Unraveling the Loan Growth Threshold Effect on Non-Performing Loans During Total Dollarization in Zimbabwe
The availability of bank loans is a vital component in determining the investment and spending patterns that influence economic growth. This article examines the threshold effect of loan growth on non-performing loans (NPLs) in the Zimbabwean banking industry during dollarization. The study employe...
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| Format: | Article |
| Language: | English |
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Vilnius University Press
2024-05-01
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| Series: | Organizations and Markets in Emerging Economies |
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| Online Access: | https://www.journals.vu.lt/omee/article/view/32122 |
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| author | Blessing Katuka Calvin Mudzingiri Edson Vengesai |
| author_facet | Blessing Katuka Calvin Mudzingiri Edson Vengesai |
| author_sort | Blessing Katuka |
| collection | DOAJ |
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The availability of bank loans is a vital component in determining the investment and spending patterns that influence economic growth. This article examines the threshold effect of loan growth on non-performing loans (NPLs) in the Zimbabwean banking industry during dollarization. The study employed panel threshold regression models developed by Seo et al. (2019) and Kremer et al. (2013) on a panel of thirteen banks from 2009 to 2017. The study revealed that locally owned banks held a higher percentage of NPLs (12.7%) than foreign-owned banks (6.1%) during the period under study. The study also documents a loan growth threshold level of 38%. On average, the industry lends excessively, as demonstrated by the 48% loan growth rate. Primarily, local banks dominate this rate by lending above the threshold compared to foreign banks. The study observed that, below and above the threshold, loan growth exerts a negative and significant effect on NPLs. Based on the results, it can be recommended that banks should devise strategies to maintain a steady loan growth rate, enhance profitability, and effectively monitor liquidity risk exposure. The findings provide insights into reviewing bank credit policies and prudential guidelines.
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| format | Article |
| id | doaj-art-da1715a0cd8a4128919356103157760b |
| institution | Kabale University |
| issn | 2029-4581 2345-0037 |
| language | English |
| publishDate | 2024-05-01 |
| publisher | Vilnius University Press |
| record_format | Article |
| series | Organizations and Markets in Emerging Economies |
| spelling | doaj-art-da1715a0cd8a4128919356103157760b2025-01-20T18:21:41ZengVilnius University PressOrganizations and Markets in Emerging Economies2029-45812345-00372024-05-01151(30)10.15388/omee.2024.15.8Unraveling the Loan Growth Threshold Effect on Non-Performing Loans During Total Dollarization in ZimbabweBlessing Katuka0https://orcid.org/0000-0003-4716-8399Calvin Mudzingiri1https://orcid.org/0000-0002-1186-4109Edson Vengesai2University of the Free State, South AfricaUniversity of the Free State, South AfricaUniversity of the Free State, South Africa The availability of bank loans is a vital component in determining the investment and spending patterns that influence economic growth. This article examines the threshold effect of loan growth on non-performing loans (NPLs) in the Zimbabwean banking industry during dollarization. The study employed panel threshold regression models developed by Seo et al. (2019) and Kremer et al. (2013) on a panel of thirteen banks from 2009 to 2017. The study revealed that locally owned banks held a higher percentage of NPLs (12.7%) than foreign-owned banks (6.1%) during the period under study. The study also documents a loan growth threshold level of 38%. On average, the industry lends excessively, as demonstrated by the 48% loan growth rate. Primarily, local banks dominate this rate by lending above the threshold compared to foreign banks. The study observed that, below and above the threshold, loan growth exerts a negative and significant effect on NPLs. Based on the results, it can be recommended that banks should devise strategies to maintain a steady loan growth rate, enhance profitability, and effectively monitor liquidity risk exposure. The findings provide insights into reviewing bank credit policies and prudential guidelines. https://www.journals.vu.lt/omee/article/view/32122non-performing loansexcessive lendingmoral hazardpanel threshold regressionZimbabwe |
| spellingShingle | Blessing Katuka Calvin Mudzingiri Edson Vengesai Unraveling the Loan Growth Threshold Effect on Non-Performing Loans During Total Dollarization in Zimbabwe Organizations and Markets in Emerging Economies non-performing loans excessive lending moral hazard panel threshold regression Zimbabwe |
| title | Unraveling the Loan Growth Threshold Effect on Non-Performing Loans During Total Dollarization in Zimbabwe |
| title_full | Unraveling the Loan Growth Threshold Effect on Non-Performing Loans During Total Dollarization in Zimbabwe |
| title_fullStr | Unraveling the Loan Growth Threshold Effect on Non-Performing Loans During Total Dollarization in Zimbabwe |
| title_full_unstemmed | Unraveling the Loan Growth Threshold Effect on Non-Performing Loans During Total Dollarization in Zimbabwe |
| title_short | Unraveling the Loan Growth Threshold Effect on Non-Performing Loans During Total Dollarization in Zimbabwe |
| title_sort | unraveling the loan growth threshold effect on non performing loans during total dollarization in zimbabwe |
| topic | non-performing loans excessive lending moral hazard panel threshold regression Zimbabwe |
| url | https://www.journals.vu.lt/omee/article/view/32122 |
| work_keys_str_mv | AT blessingkatuka unravelingtheloangrowththresholdeffectonnonperformingloansduringtotaldollarizationinzimbabwe AT calvinmudzingiri unravelingtheloangrowththresholdeffectonnonperformingloansduringtotaldollarizationinzimbabwe AT edsonvengesai unravelingtheloangrowththresholdeffectonnonperformingloansduringtotaldollarizationinzimbabwe |