DETERMINANTS OF NONPERFORMING LOAN IN DEVELOPMENT BANK OF ETHIOPIA

Abstract

The study examines the determinants of nonperforming loan in DBE. In the study, econometrics regression using liner probability model were used. In addition descriptive analyses of methodology were used. The finding using regression analysis revealed that the probability of NPL is high when the Bank lends by owning collateral rather than without non collateral lending. On the other hand the probability of NPL is high when the Bank risk taking is very large as compare to small one. Risk assessment is another variable that affect NPL significantly. The probability of NPL low when risk assessment of the Bank is very strong. Strict monitoring and follows up, which is also significantly affecting NPL of the Bank. The probability of NPL reduce when strict monitoring and follow up is undertaken for the disburse loan. On the other hand In a Likert scale measure the finding shows average respondents agreed that credit assessment is related to loan default. They also agreed with the fact that loans follow up /monitoring is related to occurrence of nonperforming loans. On the other hand the response on relation between collateral and loan default indicated agreement. Respondents were of the view that aggressive lending and compromised integrity lead to occurrences of NPL.