Determinants of non-performing loans in ghanaian banking sector; a study at rural banks in ghana.
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Date
2023
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KNUST
Abstract
The study's goal was to evaluate the factors that contribute to non-performing loans in Ghana's rural banks. As independent factors, interest rates, inflation, and loan growth were taken into consideration. The dependent variable chosen was a non-performing loan. 43 rural banks in Ghana made up the study's sample size, and SPSS was used to analyze the data. According to the study, the rate of inflation and non-performing loans from rural banks in Ghana are positively associated (0.316). The study also discovered a negative correlation between nonperforming loans and the real interest rate (-0.468) and loan growth rate (-0.013), respectively. With an adjusted R2 of 0.553, the study further revealed that the study factors collectively influenced the non-performing loans. Accordingly, 55.3 percent of the variation in the dependent variable in the regression model may be attributed to independent variables, whereas 44.7% is attributable to error terms, random chance, or other unexplained factors. There was additional significance in the F- Statistics of 23.409. As a result, the model was deemed reliable or well-fit to the variables' actual data. The analysis comes to the conclusion that the non-performing loans in Ghana's rural banks were jointly caused by the independent variables taken into account in the study. The study also discovered a significant correlation between non-performing loans and inflation. The study also comes to the conclusion that real interest rates and the growth rate of loans in Ghana's rural banks are negatively correlated with nonperforming loans. According to the study, the government must start taking steps to manage Ghana's real interest rate in order for the rural banks there to develop. Since interest rates are adversely correlated with the percentage of non-performing loans, lower rates would be more suited to lower the proportion of non-performing loans in Ghana. The study suggests that the government limit Ghana's inflation rate as there is some evidence to suggest that low inflation may improve loan performance in Ghana. The study further recommends that there is need for the rural banks to initiate policies that will control the amount of loans they have.
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A thesis submitted to the school of business, college of humanities, Kwame Nkrumah university of science and technology in partial fulfillment of the requirements for the degree of master of business administration