Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/317260 
Year of Publication: 
2024
Citation: 
[Journal:] Organizations and Markets in Emerging Economies [ISSN:] 2345-0037 [Volume:] 15 [Issue:] 1 [Year:] 2024 [Pages:] 146-164
Publisher: 
Vilnius University Press, Vilnius
Abstract: 
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.
Subjects: 
excessive lending
moral hazard
non-performing loans
panel threshold regression
Zimbabwe
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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