International Journal of

ADVANCED AND APPLIED SCIENCES

EISSN: 2313-3724, Print ISSN: 2313-626X

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 Volume 11, Issue 5 (May 2024), Pages: 121-128

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 Original Research Paper

Analyzing microeconomic determinants of non-performing loans in Saudi Arabian banks: Implications for banking sector health and risk management

 Author(s): 

 Abdullah Ewayed Twairesh *

 Affiliation(s):

 Department of Finance and Insurance, College of Business Administration, Northern Border University, Arar, Saudi Arabia

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 * Corresponding Author. 

  Corresponding author's ORCID profile: https://orcid.org/0009-0001-3914-3928

 Digital Object Identifier (DOI)

 https://doi.org/10.21833/ijaas.2024.05.013

 Abstract

This research aims to study the smaller economic factors that influence the percentage of loans that banks in Saudi Arabia have given out but are not getting repaid. It uses data from 10 Saudi Arabian banks, covering 130 instances from the years 2009 to 2021, to figure out which economic factors at the bank level matter most. These factors are taken from the banks' yearly financial statements. The study looks at five specific factors suggested by earlier research, which are believed to impact the percentage of these non-repaying loans in the banking sector. These factors are the ratio of loans to deposits, the capital adequacy ratio (CAR), the return on assets (ROA), the net interest margin (NIM), and the size of the bank. The findings reveal that the size of the bank, its CAR, its ROA, its ratio of loans to deposits (which has a reverse effect), and its NIM (which has a direct effect) all play significant roles in determining the percentage of non-repaying loans in Saudi Arabian banks. Understanding these factors is crucial for getting insights into the health of the banking system. Monitoring and evaluating the ratio of non-repaying loans is important for keeping the financial system healthy and supporting steady economic growth. The study suggests that to manage the risks of loans not being repaid and to keep the banking system stable, effective policies and risk management practices are needed. It advises that banks improve their lending processes to manage non-repaying loans better and ensure profits for their shareholders.

 © 2024 The Authors. Published by IASE.

 This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).

 Keywords

 Non-performing loans, Microeconomic determinants, Banking sector health, Risk management

 Article history

 Received 17 December 2023, Received in revised form 17 April 2024, Accepted 1 May 2024

 Acknowledgment 

The author extends their appreciation to the Deanship of Scientific Research at Northern Border University, Arar, KSA, for funding this research work “through the Project number “NBU-FFR–2024–2453–01.”

 Compliance with ethical standards

 Conflict of interest: The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

 Citation:

 Twairesh AE (2024). Analyzing microeconomic determinants of non-performing loans in Saudi Arabian banks: Implications for banking sector health and risk management. International Journal of Advanced and Applied Sciences, 11(5): 121-128

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 Tables

 Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 

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