Factors Affecting the Bank Credit: An Empirical Study on the Jordanian Commercial Banks

Abstract

This paper aimed to examine the determinants of commercial banks' lending in Jordan. The study sample consisted of ten Jordanian commercial banks during the period 2005-2013. The study used the ratio of credit facilities to total assets as a dependent variable, and eleven independent variables including the ratio of deposits, ratio of non-performing loans, capital ratio, liquidity ratio, asset size, lending rate, deposits rate, window rate, legal reserve ratio, inflation and economic growth rate .The results showed that the ratio of non-performing loans, liquidity ratio and window rate have a negative and significant impact on the ratio of credit facilities, while found that the bank size and the economic growth have a positive and significant impact on the ratio of credit facilities granted by commercial banks in Jordan. The study recommended Jordanian commercial banks to avoid excess liquidity, and to pay more attention to reduce the ratio of non-performing loans.

Effects of information sharing on banking credit and economic growth in developing countries: Evidence from the West African Economic and Monetary Union

“…An increase in outstanding debts shows that the bank is endorsing lost resources, and new funding possibilities are assigned. This result matches the findings of Rabab'ah () in Jordanian.…”

“…The control variables of Equation are inspired from the credit determinant literature, especially the findings of Chernykh and Theodossiou (), Imran and Nishatm (), and Rabab'ah (). We address the bank credit risk, the banking concentration, the capital ratio, and the deposit ratio.…”

“…This measure captures the drawbacks' credit share that is supposed to negatively affect credit offers. Rabab'ah () found that the high proportion of the non‐performing loans ratio reduces the credit facilities granted by the commercial banks. Deposits are taken into account in order to appreciate the importance of deposit in credit offers.…”

An Interest Rate Commission Agent Banking System

“…Nonperforming asset ratio does not specifically measure how much the borrower lags repayments due to new loan disbursement but measuring at par enables us to understand the level of nonperforming asset percentage. In identifying the factor affecting the bank credit, Rabab'ah (2015) used the non-performing ratio measure as percentage of non-performing asset to total loan portfolio.…”

Capital and lending growth of banking sector in Indonesia: Study on the BUKU category

“…Many studies proved that bank capital and lending have positive linear relationship (Gambacorta & Mistrulli, 2004;Berrospide & Edge, 2010;Satria & Subegti, 2010;Francis & Osborne, 2012;Rabab'ah, 2015;Moussa & Chedia, 2016;Kim & Sohn, 2017;Setiawan & Pratama, 2019). Bank capital improves banking performance to generate more profit from lending policy (Kolari, Berney, & Ou, 1996;Subandi & Ghozali, 2013;Raharjo, 2014;Ekpu & Paloni, 2016;Thalib, 2016) and increase their ability to absorb risk (Kamaludin, Darmansyah, & Usman, 2015).…”