Determinants of Non-Performing Loans of Banks in Ghana: A Case of Listed Banks

Abstract

This research investigates into the determinants of non-performing loans of listed banks in Ghana using a quantitative research design which allows for both entity and time dimension. Data for macroeconomic variables for the years 2006 to 2016 were obtained from World Development Indicators (WDI) whiles Bank specific data were collected from the annual reports of banks. The study found banks size to be positively related to NPLs. ROA is negatively related to NPLs but it was not significant. Efficiency variable is also not significantly related to NPLs. Inflation and GDPG were significantly related to NPLs while M2GDP was not significant. The study recommends a firm policy reform that pays attention to credit appraisal mechanisms to improve the quality of bank loan portfolios. Also, large local banks should do a thorough check on their borrowers so that loan default rate can be minimized. Management must also take some strategic decisions that can reduce the rate at which default rate rises