Determinants of non-performing loans in Banks in Ghana.
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Date
2016-08
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KNUST
Abstract
A considerably low level of Non-Performing Loans (NPLs) is ideal for bank operations in the long run. Loan advancing is one of the main functions of commercial banks in general and it is paramount for banks to have an appreciably high loan recovery rate to enhance subsequent lending to its customers. This study sought to examine the determinants of Non-Performing Loans of banks in Ghana. Employing bank specific data from 10 purposively sampled banks in Ghana and employing some macro level data for 8 years period (2007-2014), the study made use of panel random effect model to examine the determinants of NPLs. These data were collected gathered from the audited annual reports of banks for the ten banks whilst data on macroeconomic variables were gathered from the World Development Indicator (WDI) database. This research used explanatory research design that identifies the cause and effect relationships between the NPLs and its determinants. The results indicate bank specific and macroeconomic variables have impact on NPLs. Specifically, bank specific variables such as inflation significantly affect NPLs of banks in Ghana. commercial banks in Ghana. return on equity, return on asset, loan to deposit ratio and macroeconomic variables such as Also, the trend analysis of Non-Performing Loans in the selected banks were conducted for the period 2007 to 2014. The study shows a downward sloping of Non-Performing Loans for commercial banks in Ghana. The finding of this study is significant since once the determinants of NPLs are identified, would enable management body to make appropriate lending policies that prevent the occurrence of NPLs.
Description
A Thesis Submitted In Partial Fulfillment For The Requirement For The Degree Of Masters Of Business Administration (Finance).