Macroeconomic Determinants of Nonperforming loans in some selected banks of Ethiopia

Abstract

loans have a vital contribution towards development of economy. However, its nonpayment also leads to incidence of huge loss on banks in particular and country in general. Hence, this study was conducted to examine macroeconomic (growth in Gross domestic product, lending rate, inflation and exchange rate) determinants of NPLs of selected banks in Ethiopia. To this end, the researcher has selected nine senior banks in Ethiopia judgmentally. This study used secondary sources of data, which is panel data in nature, over the period 2002-2013 These data were collected from MoFED, NBE and CSA. Furthermore, random effect model was used to examine the determinants of NPLs. This research is an explanatory research design that identifies the cause and effect relationships between the NPLs and its macroeconomic determinants.