Business Cycle Effects on Commercial Bank Loan Portfolio Performance in Developing Economies

2011 ◽  
Author(s):  
Camilo Mondragon-Velez ◽  
Jack D. Glen
Keyword(s):  
Business Cycle ◽  
Commercial Bank ◽  
Developing Economies ◽  
Bank Loan ◽  
Portfolio Performance ◽  
Loan Portfolio

scholarly journals FEATURES OF FORMATION OF CREDIT POLICY AND CREDIT PORTFOLIO OF COMMERCIAL BANK IN MODERN CONDITIONS

2021 ◽  
Author(s):  
Natalia Ostrovska
Keyword(s):  
Commercial Bank ◽  
Banking Sector ◽  
Cash Flows ◽  
Bank Loan ◽  
Economic Conditions ◽  
Credit Policy ◽  
Loan Portfolio ◽  
Loan Market ◽  
Modern Economic ◽  
Banking Institution

The level of development of production, social infrastructure and the degree of development of society as a whole largely depends on how developed the banking sector of the state is. An important role in fulfilling the tasks is assigned to commercial banks, which can provide credit resources to enterprises and organizations, as well as citizens. In addition, an efficient and stable banking sector is a key factor in the growth of the national economy. The purpose of the article is to determine the features of the formation of credit policy and loan portfolio of a commercial bank in modern economic conditions. The article identifies the features of the formation of credit policy and loan portfolio of a commercial bank in modern economic conditions. It is generalized that the main specific features of credit relations are: their emergence at the stage of redistribution of final income; formation on the basis of return and with the payment of interest; impact on the structure and volume of cash flows and features of the bank loan market. It is proved that the study of the bank loan market involves the analysis of the structure of the loan portfolio, its most important areas are the assessment of the structure of the loan portfolio by type of customers, terms of lending, as well as by type of currency and more. It is determined that the credit policy of a banking institution is one of the main elements of banking policy, which is a strategy and tactics of the bank to attract temporarily free funds in the economy and direct them to credit operations. In the process of credit risk management, an important element is the ability of the bank's management to choose correctly: the sphere of management in which it is advisable to concentrate the bank's lending activities at a given time; "Its client", based on its creditworthiness and other factors that are of paramount importance for the bank in deciding on the possibility of granting a loan, etc. The credit policy of the banking institution determines the priorities in the development and improvement of lending activities, development of the credit process and increase its efficiency and ensures the stability, profitability and liquidity of the bank.

scholarly journals Problems of qualitative evaluation of commercial bank loan

2020 ◽  
pp. 15-19
Author(s):  
Nadiia SOLOVEI ◽  
Ihor SKRYPNYCHENKO
Keyword(s):  
Commercial Bank ◽  
Financial Stability ◽  
Risk Index ◽  
Maximum Yield ◽  
Bank Loan ◽  
Credit Policy ◽  
Loan Portfolio ◽  
Banking Institutions ◽  
Credit Portfolio

The article defines the nature of the loan portfolio, as well as the problems in the assessment and analysis of the commercial bank loan portfolio. In order to improve the existing credit portfolio of the bank, the dynamics, categories of the borrower ratio and the quality of the loan portfolio are analyzed, based on the obtained data, significant factors influencing the formation and management of the analyzed bank's loan portfolio are determined. Generation of a loan portfolio is usually subject to issuance of loans with maximum yield on the same terms. The profitability of a loan transaction is determined by the amount of the interest rate on the specific loan, the duration of the loan and the accepted system of calculation of interest payments. Practice shows that the success of managing the efficiency of banking investments and the formation of an effective structure of the bank's credit portfolio depend to a large extent on the skills of managing the banking institutions that carry out optimal formation, management of the credit portfolio and good management to ensure the efficiency of activities with the least possible risk and maximize results. The quality of the loan portfolio is analyzed using the coefficient method based on the calculation and analysis of trends in the development of relevant quantitative indicators. In the economic literature, the indicators that we can use to assess the quality of a bank's loan portfolio are divided into two groups: the credit portfolio risk index and the profitability of the credit business. The results of the analysis allow us to draw conclusions about the level of risk and profitability of the bank's loan portfolio and to develop measures to improve the effectiveness of the bank's credit policy. Based on the analysis of the structure and quality of the loan portfolio, the Bank's management is given an opinion to consider in order to determine the priority instructions for the placement of credit resources, limit the concentration and diversification of the loan portfolio and set limits on the execution of individual loans. It is concluded that prudent credit policy with an increase in rates, constant monitoring of the components of the credit portfolio, urgent management measures of banking institutions in the field of risk management should lead to an increase in lending and improve the quality of the portfolio management system. It is noted that the implementation of mainly quality measures to improve the structure of the loan portfolio will inevitably affect the financial stability of the bank and business efficiency, as well as increase its competitiveness and operational security.

scholarly journals THE EVALUATION MODEL OF A COMMERCIAL BANK LOAN PORTFOLIO

2008 ◽  
Vol 9 (4) ◽  
pp. 269-277 ◽  
Author(s):  
Irena Mačerinskienė ◽  
Laura Ivaškevičiūtė
Keyword(s):  
Commercial Bank ◽  
Negative Impact ◽  
Evaluation Model ◽  
Banking System ◽  
Business Environment ◽  
Bank Loan ◽  
Successful Performance ◽  
Loan Portfolio ◽  
Portfolio Evaluation ◽  
Further Development

As in other countries where the traditional banking is dominating, the major part of banks’ assets and loan interest income makes a significant share of banks’ income. Inappropriate loan portfolio evaluation might have negative impact on a commercial bank's performance, the overall banking system, and the economic growth of the country. It is not enough for a bank to have a precise strategy, high lending culture, and observance of general principles to ensure the further growth of profitable loans. It is necessary to apply various evaluation methods of historical and present data, of ratios and factors enabling to implement coherent and comprehensive loan portfolio evaluation, and to encompass different factors as far as possible. Due to a complex business environment and intense competition between banks, it is not enough to evaluate a commercial bank loan portfolio only through the aspect of credit risk, i.e. loss probability level aspect, as is suggested by the scientists. As to every business subject striving for a successful performance and further development, it is essential for a bank to earn profit by financing the other subjects, and to establish the level of assets liquidity.

scholarly journals LABOR MARKET DYNAMICS UNDER TECHNOLOGY SHOCKS: THE ROLE OF SUBSISTENCE CONSUMPTION

2021 ◽  
pp. 1-29
Author(s):  
Sangyup Choi ◽  
Myungkyu Shim
Keyword(s):  
Labor Market ◽  
Business Cycle ◽  
Developing Economies ◽  
Structural Var ◽  
Market Dynamics ◽  
Technology Shocks ◽  
Structural Factors ◽  
Long Run ◽  
Labor Market Dynamics ◽  
Short Run

This paper establishes new stylized facts about labor market dynamics in developing economies, which are distinct from those in advanced economies, and then proposes a simple model to explain them. We first show that the response of hours worked and employment to a technology shock—identified by a structural VAR model with either short-run or long-run restrictions—is substantially smaller in developing economies. We then present compelling empirical evidence that several structural factors related to the relevance of subsistence consumption across countries can jointly account for the relative volatility of employment to output and that of consumption to output. We argue that a standard real business cycle (RBC) model augmented with subsistence consumption can explain the several salient features of business cycle fluctuations in developing economies, especially their distinct labor market dynamics under technology shocks.

Determinants of commercial bank loan and advance disbursement: the case of private Ethiopian commercial banks

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tekeste Birhanu ◽  
Sewunet Bosho Deressa ◽  
Hossein Azadi ◽  
Ants-Hannes Viira ◽  
Steven Van Passel ◽  
...  
Keyword(s):  
Credit Risk ◽  
Commercial Bank ◽  
Commercial Banks ◽  
Inflation Rate ◽  
Bank Loans ◽  
Bank Loan ◽  
Portfolio Investment ◽  
Negative Effects ◽  
Content Type ◽  
Lending Rate

PurposeThis paper aimed to investigate the determinants of loans and advances from commercial banks in the case of Ethiopian private commercial banks.Design/methodology/approachThe study randomly selected seven commercial banks to represent the population stratified on their asset, deposit and paid-up capital amounts. The study utilized an unbalanced panel data model as each bank started operation at a different period of time and considered the period 1995–2016 for secondary details.FindingsThe findings showed that the deposit size, credit risk, portfolio investment, average lending rate, real gross domestic product (GDP) and inflation rate had significant and optimistic effects on the lending and advancement of private commercial banks. On the contrary, liquidity ratio had significant and negative effects on private commercial bank loans and advances. Finally, the study forwarded a feasible recommendation for concerned organs to focus on deposit size, credit risk, portfolio investment, average lending rate, real GDP, inflation rate and liquidity ratio. The results of this study will help banking industry policymakers and planners understand how to minimize inflation and unemployment by improving development and sustainable economic growth.Originality/valueThe findings of this study can also affect the general attitudes of a society by increasing knowledge and improve the quality of life for the general public.

Revisiting earnings quality and bank efficiency among East African developing economies: do systemic banking and financial crises matter?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
David Mutua Mathuva ◽  
Moses Nyangu Nzuki
Keyword(s):  
Earnings Management ◽  
Developing Economies ◽  
Earnings Quality ◽  
Bank Loan ◽  
East African ◽  
Loan Loss ◽  
Profit Efficiency ◽  
Regional Economic ◽  
Content Type ◽  
Economic Bloc

PurposeIn this paper, the authors investigate whether the systemic local banking crises (LBCs) and global financial crisis (GFC) impact the association between bank profit efficiency and earnings quality in developing economies.Design/methodology/approachUsing panel data spanning 29 years over the period 1991–2019 for 169 banks drawn from five East African countries, the authors perform difference-in-difference multivariate analyses using the generalised method of moments (GMM) system estimator on a sample consisting of 2,261 bank-year observations.FindingsThe results, which are robust for endogeneity and other checks, show that banks with higher profit efficiency consistently report higher quality earnings. The authors further establish that whereas systemic LBCs contribute negatively to bank earnings quality, the GFC tends to have a positive impact. These results are upheld when the joint impacts of both systemic LBCs, GFC and profit efficiency on earnings quality are considered. The positive influence of profit efficiency and GFC on earnings quality is pronounced under income-decreasing earnings management. The impacts of profit efficiency, LBCs and GFC on earnings quality appear to be non-monotonic and vary across the sampled countries.Research limitations/implicationsThe study's findings are based on banks in five developing countries within a regional economic bloc. Additional studies could focus on other economic blocs for enhanced generalisability of the findings. In addition, some of the variables examined are studied at bank-level, while other variables are at country-level. Finally, the study establishes an association between the variables of interest, and this does not necessarily imply causation.Practical implicationsThe results provide useful insights to bank regulatory and supervisory agencies on the need to exercise increased risk-based scrutiny over bank loan loss provisioning and minimum loan loss reserve requirements. From an audit perspective, auditors need to be cautious and apply an enhanced risk-based audit especially when auditing banks during and after a financial, banking or systemic crisis. Credit rating agencies need to pay closer attention to the LLPs of distressed banks. Finally, bank investors and customers should be cautious when using bank financial statements, since bank managers of poorly performing banks might engage in aggressive earnings management.Originality/valueThe study is perhaps the first to examine the joint effects of systemic LBCs on the association between bank profit efficiency and the quality of earnings in a larger dataset of banks in a developing regional economic bloc. The authors also employ the GMM system estimator in the modelling, which helps address some weaknesses in prior studies.

Factors Affecting the Sustainability of Microfinance Institutions: A Case of Malawi Microfinance Institutions

2021 ◽  
Author(s):  
Helex Kayembe ◽  
Yunjian Lin ◽  
George N. Chidimbah Munthali ◽  
Wu Xuelian ◽  
Lazarus Obed Livingstone Banda ◽  
...  
Keyword(s):  
Corporate Governance ◽  
Portfolio Management ◽  
Developing Economies ◽  
Statistical Significance ◽  
Least Square ◽  
Microfinance Institutions ◽  
Cross Sectional Survey ◽  
Loan Portfolio ◽  
Cross Sectional ◽  
Factors Affecting

Abstract Background: Micro Finance Institutions (MFIs) have been used as a tool for poverty alleviation in many developing economies globally, including Malawi. However, their sustainability in many countries has been dependent solely on loan repayment, donor aid, and subsidies. Aim: This study aimed at investigating the factors that influence the sustainability of MFIs in Malawi. Methods: A cross-sectional survey was conducted from November to December 2020 among the MFIs employees in the central region of Malawi. Convenience and purposive sampling techniques were used to collect data online using a google form sent via social media platforms. Data were analyzed using IBM SPSS software with Statistical significance placed at .05. Results: 120 respondents completed the survey representing a 79.3% response rate, of which 63% were male. The majority of the respondents fell within the age group of 31-40 years, representing 58%, having attained universities and vocational colleges' education level, representing 32.8%. With an experience of above 16 years, representing 41.2% of which were branch managers, representing 49.6%. The results of the ordinary least square regression indicated that reporting and loan management system (RLMS) (β=0.200, P=0.021), corporate-governance (β=0.257, P=0.004), and commercialization (β=0.161, P=0.047) were positively significantly influencing the sustainability of MFI. On the other hand, loan design/type (β =-0.211, P=0.006), loan portfolio management (β =-0.179, P=0.050) were found to be negatively impacting the MFI. Lastly, variables of over-indebtedness (B= 0.077, P=0.426), loan disbursement (β =0.121, P=0.104) were found statistically insignificant. Conclusion: Our study argues that commercialization, standardized reporting, and effective loan portfolio management systems, stakeholder-based approach to corporate governance, and favored board independence through scale and cost management is critical to improving MFIs' financial sustainability.

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