A Retrospective Study of Non-Performing Loans of the Ghana Banking Sector between 1998 and 2019

Abstract

This study was conducted as a retrospective analysis of the determinants of Ghana’s Non-Performing Loans (NPLs) using historical time series annual data covering the period of 1998-2013 with an extension to 2019 on NPLs to Total Gross Loans (%). A rising NPLs in a bank portfolio is a pressing issue to bank managers and regulators. The ex-post facto research design was used for this study. Using the Seemingly Unrelated Regression model and Principal Component Analysis, the study found money supply, financial development, and macroeconomics variables to be significant determinants of NPL, except real income. NPL is a significant factor used by regulators to determine financial stability and bank asset quality. The study recommends policies targeted at influencing NPLs and the need for regulators to ensure good corporate governance by the banks to avoid bank failure.