The Impact of Non-performing Loans on Performance of Selected Private Commercial Banks in Ethiopia

Abstract

The objective of this study is to examine the impact of Non-performing Loans on bank’s  performance in case of some selected private commercial banks in Ethiopia. To achieve this objective, the study has used explanatory research design.  The selected banks are Awash Bank, Dashen Bank, Lion International Bank, Nib International Bank, United Bank, Wegagen Bank and Zemen Bank.  Major sources of data are annual reports of respective banks.  The data was analyzed by using of study STATA 13 software. The panel data which include Time series and cross sectional data are set covering for  10 years (2010/11 to 2019/20) to examine the relationship between nonperforming loans and other key internal and external variables along with the impacts on bank performance. The results of the study show that Non-perform loan Rate, Size of Loan and Advance and Loan Interest Ratio are statistically negative significant with Return On Asset(ROA) and Gross Domestic Product while Inflation Rate has statistically positive relation  with ROA.