational Administration and Management (ICREAM 2020)

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The main problem of this research is because the rapid development of the market share of Islamic banking in Indonesia and Malaysia in the past five years is interesting because the risks with varying complexity will always be close to the operations of Islamic banks. This study aims to determine the effect of the variable Return On Assets, Loan Loss Provision and Loan to Asset Ratio on credit risk proxied by the NPF and to know the differences in determinants of credit risk in Islamic banking in Indonesia and Malaysia. This study uses panel data regression analysis techniques and different tests. The sample in this study were 11 Islamic banks in Indonesia and 11 Islamic banks in Malaysia that had complete financial reports from 2011 to 2017. The results of the study showed that there were significant effects by the ROA and LLP variables on the proxied credit risk by NPF. In addition, there are differences in the determinants of credit risk for Islamic banks in Indonesia and Malaysia, where Islamic banks in Malaysia are better in terms of asset use than Islamic banks in Indonesia, Islamic banks in Indonesia are better prepared to face the risk of loss from investing in assets productive and Islamic banks in Malaysia have lower bank liquidity capabilities than Islamic banks in Indonesia.The implication for managerial is that management is expected to be able to anticipate through enlarged reserves so that Islamic banks are better prepared to face future credit risks. In addition to paying attention to the reserve side of losses, investors need to pay attention to the side of profitability because it also has a large influence on Credit Risk.

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Section: B Discussion Of Hypothesis 2 Test Resultssupporting

confidence: 93%

Employee Education Background on Credit Risk Defining Factors of Islamic Banking in Indonesia and Malaysia

A.P¹,

Leon²

2021

Proceedings of the 4th International Conference on Research of Educational Administration and Management (ICREAM 2020)

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“…In another study, Shkodra and Ismajli (2017) study the determinants of credit risk in Kosovo. The empirical findings show that a significant relationship exists between credit risk and the following variables, profitability, inefficiency, loans to deposit ratio, credit growth and deposit rate, while variables of solvency and credit rate are not statistically significant in terms of credit risk.…”

Section: Previous Studiesmentioning

confidence: 99%

The Determinants of Credit Risk Under Dual Banking System: Indonesian Experience Based on Bank Specific Variables

Achsani

Kassim

2021

JAM

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In Indonesian banking system, conventional banks are operating side by side with Islamic banking in a dual banking system. In terms of the credit risk determinants, Islamic banks should be affected by the different factors as conventional banks. However, the similarity of Islamic banks and the conventional bank in terms of contracts might lead to the opinion the same variables are affecting the performance of Islamic and conventional banks. The objective of the study is to examine and obtain an understanding on how the credit and financing in Indonesian dual banking system responses to changes in bank-specific variables. The main approach to fit the model used in this study is the dynamic panel data. Based on the result of the combined model, there are some independent variables that significantly affect credit risk. Profitability significantly affects credit risk with a negative relationship. While size significantly affects credit risk with a positive relationship. When it comes to the dummy variable, it can be said that the type of bank doesn’t play a significant role in determining the credit risk. In other word, there is no difference between Islamic bank and conventional banks in terms of credit risk. To analyze the crisis effect deeper, we compare the result of conventional banking model 2016-2020 and Islamic banking model 2016-2020. There is no independent variable that significantly affect the credit risk in the conventional banking model 2016-2020, three out of four independent variables affect credit risk significantly in the Islamic banking model 2016-2020. This is because conventional banks tend to play safe by avoiding the disbursement of credit and focusing on derivatives. However, this strategy is not suitable for Islamic banking as they are not allowed to do speculative activities. Islamic banking are still focusing on traditional banking activity.

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“…Industrial concentration, prevailing inflation and GDP growth have been considered to address the influence of market structure and overall economic system on problem loans. Banks showing efficient performance and generating higher profits as compared to others are expected to suffer less from the issue of loan nonrepayment (Farooq et al, 2019;Shkodra and Ismajli, 2017). On the contrary, less efficient banks face higher bad loan accounts.…”

Section: Other Factors Bearing Impact Over Nonperforming Assetsmentioning

confidence: 99%

The nexus of economic growth, priority sector lending and non-performing assets: case of Indian banking sector

Gaur

Mohapatra

2020

SAJBS

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PurposeIn recent years, the Indian banking sector is facing a major cause of concern in the form of Nonperforming Assets (NPA), and the priority sector lending (PSL) is generally recognized as the major factor contributing to it. Thus, the present study has been carried out with the objective of examining the relationship between priority sector lending and GDP growth. Thereafter, the role of PSL and certain other bank-specific, industry-specific and macroeconomic variables in determining NPA has been studied.Design/methodology/approachTaking a sample of 45 scheduled commercial banks, the study has been carried out for 14 years (2004–2018). Granger causality between PSL and GDP has been examined by applying the Dumitrescu-Hurlin test. For the purpose of investigating the impact of PSL and other determinants on NPA, both static and dynamic panel regression have been performed. Under the dynamic panel, system generalized methods of moments (S-GMM) approach has been followed.FindingsThe findings show that there exists a positive correlation and bidirectional causal relationship between PSL and GDP, which implies that PSL brings additional growth for the whole economy. In addition to it, PSL is found to be insignificant for the NPA ratio, and thus, it can be inferred that credit extended to government-specified sectors does not bring any major increase in the bad loan portfolio of banks.Practical implicationsThe policymakers and bank management can take a cue from the findings of this study to decrease the exposure to loan nonrepayment issue. The priority sectors are in need of formal credit for their growth, and since the rising population of the country can find employment in these sectors, banks should meet their credit needs while securing their position with regard to the NPA problem.Originality/valueThe issue of NPA determinants, and in particular, the contribution of priority sector lending in it has not been much explored for Indian banking sector. Also, the present study adds to the literature by using the causality approach for examining the importance of directed credit schemes for economic growth.

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Determinants of the credit risk in developing countries: a case of Kosovo banking sector

Cited by 12 publications

References 12 publications

Employee Education Background on Credit Risk Defining Factors of Islamic Banking in Indonesia and Malaysia

Employee Education Background on Credit Risk Defining Factors of Islamic Banking in Indonesia and Malaysia

The Determinants of Credit Risk Under Dual Banking System: Indonesian Experience Based on Bank Specific Variables

The nexus of economic growth, priority sector lending and non-performing assets: case of Indian banking sector

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