Determinants of Non-Performing Loans in Nigerias Deposit Money Banks

Gambo, EL-Maude Jibreel; Abdul-Rahman, Ahmad; Ibrahim, Muhammad bin

doi:10.14738/abr.51.2368

Cited by 13 publications

(21 citation statements)

References 3 publications

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“…El-Maude [2] examined the relationship and influence of specific factors of banks and macroeconomics on NPLs in 10 commercial banks in Nigeria during the period 2010 to 2014. Injuries suffered due to bad credit losses have reduced the capital position of many banks, which can cause the Nigerian banking industry's failure.…”

Section: Literatur Reviewmentioning

confidence: 99%

“…It indicates that rural banks have not been optimal in managing their assets, making them vulnerable to liquidation. Risk assets such as total loans are a significant part of bank assets [2]. As a financial institution with the main activity of collecting and distributing funds, rural banks are faced with credit risk.…”

Section: Introductionmentioning

confidence: 99%

“…It happens because the NPL is the ratio between the number of problem loans and the total loans provided by banks. However, different results show that a high LDR will increase the chances of problem loans resulting in higher NPL levels [2,[9][10].…”

Section: Introductionmentioning

confidence: 99%

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The Effect of Asset Quality and Financial Performance on Non Performing Loans (NPLs) of Rural Banks in Indonesia

Hamdillah¹,

Purwanto²,

Ermawati³

2021

Proceedings of the 1st International Conference on Sustainable Management and Innovation, ICoSMI 2020, 14-16 September 2020, Bo

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The number of Rural Banks in Indonesia continued to decrease during 2015-2019, even when its assets increase positively. Credit is the primary source of income for rural banks, so most assets are placed in lending. However, growth in lending was followed by higher growth in problematic lending so that the level of Non-Performing Loans (NPLs) continued to increase and exceeded the maximum limit set by Bank Indonesia. It indicates that Rural Banks has not worked optimally in Indonesia, especially in facing the credit risks. This study aimed to analyze the effect of assets qualities consisting of total assets and earning assets quality and financial performance consisting of productivity, efficiency, and profitability on NPL over the 2015-2019 periods. This research used secondary data that is a financial report publication published by Otoritas Jasa Keuangan. Research's sample used 320 Rural Banks all over Indonesia selected by purposive sampling method. The data were analyzed with regression data panel. The results showed that total assets did not affect NPL. Earning assets quality had a positive effect on NPL, while productivity, efficiency, and profitability negatively affected NPL.

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Section: Literatur Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The Effect of Asset Quality and Financial Performance on Non Performing Loans (NPLs) of Rural Banks in Indonesia

Hamdillah¹,

Purwanto²,

Ermawati³

2021

Proceedings of the 1st International Conference on Sustainable Management and Innovation, ICoSMI 2020, 14-16 September 2020, Bo

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show abstract

“…NPL as percentage of total loans, which is represented by the empirical results in cases of SCBs, is very high and they hold greater than 50% of the total NPLs of the banking industry during last 8 years. Study was conducted by another researchers such as, Akinlo and Emmanuel (2014) on the determinants of non-performing loan with a macroeconomic model in the banking system of Nigeria. It has been found that economic growth is negatively related to non-performing loan.…”

Section: Page13 Page13 Page13mentioning

confidence: 99%

Analysing the Return on Asset to Construct Foretelling Indicator for Bangladeshi Banking Sector

Afreen

2020

IJFBS

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Financial institutions and banks are required to follow mechanisms to monitor the positions and create stimulas for sensible risk-taking by divisions a well as individuals. Risk measurement comprises of the quantification of risk exposures, whereas risk management demonstrates to the overall procedures by which managers fulfill these needs to identify the risks and recognise the category of the risks it faces. This research targerts on the economic instability faced by banks in financial arena in terms of the crises affairs in regard of economic distress. Here, the methodology followed is based on the CAMELS framework variables. CAMELS is a short form stands for: capital adequacy (C), asset (A), management (M), earnings (E), liquidity (L) and sensitivity to market risk (S). Based on these nomenclature, a couple of variables should be selected, such as capital asset ratio, cost income ratio, non-performing loan, non-interest income as component series and return on asset (ROA) as the reference series to identify turning points of economic volatility in banking sector of Bangladesh. Thus, by forecasting the directional deviations it could make financial policymakers aware of the changes at early stage in financial markets and banking industry and privilege them to undertake precautionary steps for preventive purposes. The constructed MPI should have a incredible lead time of about 5 to 7 months on an average in case of prediction against leading for the reference series. By renovating financial efficacy of venture banks, Bangladesh also should recover their subsequent banking system to execute these suggestions.

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“…NPL as percentage of total loans, which is represented by the empirical results in cases of SCBs, is very high and they hold greater than 50% of the total NPLs of the banking & financial industry during the last 8 years. Study was conducted by Akinlo and Emmanuel (2014) on the determinants of non-performing loan with a macroeconomic model in the banking system of Nigeria. It has been found that economic growth is adversely integrated with the non-performing loan.…”

Section: Literature Reviewmentioning

confidence: 99%

Building Vulnerability Predictive Indicator for the Banking Sector

Afreen

2020

IJFBS

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Abstract For risk and capital measurement, banks and other financial institutions need to meet forthcoming regulatory requirements. However, it is a serious issue to think that meeting regulatory requirements is the sole or even the most important reason for establishing a scientific, sound risk management system. To direct capital to activities with the best risk/reward ratios, managers need reliable risk measures. To stay within the limits imposed by readily available liquidity, by creditors, customers, and regulators, they need estimates of the size of potential losses. They need mechanisms to monitor positions and create incentives for prudent risk-taking by divisions and individuals. Risk measurement deals with the quantification of risk exposures, whereas risk management refers to the overall process by which managers satisfy these needs and follows to define a business strategy, to detect the risks to which are visible, quantifying those risks, and to control and understand the nature of the risks it faces. This research focuses on the economic vulnerability faced by banks in the financial sector in terms of the crises issues perspective of economic distress. Here, the methodology followed is based on the CAMELS framework variables. CAMELS is an abbreviation for: capital adequacy (C), asset (A), management (M), earnings (E), liquidity (L) and sensitivity to market risk (S). Based on these terminologies, a couple of variables should be selected, such as capital asset ratio, non-performing loan, cost income ratio, industry production index, non-interest income, reserve of gold, inflation, stock turnover ratio, real interest rate as component series and return on equity (RoE) as reference series to identify the turning points of economic vulnerability in the banking sector in Bangladesh. Thus, by forecasting the directional changes it could make policymakers aware of changes in the financial markets and banking economy and allow them to undertake preventive steps for remedial purposes. The constructed MPI should have a remarkable lead time of about not less than 6 months on average in case of prediction against the leading for reference Series.By mending the financial efficacy of investment banks. Bangladesh also should improve their corresponding banking system to implement these suggestions.

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Determinants of Non-Performing Loans in Nigerias Deposit Money Banks

Cited by 13 publications

References 3 publications

The Effect of Asset Quality and Financial Performance on Non Performing Loans (NPLs) of Rural Banks in Indonesia

The Effect of Asset Quality and Financial Performance on Non Performing Loans (NPLs) of Rural Banks in Indonesia

Analysing the Return on Asset to Construct Foretelling Indicator for Bangladeshi Banking Sector

Building Vulnerability Predictive Indicator for the Banking Sector

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