Cover Image

Nonperforming Loans in Sub-Saharan Africa : Causal Analysis and Macroeconomic Implications

This paper investigates the leading causes of nonperforming loans during the economic and banking crises that affected a large number of countries in Sub-Saharan Africa in the 1990s. Empirical analysis shows a dramatic increase in these loans and extremely high credit risk, with significant differen...

Full description

Bibliographic Details
Main Author: Fofack, Hippolyte L.
Language:English
Published: World Bank, Washington, DC 2012
Subjects:
ACCOUNTING
ASSET MANAGEMENT
ASSET MANAGEMENT COMPANIES
BALANCE OF PAYMENTS
BANK ACCOUNTING
BANK CAPITAL
BANKING CRISES
BANKING CRISIS
BANKING INDUSTRY
BANKING SECTOR
BANKING SYSTEM
BANKS
BANQUE CENTRALE DES ETATS DE L'AFRIQUE DE L'OUEST
BANQUE DES ETATS DE L'AFRIQUE CENTRALE
CAPITAL BASE
CAPITAL REQUIREMENT
CAPITAL REQUIREMENTS
CAPITAL TO ASSET RATIO
CENTRAL BANK
CENTRAL BANKS
COMMERCIAL BANKS
COMMODITY PRICES
COST OF CAPITAL
COUNTRY COMPARISONS
CREDIT RISK
CREDIT RISKS
DEPOSIT INSURANCE
DEPOSIT INSURANCE SCHEMES
DEPOSITORS
DEPOSITS
DEREGULATION
DIRECT INVESTMENT
DOMESTIC CREDIT
ECONOMIC GROWTH
EMERGING MARKET ECONOMIES
EMPIRICAL ANALYSIS
EXCHANGE RATES
FINANCIAL CRISES
FINANCIAL CRISIS
FINANCIAL DISTRESS
FINANCIAL INFORMATION
FINANCIAL INSTITUTIONS
FINANCIAL INTERMEDIATION
FISCAL DEFICITS
GOVERNMENT SUPPORT
INDIRECT CHANNELS
INFLATION
INSIDER LENDING
INSOLVENT BANKS
INTEREST PAYMENTS
INTEREST RATE
INTEREST RATES
INVESTMENT PROJECTS
LENDER OF LAST RESORT
LIQUID ASSETS
LIQUIDITY
MACROECONOMIC STABILITY
MATURITIES
MATURITY
MEASURES OF PROFITABILITY
MERCHANT BANKS
MERGERS
MIDDLE EAST
MONETARY AUTHORITIES
MONETARY POLICY
MORAL HAZARD
NET INTEREST MARGIN
NONPERFORMING ASSETS
NONPERFORMING LOANS
OWNERSHIP STRUCTURE
PORTFOLIO
PORTFOLIOS
PREDICTIONS
PRIVATE BANKS
PRIVATE INVESTMENT
PROBLEM BANKS
PUBLIC ENTERPRISES
REAL ESTATE LOANS
REAL INTEREST RATES
RECAPITALIZATION
RESOURCE MOBILIZATION
RETURN ON ASSETS
RETURN ON EQUITY
RISK ASSESSMENT
RISK EXPOSURE
RISK MANAGEMENT
RUNS ON BANKS
SHAREHOLDERS
SOLVENCY
SPECULATIVE ATTACKS
STATE BANKS
SUB-SAHARAN AFRICA
SUBSTANDARD LOANS
SYSTEMIC BANKING CRISES
VOLATILITY
VULNERABILITY
Online Access:http://documents.worldbank.org/curated/en/2005/11/6406525/nonperforming-loans-sub-saharan-africa-causal-analysis-macroeconomic-implications
http://hdl.handle.net/10986/8498
Description
Summary:This paper investigates the leading causes of nonperforming loans during the economic and banking crises that affected a large number of countries in Sub-Saharan Africa in the 1990s. Empirical analysis shows a dramatic increase in these loans and extremely high credit risk, with significant differences between the CFA and non-CFA countries, and substantially higher financial costs for the latter sub-panel of countries. The results also highlight a strong causality between these loans and economic growth, real exchange rate appreciation, the real interest rate, net interest margins, and interbank loans consistent with the causality and econometric analysis, which reveal the significance of macroeconomic and microeconomic factors. The dramatic increase in these loans is largely driven by macroeconomic volatility and reflects the vulnerability of undiversified African economies, which remain heavily exposed to external shocks. Simulated results show that macroeconomic stability and economic growth are associated with a declining level of nonperforming loans; whereas adverse macroeconomic shocks coupled with higher cost of capital and lower interest margins are associated with a rising scope of nonperforming loans. These results are supported by long-term estimates of nonperforming loans derived from pseudo panel-based prediction models.

Similar Items