AN EXPLORATORY STUDY: HOW DOES RELIGION RELATE TO NON-PERFORMING LOANS IN THE CONTEXT OF COMMERCIAL BANKS OF PAKISTAN

Authors

  • Dr. Hishamul Hassan

Keywords:

Non-performing loans, Bank-specific factors, Macroeconomic factors, Pakistan

Abstract

The role of the banking sector in the growth of the economy of any country is important. It is quite obvious that banks should have processes that may ensure that advances or loans are not only used in safe as well as in profitable projects. The major aim of this research is to examine the factors of non-performing loans (NPLs) which can be divided into dual purposes: Firstly, to propose a conceptual model that explores factors of NPLs and to test this model in the context of the Pakistani banking sector. Secondly, to assist bankers in identifying or executing necessary steps for factors of NPLs in the banking sector of Pakistan. In this exploratory research, the data was gathered through a semi-structured interview method. The interviews were conducted with senior credit managers related to loans and advances departments of commercial banks of Pakistan because they could provide rich information about the dissertation topic. Snowball sampling was used because interviews with senior bankers were required and the researcher could not approach the best sample very easily. The methodology helped to analyze data about factors of NPLs as well as to have an insight into the nature of their relationship with each other. A total of 22 themes emerged from the interviews, out of which the researcher chose a few relevant theme that matched the project: religion of a country. This study considered religionless as significant factor of NPLs in the context of Pakistani commercial banks. Moreover, this study revealed that the Pakistani bankers knew about the loan sanctioning techniques, however, there were issues related to their compliance. It was concluded that the analysis of factors of NPLs would help bankers and policymakers to devise mechanisms that would support the financial sector, especially banks, to control the issue of loan defaults in Pakistani banks.

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Published

2022-03-01