Determinants of credit risk in the banking system in Sub-Saharan Africa

https://doi.org/10.1016/j.rdf.2018.08.001Get rights and content
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Abstract

This paper investigates the macroeconomic determinants of credit risk in the banking system of 22 Sub-Saharan African economies. We measure credit risk as the ratio of non-performing loans to total gross loans (NPLs) and employ dynamic panel data methods over the period 2000–2016. Using a variety of specifications, the results show that an increase in real GDP growth rate has a statistically and economically significant reducing effect on the ratio of non-performing loans to total gross loans. Furthermore, inflation rate, domestic credit to private sector by banks as a percent of GDP, trade openness, VIX as a proxy of global volatility, and the 2008/2009 global financial crisis, all have positive and significant impact on NPLs.

JEL classifications

E44
G21

Keywords

Non-performing loans
Macroeconomic factors
Banking system
Panel data
Sub-Saharan Africa

Cited by (0)

Peer review under responsibility of Africagrowth Institute.