FACTORS AFFECTING NON-PERFORMING LOAN IN THE CASE OF ETHIOPIAN COMMERCIAL BANKS

Abstract

The main objectives of the study were to examine factors affecting non-performing loans in Ethiopian commercial banks in the period 2002 – 2016. The study used secondary data which is audited annual financial reports of the seven selected banks. Descriptive and inferential statistics are used to analyze the data collected. The descriptive statistic shows the trend analysis of the dependent and independent variables by using graphical methods, while panel regression analysis was used to identify the relative importance of each independent variables influence NPLs of Ethiopian banks by using E-views 9 software. The finding of the study shows that the trend analysis of dependent and independent variables are downward sloping and NPLs level indicates above the threshold of NBE rules. The regression result shows the determinant variables are a significant relationship with NPLs. Based on the findings the researcher forward subsequent recommendation: each banks improve the inspection techniques and bankers must understand how the risks of individual loans and portfolios are interrelated and the bank managers should be ensure the credit department adequately resourced to support for monitoring activities and follow up the borrowed fund are being used the intended purpose and timely monitor the loan is being disbursed.