International Journal of Accounting Research

Abstract

Determinants of Non-Performing Loans in Ethiopian Development Bank

Dereje Lemma Lalisho*

This study aimed at examining the determinant of non-performing loan on development bank of Ethiopia. Other objectives included, to determine bank specific, Industry specific and macroeconomic factors for default loan performance. Based on DBE reports from 1990-2019 there was increase in NPLs between the studied period. Due to this the performance of the highly affected and the bank’s lead to insolvency. It aimed to determine determinant of non-performing loans in DBE by determining theoretical and empirical evidences that help answer the research objective. Data to do the analysis was obtained from bank’s annual report. The study used both primary by interviewee to staff of DBE those who were senior credit officers and team managers. Secondary data from the bank’s annual financial performance report, balance sheet and National Bank annual report of thirty consecutive fiscal periods from 1990 up to 2019. In this study correlation and multiple regressions analysis done with random effect model and Eview 9 software used to regress the data. Non performing ratio was dependent variable while Return on asset (earning capacity), liquidity ,capital adequacy, bank size, exchange rate ,lending rate (interest rate), inflation and GDP have taken as an independent variables. The study found out that there was significantly negative relationship between liquidity, inflation rate, exchange rate credit growth, bank size and earning ability with non- performing loan of development banks of Ethiopia. The relationship between Interest rate gross domestic products, capital adequacy ratio and exchange rate with non-performing loans were found to be positive.

Published Date: 2020-06-22; Received Date: 2020-03-13