Non-performing Loans Issues in Malaysian Banking Industry

Mohamed, Sulzakimin; Hamid, Mohamad Aqib Abd; Husnizam, Hosin; Isa, Mohamad Azwan Md

doi:10.6007/ijarbss/v11-i3/8784

Cited by 3 publications

(4 citation statements)

References 7 publications

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“…In addition, due to the uncertainty of their employment status, individuals with low-income levels are charged ballooned interest rates, which impairs their capacity to service their loans. However, contrary to the findings of Mohamed et al (2021), the coefficient value of unemployment showed a negative value; therefore, there is a significant and negative relationship between unemployment and non-performing loans. Therefore, the researcher accepted the claim that a positive and statistically significant relationship exists between UR and NPL (H4).…”

Section: Unemployment Rate (Ur) and Nplcontrasting

confidence: 99%

“…In addition, when they set aside more cash, they can procure progressively through the bank's loan costs. As a result, the bank will utilize its cash for loaning exercises and win the financing cost benefits (Mohamed et al, 2021). Therefore, the number of NPLs within a bank should be controlled due to their effect on its sustenance and the economy's survival (Islam, 2020).…”

Section: Introductionmentioning

confidence: 99%

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Factors Affecting Non-Performing Loans of Commercial Banks in Malaysia

Haji Md Isa,

Mohamed Sadique,

Alias

et al. 2023

AFR

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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.

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Section: Unemployment Rate (Ur) and Nplcontrasting

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Factors Affecting Non-Performing Loans of Commercial Banks in Malaysia

Haji Md Isa,

Mohamed Sadique,

Alias

et al. 2023

AFR

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“…The other informant further stressed that debtors have a high risk of default due to the late payment of monthly financing during the endemic and affected unemployment, regardless of formal and informal workers. This is consistent with Foglia (2022), Mohamed et al (2021) and Vaicondam et al (2019) where the unemployment factors are believed to contribute to the non-performing financing to the bank. The extract from the interview below supports this: Among the formal workers who come and ask for zakat assistance are from the aviation industry.…”

Section: Gharimin's Interpretationsupporting

confidence: 90%

The role of zakat distribution on the sustainability of gharimin (genuine debtors) in Islamic financial institutions in Malaysia

Yamaludin

Alwi

Rosman

et al. 2023

JIABR

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Purpose This study aims to explore the COVID-19 impact on the sustainability of gharimin (genuine debtors) in Islamic financial institutions (IFI) in Malaysia. The analysis was further conducted to expand the interpretation of gharimin in zakat institutions (ZI) to use the role of zakat distribution during the post-pandemic period due to income shock and long-term unemployment. Design/methodology/approach This study adopted a qualitative research approach with grounded theory analysis to integrate theoretical insights into the interpretation of gharimin and current practices from the perspectives of ZI and IFI. An in-depth interview with 18 informants was conducted, and data were collected from senior management positions in the zakat distribution department, academicians who are experts in the area of zakat, and heads of Shariah departments in IFI. Findings Expanding the interpretation of gharimin could help ZI and IFI recover the sustainability of gharimin for preparedness during post-pandemic and any emergency crisis in the future. Practical implications This study implies the potential role of ZI in combating the risk of defaulting debtors in IFI to prepare for pandemic recovery in the future. Social implications The new interpretation assists gharimin in reducing the burden debt using the zakat fund and protects genuine debtors by preventing IFI from declaring default or bankruptcy. Originality/value This study narrows the literature gaps about gharimin in IFI in the context of the pandemic. To the best of the authors’ knowledge, this is, perhaps, the first paper to present the expansion of interpretation for gharimin into mu’sir in IFI in Malaysia.

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“…Moreover, financial institutions recapitalized by Danamodalin the stabilization phase by injecting RM64 million into financial institutions in Malaysia to increase the capital adequacy ratio (Azmi & Razak, 2017). In addition, the establishment of the Corporate Debt Restructuring Committee (CDRC) also assists companies in restructuring and is not assisted by the government (Mohamed et al, 2021). These are some recovery plans that support financial institutions in Malaysia to reduce NPLs.…”

Section: Non-performing Loansmentioning

confidence: 99%

Determinants of Non-Performing Loans: Evidence from Malaysia

Mohd Amil,

Haris,

Kassim

2023

IMBR

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Financial institutions worldwide have huge dangers in non-performing loans. Hence, they are required to review their lending policies. The default loans also lead to massive losses on banks and decreased economic growth. Therefore, non-performing loans are a predominant concern that affects financial markets and banking industry suitability. The rise in non-performing loans has an adverse impact on the banking sector. Therefore, understanding the determinants of non-performing loans is critical to safeguard the overall economy's productivity. Motivated by this scenario, this study investigates the determinants of Non-Performing Loans in Malaysia's banking system. Inflation Rates, Lending Interest Rates, Real Interest Rates, Gross Domestic Product, Gross Domestic Saving and Unemployment Rates are the variables used and collected yearly from 1988 to 2020, consisting of 33 observations for each variable. The method used for data analysis in this study is multiple regression analysis. The research results revealed that Gross Domestic Product, Gross Domestic Saving, and Unemployment significantly explained Non-Performing Loans in Malaysia. The findings have important implications for policymaking, besides adding new knowledge to the existing literature.

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Non-performing Loans Issues in Malaysian Banking Industry

Cited by 3 publications

References 7 publications

Factors Affecting Non-Performing Loans of Commercial Banks in Malaysia

Factors Affecting Non-Performing Loans of Commercial Banks in Malaysia

The role of zakat distribution on the sustainability of gharimin (genuine debtors) in Islamic financial institutions in Malaysia

Determinants of Non-Performing Loans: Evidence from Malaysia

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