DETERMINANTS OF NON-PERFORMING LOANS IN THE STATE OF QATAR WITH SPECIAL REFERENCES TO SMALL AND MEDIUM ENTERPRISES

Abstract

This research examines borrower-specific and bank-specific factors affecting Qatar's non-performing loans (NPLs). This is done by investigating the factors influencing SMEs' failure to meet their financial obligations with banks in Qatar. Also, this study empirically investigates bank-specific determinants of NPLs and controls for some macroeconomic variables. We selected SMEs from Qatar Development Bank (QDB) portfolio for the borrower-specific factors using a questionnaire to explore the SMEs' causes of NPLs. For the empirical study of the bank-specific determinants, quarterly data from the listed sample of four Islamic and four conventional banks within Q4 2017 - Q3 2022 were used. The factors considered in this study include loan growth, profitability, income diversification, capital adequacy, efficiency, and bank-type dummy. The study also controlled for money supply and oil prices. The estimations were done by applying the OLS regression modeling approach. The findings regarding borrower-specific factors include high-interest rates, overhead costs, public procurement, economic and government policies & regulations, and a highly competitive market influencing the non-payment of loans. Further, the results show that loan growth and return on asset (ROA) significantly negatively impact NPLs. This indicates that the profitability and loan growth of the banks in Qatar will decrease when the NPLs rate increases. Also, the level of NPLs increase is influenced by the money supply within the Qatari economy. Finally, there is no significant difference between bank-specific determinants of NPLs between Conventional and Islamic banks in Qatar. The findings imply that policymakers should put measures in place to ensure that profitability and loan growth are monitored to achieve low NPLs for the sustainability of the banking sector in Qatar.

Date of Award	2023
Original language	American English
Awarding Institution	HBKU College of Islamic Studies