FACTORS AFFECTING NON-PERFORMING LOAN IN THE CASE OF DEVELOPMENT BANK OF ETHIOPIA CENTERAL REGION

Abstract

Banks have a vital contribution towards the development of economy by financing different sector. The objective of this study is assessing the factors affecting non-performing loans in the case of Development bank of Ethiopia in Addis Ababa credit and risk departments. The research has been analyzed through both descriptive and explanatory form of research design to provide solutions to the research problems Purposive sampling is used to draw the sampled departments and then a convenience sampling method is used to distribute the questionnaire to 121 respondents. This study used quantitative research approach and both primary and secondary data sources. The secondary source of data used the recent five years (2018/19-2022/23G.C) Development bank of Ethiopia audited financial annual reports. Both descriptive and inferential statistics have been used to find frequency percentage regression and correlation. The data are analyzed by using SPSS version25package.Correlation analysis results shows that all the five major factors have a strong positive relationship with NPL in Development bank of Ethiopia and also the researcher found out that not all of the factors have positive and significant effect on NPL which is from the findings there is high inflation rate and NPL weak monitoring/follow in Development bank of Ethiopia this implies that the bank is not strictly follow and mange it loan status. In additions to this from the recorded date of NPL trend analysis of Development bank of Ethiopia shows that there is high NPL percentage which indicates that the bank has weak NPL collections and poor follow up so this also comes due to borrower may not meet obligations per the terms and conditions of the loan contract. Based on the findings, the study recommends that the Development bank of Ethiopia management should investigate the main reason of factor affecting of NPL and take corrective measure accordingly