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Macroeconomic and bank-specific determinants of non-performing loans in sub-Saharan Africa

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  • Trust R. Mpofu

    (School of Economics, University of Cape Town)

  • Eftychia Nikolaidou

    (School of Economics, University of Cape Town)

Abstract

This paper investigates the macroeconomic and bank-specific determinants of non-performing loans (NPLs) in eight sub-Saharan African economies. The study is motivated by the fact that some of these economies have experienced banking crises in the past, their NPLs have relatively been rising post the 2008/2009 global financial crisis and have recently experienced rapid growth of bank credit to the private sector. Such issues pose credit risks in the banking sector. Employing dynamic panel data methods over the period 2000-2017 and using a variety of specifications, the results show that NPLs decrease when real GDP growth rate, return on equity, return on assets, and bank size increase and rises when public debt, inflation rate, broad money, and domestic credit to private sector by banks increase.

Suggested Citation

  • Trust R. Mpofu & Eftychia Nikolaidou, 2019. "Macroeconomic and bank-specific determinants of non-performing loans in sub-Saharan Africa," School of Economics Macroeconomic Discussion Paper Series 2019-02, School of Economics, University of Cape Town.
    • Handle: RePEc:ctn:dpaper:2019-02
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    Cited by:

    1. Odunayo Magret Olarewaju, 2020. "Investigating the factors affecting nonperforming loans in commercial banks: The case of African lower middle‐income countries," African Development Review, African Development Bank, vol. 32(4), pages 744-757, December.

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