Assessing Non-Performing Loans in the Development Bank of Ethiopia, Bahir Dar District. An Analysis of Determinants Using Quantitative and Qualitative Approaches

Table of Contents

1. INTRODUCTION

1.1 Background of the study

1.2 Statement of the problem

1.3 Objectives of the study

1.3.1 General objective

1.3.2 Specific objectives

1.4. Significance of the study

1.5. Scope of the Study

1.6. Limitation of the Study

1.7. Organization of the Paper

2. REVIEW OF RELATED LITERATURE

2.1 Introduction

2.2 Theoretical Review Literature

2.3. Basic concept of Nonperforming Loan

2.3.1. Classifications of Loans and advance

2.3.2 Five Cs of Nonperforming/Bad loans

2.3.3 The “Five C’s-the Basic Components of a Credit Analysis:

2.3.4. Determinants of Non-Performing Loan (NPL)

2.4. Empirical studies

2.4.1. Empirical studies in other Countries

2.4.2. Empirical studies in Ethiopia

2.4.3 Present knowledge gap

2.5. Conceptual framework

2.6. Research Hypothesis

3. RESEARCH METHODOLOGY

3.1 Introduction

3.2 Research approach

3.3 Research Design

3.4. Types of data and Source

3.5. Target Population

3.6 Data collection instrument

3.7. Validity and Reliability of Research

3.8 Data analysis Technique

3.9. Ethical Considerations

4. DATA PRESENTATION, ANALYSIS AND DISCUSSION

4.1. Introduction

4.2 Response rate

4.3. Demographic Characteristics of Respondents

4.4. Descriptive Analysis

4.5. Decision rule

4.6. Correlation Analysis

4.7. Multiple Regression Analysis

4.7.1. Regression Model Diagnosis

4.7.2. Test for Multi co Linearity

4.7.5. Regression Analysis of Dependent and Independent Variables

4.7.6. Effects of the Determinant on nonperforming loans

4.8. Qualitative Analysis of Interview

4.9. Nonperforming loan ratio Analysis

5. SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 Introduction

5.2. Summary

5.3 Conclusion

5.4 Recommendations

5.5. Recommendation for Further study

Research Objectives and Themes

The primary objective of this research is to identify and examine the determinants of non-performing loans (NPLs) within the Development Bank of Ethiopia, specifically in the Bahir Dar District, by analyzing both bank-specific and external factors that contribute to loan defaults.

• Analysis of bank-specific determinants, including credit assessment processes and project monitoring.
• Investigation of external factors affecting loan repayment, such as political and social instability.
• Assessment of the current trend of NPL ratios within the district over the last five years.
• Evaluation of the impact of credit appraisal and collateral strength on loan quality.

Excerpt from the Thesis

Summary of Chapters

CHAPTER ONE: Provides the background of the study, identifies the research problem, and defines the research objectives and scope.

CHAPTER TWO: Reviews theoretical and empirical literature related to non-performing loans and identifies the current research gap.

CHAPTER THREE: Details the research methodology, including the approach, design, and data collection tools used for the study.

CHAPTER FOUR: Presents the primary data, empirical analysis, and discussion of the research findings regarding NPL determinants.

CHAPTER FIVE: Synthesizes the research findings, concludes the study, and offers recommendations based on the analysis.

Key Words

Bank specific factor, External factor, Nonperforming loan, Credit assessment, Project monitoring, Collateral strength, Credit appraisal, Bank top management pressure, Lending interest rate, Financial performance, Loan default, Credit risk, Market stability, Infrastructure, KYC assessment.

Frequently Asked Questions

What is the core focus of this research?

The study investigates the factors that determine the occurrence of non-performing loans (NPLs) at the Development Bank of Ethiopia, specifically within the Bahir Dar District.

What are the primary thematic areas covered?

The research focuses on the impact of bank-specific determinants like credit assessment, project monitoring, and appraisal, as well as external factors such as political instability and infrastructure availability.

What is the main objective of the thesis?

The main objective is to empirically examine the causality between independent variables (internal bank practices and external environmental factors) and the dependent variable (non-performing loans).

Which scientific methods were employed?

The study utilizes a mixed-methods approach, combining quantitative data analysis (SPSS, descriptive/inferential statistics, and multiple regression models) with qualitative insights from interviews conducted with branch and district managers.

What topics are discussed in the main body?

The main body covers the theoretical framework of credit analysis, detailed empirical studies regarding Ethiopian and international banking sectors, and an in-depth analysis of collected survey data.

Which keywords help define the scope of the study?

Key terms include Nonperforming loans, Bank-specific factors, External factors, Credit risk, Credit appraisal, and Financial sector stability.

How is "Non-performing loan" defined by the bank?

Following NBE directives, NPLs are defined based on quantitative criteria, specifically loans for which interest and principal payments are overdue for a stipulated period, rendering them non-recoverable under current contract terms.

What is the significance of the "Bank Top Management Pressure" variable?

The study suggests that unnecessary intervention from top management, which forces credit activities beyond standard policies and procedures, is a significant factor driving the increase in NPLs.