Factors affecting non-performing loans in commercial banks of selected West African countries

  • Received October 12, 2021;
    Accepted December 14, 2021;
    Published January 19, 2022
  • Author(s)
  • DOI
    http://dx.doi.org/10.21511/bbs.17(1).2022.01
  • Article Info
    Volume 17 2022, Issue #1, pp. 1-12
  • TO CITE АНОТАЦІЯ
  • Cited by
    3 articles
  • 892 Views
  • 351 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

This paper examines the macro-economic and bank-specific factors affecting non-performing loans in commercial banks. Using 47 listed commercial banks from six countries, namely 19 banks from Nigeria, 14 banks from Benin, 3 banks from Burkina Faso, 3 banks from Gambia, 3 banks from Guinea, and 5 banks from Liberia for the period 2008 to 2019, fixed and random effect model was used. The Hausman test favored the selection of fixed effect model, and it was found from the estimation that the liquidity ratio, capital adequacy ratio and inflation rate significantly affect non-performing loans. As a result, it is advised that banks depend not only on their ability to achieve the capital adequacy ratio, but also guarantee that loans are thoroughly scrutinized before being issued to beneficiaries. Bank managers should guarantee that banking staff is not simply awarding loans to secure their jobs by accumulating deposits from consumers at the price of the bank’s long-term stake. In addition, the economies of West Africa should keep their inflation rates low so that repayment of loans on time is cheap and realistic.

Acknowledgment
I would like to appreciate Fezile Nonjabulo Gcwabaza for love and support throughout this research project.

view full abstract hide full abstract
    • Table 1. Summary of NPLs rate in 2020
    • Table 2. Population and sample of banks used
    • Table 3. Summary statistics
    • Table 4. Correlation analysis
    • Table 5. General least square estimation
    • Conceptualization
      Thabiso Sthembiso Msomi
    • Data curation
      Thabiso Sthembiso Msomi
    • Formal Analysis
      Thabiso Sthembiso Msomi
    • Funding acquisition
      Thabiso Sthembiso Msomi
    • Investigation
      Thabiso Sthembiso Msomi
    • Methodology
      Thabiso Sthembiso Msomi
    • Project administration
      Thabiso Sthembiso Msomi
    • Resources
      Thabiso Sthembiso Msomi
    • Software
      Thabiso Sthembiso Msomi
    • Supervision
      Thabiso Sthembiso Msomi
    • Validation
      Thabiso Sthembiso Msomi
    • Visualization
      Thabiso Sthembiso Msomi
    • Writing – original draft
      Thabiso Sthembiso Msomi
    • Writing – review & editing
      Thabiso Sthembiso Msomi