Commercial banks are the most important depository organizations that provide loan and advance in developing country. The objective of this study was to provide empirical evidence on determinants of banks’ loan and advances in Ethiopia. Fixed effect balanced panel regression was used for the data of ten purposively chosen commercial banks over the period of 12 years (2010 to 2021). To realize the stated objective quantitative approach and explanatory design were employed using secondary data sources from the audited financial statement. Consequently bank specific, industry specific and macro-economic variable that affect banks’ loan were selected and analyzed by using E-view 10 econometrics software. According to the findings, capital adequacy, liquidity ratio, bank size, and foreign exchange rate all have a positive and statistically significant impact on bank loans. Profitability ratios, cash reserve ratios, and broad money supply, on the other hand, has a negative and statistically significant impact on bank lending. While fixed asset ratio, asset quality ratio, and GDP were found to have statistically insignificant effects on the bank’s loans and advances. The regression result indicated that Profitability, cash reserve requirements, and broad money supplies all have negative effects. Therefore Ethiopian commercial banks and NBE must pay close attention and control for those variables to be able advancing banks’ loan.
| Published in | Journal of Finance and Accounting (Volume 11, Issue 3) |
| DOI | 10.11648/j.jfa.20231103.17 |
| Page(s) | 113-123 |
| Creative Commons |
This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited. |
| Copyright |
Copyright © The Author(s), 2023. Published by Science Publishing Group |
Loans, Advances, Bank Specific, Industry- Specific, Macro-Economic Variable
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APA Style
Hussen Abdulkadir Roba, Habtamu Alebachew Legass. (2023). Factors Determining Banks’ Loan and Advance: A Case Study on Commercial Banks in Ethiopia. Journal of Finance and Accounting, 11(3), 113-123. https://doi.org/10.11648/j.jfa.20231103.17
ACS Style
Hussen Abdulkadir Roba; Habtamu Alebachew Legass. Factors Determining Banks’ Loan and Advance: A Case Study on Commercial Banks in Ethiopia. J. Finance Account. 2023, 11(3), 113-123. doi: 10.11648/j.jfa.20231103.17
AMA Style
Hussen Abdulkadir Roba, Habtamu Alebachew Legass. Factors Determining Banks’ Loan and Advance: A Case Study on Commercial Banks in Ethiopia. J Finance Account. 2023;11(3):113-123. doi: 10.11648/j.jfa.20231103.17
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Download@article{10.11648/j.jfa.20231103.17,
author = {Hussen Abdulkadir Roba and Habtamu Alebachew Legass},
title = {Factors Determining Banks’ Loan and Advance: A Case Study on Commercial Banks in Ethiopia},
journal = {Journal of Finance and Accounting},
volume = {11},
number = {3},
pages = {113-123},
doi = {10.11648/j.jfa.20231103.17},
url = {https://doi.org/10.11648/j.jfa.20231103.17},
eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20231103.17},
abstract = {Commercial banks are the most important depository organizations that provide loan and advance in developing country. The objective of this study was to provide empirical evidence on determinants of banks’ loan and advances in Ethiopia. Fixed effect balanced panel regression was used for the data of ten purposively chosen commercial banks over the period of 12 years (2010 to 2021). To realize the stated objective quantitative approach and explanatory design were employed using secondary data sources from the audited financial statement. Consequently bank specific, industry specific and macro-economic variable that affect banks’ loan were selected and analyzed by using E-view 10 econometrics software. According to the findings, capital adequacy, liquidity ratio, bank size, and foreign exchange rate all have a positive and statistically significant impact on bank loans. Profitability ratios, cash reserve ratios, and broad money supply, on the other hand, has a negative and statistically significant impact on bank lending. While fixed asset ratio, asset quality ratio, and GDP were found to have statistically insignificant effects on the bank’s loans and advances. The regression result indicated that Profitability, cash reserve requirements, and broad money supplies all have negative effects. Therefore Ethiopian commercial banks and NBE must pay close attention and control for those variables to be able advancing banks’ loan.},
year = {2023}
}
TY - JOUR T1 - Factors Determining Banks’ Loan and Advance: A Case Study on Commercial Banks in Ethiopia AU - Hussen Abdulkadir Roba AU - Habtamu Alebachew Legass Y1 - 2023/06/27 PY - 2023 N1 - https://doi.org/10.11648/j.jfa.20231103.17 DO - 10.11648/j.jfa.20231103.17 T2 - Journal of Finance and Accounting JF - Journal of Finance and Accounting JO - Journal of Finance and Accounting SP - 113 EP - 123 PB - Science Publishing Group SN - 2330-7323 UR - https://doi.org/10.11648/j.jfa.20231103.17 AB - Commercial banks are the most important depository organizations that provide loan and advance in developing country. The objective of this study was to provide empirical evidence on determinants of banks’ loan and advances in Ethiopia. Fixed effect balanced panel regression was used for the data of ten purposively chosen commercial banks over the period of 12 years (2010 to 2021). To realize the stated objective quantitative approach and explanatory design were employed using secondary data sources from the audited financial statement. Consequently bank specific, industry specific and macro-economic variable that affect banks’ loan were selected and analyzed by using E-view 10 econometrics software. According to the findings, capital adequacy, liquidity ratio, bank size, and foreign exchange rate all have a positive and statistically significant impact on bank loans. Profitability ratios, cash reserve ratios, and broad money supply, on the other hand, has a negative and statistically significant impact on bank lending. While fixed asset ratio, asset quality ratio, and GDP were found to have statistically insignificant effects on the bank’s loans and advances. The regression result indicated that Profitability, cash reserve requirements, and broad money supplies all have negative effects. Therefore Ethiopian commercial banks and NBE must pay close attention and control for those variables to be able advancing banks’ loan. VL - 11 IS - 3 ER -
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