The Nexus Among Non-performing Loans, Lending Rates and Financial Performance of Banks in Ghana

Amos Ninson; Augustina Sidza; Dominic Ampah

doi:doi:10.11648/j.ijfbr.20210705.13

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The Nexus Among Non-performing Loans, Lending Rates and Financial Performance of Banks in Ghana

Amos Ninson, Augustina Sidza, Dominic Ampah

Published in International Journal of Finance and Banking Research (Volume 7, Issue 5)

Received: 25 August 2021 Accepted: 24 September 2021 Published: 12 October 2021

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Abstract

The main purpose of the study was to examine the relationship among non-performing loans, Commercial Banks’ lending rate and financial performance of Commercial Banks in Ghana. The time series design was used along with the quantitative research approach. Secondary data on the selected variable and some control variables were accessed from the economic and monetary data base of the Central Bank of Ghana from 2006 to 2019 and used for the analysis. Both theoretical and empirical literature was reviewed to create a research gap for the study. Time series properties of the variables such stationarity and descriptive were done to assess the stability of the time series variables. The Augmented Dickey-Fuller unit-root test was used for the stationarity test since the time series plots indicated no possibility of serious structural breaks. Return on assets before tax, return on equity after tax, Commercial Banks interest rate, inflation and inter-banks interest rate were found to be significant determinants of Non-performing loans in the financial sector of Ghana. It was concluded that simultaneous relationships exist among the level of non-performing loans, Commercial Banks’ lending rate and financial performance of Banks in Ghana, hence anyone of them could serve as a lead variable or policy variable in ensuring a stable financial system in Ghana. It was recommended that the management of commercial banks must exploit other avenues of generating income such as direct project financing among others and reduce reliance on interest payment through increase in interest charges.

Published in	International Journal of Finance and Banking Research (Volume 7, Issue 5)
DOI	10.11648/j.ijfbr.20210705.13
Page(s)	123-132
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Commercial Bank, Lending, Loans

References

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APA Style

Amos Ninson, Augustina Sidza, Dominic Ampah. (2021). The Nexus Among Non-performing Loans, Lending Rates and Financial Performance of Banks in Ghana. International Journal of Finance and Banking Research, 7(5), 123-132. https://doi.org/10.11648/j.ijfbr.20210705.13

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ACS Style

Amos Ninson; Augustina Sidza; Dominic Ampah. The Nexus Among Non-performing Loans, Lending Rates and Financial Performance of Banks in Ghana. Int. J. Finance Bank. Res. 2021, 7(5), 123-132. doi: 10.11648/j.ijfbr.20210705.13

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AMA Style

Amos Ninson, Augustina Sidza, Dominic Ampah. The Nexus Among Non-performing Loans, Lending Rates and Financial Performance of Banks in Ghana. Int J Finance Bank Res. 2021;7(5):123-132. doi: 10.11648/j.ijfbr.20210705.13

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@article{10.11648/j.ijfbr.20210705.13,
  author = {Amos Ninson and Augustina Sidza and Dominic Ampah},
  title = {The Nexus Among Non-performing Loans, Lending Rates and Financial Performance of Banks in Ghana},
  journal = {International Journal of Finance and Banking Research},
  volume = {7},
  number = {5},
  pages = {123-132},
  doi = {10.11648/j.ijfbr.20210705.13},
  url = {https://doi.org/10.11648/j.ijfbr.20210705.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20210705.13},
  abstract = {The main purpose of the study was to examine the relationship among non-performing loans, Commercial Banks’ lending rate and financial performance of Commercial Banks in Ghana. The time series design was used along with the quantitative research approach. Secondary data on the selected variable and some control variables were accessed from the economic and monetary data base of the Central Bank of Ghana from 2006 to 2019 and used for the analysis. Both theoretical and empirical literature was reviewed to create a research gap for the study. Time series properties of the variables such stationarity and descriptive were done to assess the stability of the time series variables. The Augmented Dickey-Fuller unit-root test was used for the stationarity test since the time series plots indicated no possibility of serious structural breaks. Return on assets before tax, return on equity after tax, Commercial Banks interest rate, inflation and inter-banks interest rate were found to be significant determinants of Non-performing loans in the financial sector of Ghana. It was concluded that simultaneous relationships exist among the level of non-performing loans, Commercial Banks’ lending rate and financial performance of Banks in Ghana, hence anyone of them could serve as a lead variable or policy variable in ensuring a stable financial system in Ghana. It was recommended that the management of commercial banks must exploit other avenues of generating income such as direct project financing among others and reduce reliance on interest payment through increase in interest charges.},
 year = {2021}
}

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TY  - JOUR
T1  - The Nexus Among Non-performing Loans, Lending Rates and Financial Performance of Banks in Ghana
AU  - Amos Ninson
AU  - Augustina Sidza
AU  - Dominic Ampah
Y1  - 2021/10/12
PY  - 2021
N1  - https://doi.org/10.11648/j.ijfbr.20210705.13
DO  - 10.11648/j.ijfbr.20210705.13
T2  - International Journal of Finance and Banking Research
JF  - International Journal of Finance and Banking Research
JO  - International Journal of Finance and Banking Research
SP  - 123
EP  - 132
PB  - Science Publishing Group
SN  - 2472-2278
UR  - https://doi.org/10.11648/j.ijfbr.20210705.13
AB  - The main purpose of the study was to examine the relationship among non-performing loans, Commercial Banks’ lending rate and financial performance of Commercial Banks in Ghana. The time series design was used along with the quantitative research approach. Secondary data on the selected variable and some control variables were accessed from the economic and monetary data base of the Central Bank of Ghana from 2006 to 2019 and used for the analysis. Both theoretical and empirical literature was reviewed to create a research gap for the study. Time series properties of the variables such stationarity and descriptive were done to assess the stability of the time series variables. The Augmented Dickey-Fuller unit-root test was used for the stationarity test since the time series plots indicated no possibility of serious structural breaks. Return on assets before tax, return on equity after tax, Commercial Banks interest rate, inflation and inter-banks interest rate were found to be significant determinants of Non-performing loans in the financial sector of Ghana. It was concluded that simultaneous relationships exist among the level of non-performing loans, Commercial Banks’ lending rate and financial performance of Banks in Ghana, hence anyone of them could serve as a lead variable or policy variable in ensuring a stable financial system in Ghana. It was recommended that the management of commercial banks must exploit other avenues of generating income such as direct project financing among others and reduce reliance on interest payment through increase in interest charges.
VL  - 7
IS  - 5
ER  -

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Author Information

Amos Ninson

Finance Directorate, Accra Technical University, Accra, Ghana
Augustina Sidza

Finance Directorate, Accra Technical University, Accra, Ghana
Dominic Ampah

Internal Audit Directorate, Accra Technical University, Accra, Ghana

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APA Style

Amos Ninson, Augustina Sidza, Dominic Ampah. (2021). The Nexus Among Non-performing Loans, Lending Rates and Financial Performance of Banks in Ghana. International Journal of Finance and Banking Research, 7(5), 123-132. https://doi.org/10.11648/j.ijfbr.20210705.13

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ACS Style

Amos Ninson; Augustina Sidza; Dominic Ampah. The Nexus Among Non-performing Loans, Lending Rates and Financial Performance of Banks in Ghana. Int. J. Finance Bank. Res. 2021, 7(5), 123-132. doi: 10.11648/j.ijfbr.20210705.13

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AMA Style

Amos Ninson, Augustina Sidza, Dominic Ampah. The Nexus Among Non-performing Loans, Lending Rates and Financial Performance of Banks in Ghana. Int J Finance Bank Res. 2021;7(5):123-132. doi: 10.11648/j.ijfbr.20210705.13

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@article{10.11648/j.ijfbr.20210705.13,
  author = {Amos Ninson and Augustina Sidza and Dominic Ampah},
  title = {The Nexus Among Non-performing Loans, Lending Rates and Financial Performance of Banks in Ghana},
  journal = {International Journal of Finance and Banking Research},
  volume = {7},
  number = {5},
  pages = {123-132},
  doi = {10.11648/j.ijfbr.20210705.13},
  url = {https://doi.org/10.11648/j.ijfbr.20210705.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20210705.13},
  abstract = {The main purpose of the study was to examine the relationship among non-performing loans, Commercial Banks’ lending rate and financial performance of Commercial Banks in Ghana. The time series design was used along with the quantitative research approach. Secondary data on the selected variable and some control variables were accessed from the economic and monetary data base of the Central Bank of Ghana from 2006 to 2019 and used for the analysis. Both theoretical and empirical literature was reviewed to create a research gap for the study. Time series properties of the variables such stationarity and descriptive were done to assess the stability of the time series variables. The Augmented Dickey-Fuller unit-root test was used for the stationarity test since the time series plots indicated no possibility of serious structural breaks. Return on assets before tax, return on equity after tax, Commercial Banks interest rate, inflation and inter-banks interest rate were found to be significant determinants of Non-performing loans in the financial sector of Ghana. It was concluded that simultaneous relationships exist among the level of non-performing loans, Commercial Banks’ lending rate and financial performance of Banks in Ghana, hence anyone of them could serve as a lead variable or policy variable in ensuring a stable financial system in Ghana. It was recommended that the management of commercial banks must exploit other avenues of generating income such as direct project financing among others and reduce reliance on interest payment through increase in interest charges.},
 year = {2021}
}

Copy | Download

TY  - JOUR
T1  - The Nexus Among Non-performing Loans, Lending Rates and Financial Performance of Banks in Ghana
AU  - Amos Ninson
AU  - Augustina Sidza
AU  - Dominic Ampah
Y1  - 2021/10/12
PY  - 2021
N1  - https://doi.org/10.11648/j.ijfbr.20210705.13
DO  - 10.11648/j.ijfbr.20210705.13
T2  - International Journal of Finance and Banking Research
JF  - International Journal of Finance and Banking Research
JO  - International Journal of Finance and Banking Research
SP  - 123
EP  - 132
PB  - Science Publishing Group
SN  - 2472-2278
UR  - https://doi.org/10.11648/j.ijfbr.20210705.13
AB  - The main purpose of the study was to examine the relationship among non-performing loans, Commercial Banks’ lending rate and financial performance of Commercial Banks in Ghana. The time series design was used along with the quantitative research approach. Secondary data on the selected variable and some control variables were accessed from the economic and monetary data base of the Central Bank of Ghana from 2006 to 2019 and used for the analysis. Both theoretical and empirical literature was reviewed to create a research gap for the study. Time series properties of the variables such stationarity and descriptive were done to assess the stability of the time series variables. The Augmented Dickey-Fuller unit-root test was used for the stationarity test since the time series plots indicated no possibility of serious structural breaks. Return on assets before tax, return on equity after tax, Commercial Banks interest rate, inflation and inter-banks interest rate were found to be significant determinants of Non-performing loans in the financial sector of Ghana. It was concluded that simultaneous relationships exist among the level of non-performing loans, Commercial Banks’ lending rate and financial performance of Banks in Ghana, hence anyone of them could serve as a lead variable or policy variable in ensuring a stable financial system in Ghana. It was recommended that the management of commercial banks must exploit other avenues of generating income such as direct project financing among others and reduce reliance on interest payment through increase in interest charges.
VL  - 7
IS  - 5
ER  -

Copy | Download