What are the bank specific and macroeconomic elements influence non-performing loans in Bangladesh? Evidence from conventional and Islamic banks

Hosen, Mosharrof; Broni, Mohammed Yaw; Uddin, Mohammad Nazim

doi:10.3934/gf.2020012

Cited by 20 publications

(15 citation statements)

References 26 publications

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“…On the other hand, the total outstanding and classified loans under the investment and the investment under Environmental and Social Due Diligence (ESDD) for both banks and NBFIs increased during the pandemic. This findings is in line with the recent studies (Barua & Barua, 2021;Ghosh & Saima, 2021;Hosen et al, 2020), which revealed that Bangladeshi banking system had been severely challenged by the increasing levels of NPLs due to the global COVID-19 crisis. Rapidly rising NPLs often create doubts in the depositors' minds, and reduces customers' confidence in depositing money into banks, resulting in a liquidity crisis for banks.…”

Section: Discussionsupporting

confidence: 91%

The Impact of COVID-19 on the Green Banking of Financial Institutions in an Emerging Economy: Implications for the Green Economic Recovery

Siddik¹,

Zheng²

2021

Preprint

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This study aims to identify the COVID-19 impact on the green banking activities including green financing of banks and non-bank financial institutions (NBFIs) during the pandemic. Besides, this study also reveals the in-house environmental management of banks and NBFIs during the COVID-19 outbreak. To analyze the impact of the pandemic on green banking activities, secondary data were obtained from the quarterly and annual reports of Bangladesh Bank (BB) on green banking activities, annual reports and websites of the sample banks and NBFIs in Bangladesh for the period 2020–2019. The study utilized descriptive statistics, relative percentage changes, and varying tables and graphs to analyze the obtained secondary data. Consequently, the empirical findings revealed that, compared to the pre-pandemic period, banks’ total green financing rose by 7.26% during the pandemic, while total green financing of NBFIs plummeted by 18.53% during the same period. In addition, the category-wise results indicate that green financing of the private commercial banks (PCBs) decreased by 11% during the COVID-19 pandemic, contrasting the 56.54% increase witnessed by the state-owned commercial banks (SOCBs) during the same period. Interestingly, our findings showed that green financing of foreign-owned commercial banks (FCBs) during the pandemic increased by 78.69% in 2020 compared to 2019. During the same period, BB refinancing scheme for green products/initiatives of banks and NBFIs grew by 76.97%. The results further showed that the PCBs and FCBs’ in-house environmental management expanded during the outbreak except for the number of solar-powered ATM booths, which dropped by 68.25% for PCBs and 9.09% for FCBs. On the other hand, SOCBs’ in-house environmental management grew during the pandemic. Furthermore, the results indicate that the Bangladeshi banks’ automation towards green banking were satisfactory during the pandemic. Therefore, major policy implications for the green economic recovery of the government, BB, and mangers of the banks and financial institutions in emerging economies like Bangladesh were discussed.

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Section: Discussionsupporting

confidence: 91%

The Impact of COVID-19 on the Green Banking of Financial Institutions in an Emerging Economy: Implications for the Green Economic Recovery

Siddik¹,

Zheng²

2021

Preprint

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“…Rural clients are less attractive to financial intermediaries due to the implementation of microfinance and weakness in the design that usually comes with small and short-term loans that are not suit-able for agriculture [54]. Moreover, a limited knowledge and awareness of financial credit will increase the risk of financial institutions, resulting in lessened bank inefficiency with a view of increasing the non-performing loans [55]. The increasing of the non-performing loan is not conducive to the development of rural digital financial inclusion.…”

Section: Theoretical Analysis and Research Hypothesismentioning

confidence: 99%

Determinants and Mechanisms of Digital Financial Inclusion Development: Based on Urban-Rural Differences

Guang

Huang

2021

Agronomy

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The combination of digital finance and financial inclusion can better meet the needs of those who have little access to financial services. This paper investigated the differences in the determinants and mechanisms of digital financial inclusion development between urban and rural areas. The sample consists of 1607 counties in China from 2014 to 2019, and uses the fixed-effect model and panel threshold technique. The empirical results indicate that: (1) The industrial economy and governmental intervention are the common determinants of urban and rural digital financial inclusion development, in which the degree is different. At the same time, secondary education is only a determinant in rural areas. (2) Industrial upgrading and indirect finance play a mediating role in the determinants of digital financial inclusion, but indirect finance is only significant for urban areas. (3) There is a threshold effect in the financial development-digital financial inclusion relationship. Under different financial development levels, the determinants of urban and rural digital financial inclusion show the discrepancy. With the development of digital financial inclusion under the trend of promoting innovative digital finance in China, these findings are expected to enhance access to financial services in urban and rural areas for more inclusive and sustainable futures.

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“…A higher economic growth will decrease the ratio of NPLs in a country, proving an inverse relationship between GDP growth rate and NPLs [25]. Mosharrof et al [26], investigated bank specific and macroeconomic determinants of NPLs in Bangladesh over 2014 to 2018 period, using pooled ordinary leased square approach. The study found that, economic growth have an insignificant positive relationship towards NPL.…”

Section: Macroeconomic Factorsmentioning

confidence: 99%

Macroeconomic and Bank Specific Determinants of Non-performing Loans in Ghanaian Banking Sector

Okyere¹,

Mensah²

2022

IJAFRM

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Banks play an important role in the creation of capital for economic growth of a nation and their reliability is very critical for financial system stability. Nevertheless, banks face risks such as credit risk, which seem to have an impact on banks profitability. To determine credit risk, the ratio of Non-Performing Loans (NPLs) to total bank loans is the most common indicator used. Non-Performing Loans are loans that do not produce interest and principal amount for a minimum of 90 days and fundamentally reflects the performance of a bank. A high ratio indicates a greater risk of loss while a small ratio presents a low risk to the bank. NPLs systematically affects the whole banking system and if care is not taken will disturb its future development. The study examined the determinants of NPLs in the banking industry of Ghana using bank specific and macroeconomic variables. The study was based on monthly data covering the period January 2007 to December 2019 and employed the ARDL bounds test of co-integration to estimate the evidence of short run and long run relationship among the variables. The study results revealed that, bank's lending rate, bank's profitability, Cost to Income Ratio, Capital Adequacy Ratio and Net Interest Margin are the bank specific factors influencing non-performing loans. At the macroeconomic level, inflation and economic growth reduces non-performing loans. Furthermore, previous year's non-performing loans and net interest margin depresses Current NPLs whereas credit adequacy ratio promotes Current NPLs in the short-run. The study recommends a firm policy reform that pays attention to credit appraisal mechanisms to improve the quality of bank loan portfolios through tougher regulations and guidelines to support healthier investment. Thus, management of banks should do well to cut interest rate on loans to make them less expensive for borrower's to meet their commitments, whiles regulators undertake policies that can ensure efficiency in bank's operations. Furthermore, Policymakers must consider GDP growth carefully by implementing a set of policies geared towards improving investment and finally profitability.

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What are the bank specific and macroeconomic elements influence non-performing loans in Bangladesh? Evidence from conventional and Islamic banks

Cited by 20 publications

References 26 publications

The Impact of COVID-19 on the Green Banking of Financial Institutions in an Emerging Economy: Implications for the Green Economic Recovery

The Impact of COVID-19 on the Green Banking of Financial Institutions in an Emerging Economy: Implications for the Green Economic Recovery

Determinants and Mechanisms of Digital Financial Inclusion Development: Based on Urban-Rural Differences

Macroeconomic and Bank Specific Determinants of Non-performing Loans in Ghanaian Banking Sector

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