ISSN: 2222-6990
Open access
Around the world, financial institutions face massive risk on non-performing loans. As a result of the previous, financial institutions are obliged to review their lending policies. However, its nonpayment also leads to massive loss on banks in particular and the country in general. Non-performing credits (NPL) is a prevalent issue that influences budgetary markets dependability as a rule and banking industry suitability specifically. In recent decades, financial crises in various countries have often preceded the rise in non-performing loans (NPLs) in the banks' asset portfolios. The increase in NPLs is an adverse impact on the banking sector. Hence, understanding the determinants of NPLs is crucial to ensure the overall economy's efficiency and soundness. This research studies the factors affecting NPLs in the Malaysian banking industry. Through this research, the researchers can examine the relationships between the dependent variable, NPLs and independent variables, bank interest rate, inflation rate, and unemployment rate. The research uses monthly secondary data from 2015 to 2019, collected from the financial statements and DataStream and applies Descriptive Analysis, Normality Test, Correlation and Multiple Regression Analyses. The results indicate that unemployment and inflation significantly impact and relationship with the NPLs in the Malaysian banking industry. Meanwhile, the interest rate, despite its insignificance, positively affects the NPLs in Malaysia. The findings have important implications on policymaking, besides adding new knowledge to the existing literature.
Atem, M. N. C. (2017). Factors Affecting Non-Performing Loans: A case study of KCB Bank Kenya Limited Nairobi Region. Journal of Finance and Economics, 13(3), 1–90.
Amanda (2019). Winter is coming for China's rural banks as overdue loan pressure increases. Retrieved December 16, 2019, from https://www.scmp.com/economy /china-economy/article/3042252/chinas-rural-banks-struggling-under-pressure-overdue-loans
Aynalem, S. (2018). Factors Affecting Non-Performing Loans in Commercial Bank of Ethiopia. Retrieved August 27, 2018, from https://papers.ssrn.com /sol3/papers.cfm?abstract_id=3215668
Badar, M., & Javid, Y. A. (2013). Impact of macroeconomic forces on non-performing loans: An empirical study of commercial banks in Pakistan. WSEAS Transactions on Business and Economics, 10(1), 40–48.
Bank-specific Factors Affecting Non-performing Loans in Developing Countries: Case Study of Indonesia. (2018, February). Retrieved February, 2018, from http://www.jafeb.org/journal/article.php?code=61553
Billings, R., Gonzalez-Hermosillo, B., & Pazarbasioglu, C. (1996). Banking System Fragility: Likelihood Versus Timing of Failure: An Application to the Mexican Financial Crisis. Working Paper No. 96/142.
Bofondi, M., & Gobbi, G. (2017). The Big Promise of Fintech. European Economic Review, 2(107), 10–14.
Durafe, A., & Singh, M. (2016). Cyclical Behavior of Public and Private Sector Banks: A Comparative Study of Non-performing Assets. Journal of Business and Management Research, 1(1), 14-25. https://doi.org/10.3126/jbmr.v1i1.14548
Ekanayake, N., & Azeez, A. A. (2015). Determinants of Non-Performing Loans in Licensed Commercial Banks?: Evidence from Sri Lanka. Asian Economic and Financial Review, 5(6), 868–882. https://doi.org/10.18488/journal.aefr/2015.5.6/102.6.868.882
Fofack, H. (2005). Non-Performing Loans in Sub-Saharan Africa: Causal Analysis and Macroeconomic Implications. World Bank Policy Research Working Paper, 1–36.
Greenidge, K., & Grosvenor, T. (2009). Forecasting Non-Performing Loans in Barbados. Annual Review Seminar Research Department Central Bank of Barbados, 1(246).
Kartikasary, M., Marsintauli, F., Serlawati, E., & Laurens, S. (2020). Factors affecting the non-performing loans in Indonesia. Accounting, 6(2), 97–106.
Klein, N. (2013). Non-Performing Loans in CESEE: Determinants and Impact on Macroeconomic Performance. IMF Working Papers, 13(72), 1.
Makri, V., Tsagkanos, A., & Bellas, A. (2014). Determinants of Non-Performing Loans: The case of Eurozone. Panoeconomicus, 61(2), 193–206. https://doi.org/10.2298/PAN1402193M
Messai, A. S., & Jouini, F. (2013). Micro and Macro Determinants of Non-Performing Loans. International Journal of Economics and Financial Issues, 3(4), 852–860.
Murthy, U., Kamil, M. N., Mariadas, A. P., & Devi, D. (2017). Factors Influencing Non-Performing Loans in Commercial Banks: The Case of Banks in Selangor. International Journal of Business and Management, 12(2), 246.
Patricia-Nezianya, N., & Izuchukwu, D. (2014). The Implications of Non Performing Loans on Nigerian Economic Growth (1992-2009). IOSR Journal of Business and Management, 16(2), 06–11.
Rinaldi, L., & Sanchis-arellano, A. (2006). What Explains Household Non-Performing Loans? Working Paper Series, 570, 45. Retrieved from http://ssrn.com/abstract_id=872528
Saba, I., & Kouser, R. (2012). Determinants of Non Performing Loans: Case of US Banking Sector. The Romanian Economic Journal, XV(44), 125–136.
Saini, P., & Sindhu, J. (2014). Role of Commercial Bank in the Economic Development of India. International Journal of Engineering and Management Research, 4(1), 27-31.
Santoso, T. I. (2015). "Non performing loan: impact of Internal and external factor evidence in Indonesia". International Journal of Humanities and Social Science Invention, 4(1), 87-91, 2015
Shingjergji, A., & Shingjergji, I. (2013). An Analysis of the Non-performing Loans in the Albanian Banking System. International Journal of Business and Commerce, 2(6), 1–11.
Skarica, B. (2014). Determinants of non-performing loans in Central and Eastern European countries. Financial Theory and Practice, 38(1), 37–59.
Vatansever, M., & Hepsen, A. (2015). Determining Impacts on Non-Performing Loan Ratio in Turkey. Journal of Applied Finance and Banking, 5(1), 1–11.
Warue, B. N. (2013). The Effects of Bank Specific and Macroeconomic Factors on Nonperforming Loans in Commercial Banks in Kenya: A Comparative Panel Data Analysis. Advances in Management & Applied Economics, vol 3(2), 135–164.
Zainol, J. M., Nor, A. M., Ibrahim, S. N., & Daud, S. (2018). Macroeconomics Determinants of Non-Performing Loans in Malaysia: An ARDL Approach. International Journal of Academic Research in Business and Social Sciences, 8(10), 692–706.
In-Text Citation: (Mohamed et al., 2021)
To Cite this Article: Mohamed, S., Hamid, M. A. A., Hosin, H., & Isa, M. A. M. (2021). Non-performing Loans Issues in Malaysian Banking Industry. International Journal of Academic Research in Business and Social Sciences, 11(3), 877-891.
Copyright: © 2021 The Author(s)
Published by Human Resource Management Academic Research Society (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode