Macroeconomic factors that affect the non performing loans: a study of Asean countries / Suhana Samsuddin

The financial crisis of 2007-2008, also known as the Global Financial Crisis and it is considered by many economists to have been the worst financial crisis since The Great Depression of the 1930s. It resulted in the threat of total collapse of large financial institutions, The bailout of banks by national governments, and downturns in stock markets and an increasing the non performing loan rate among banks around the world. Nonperforming Loans (NPLs) began to rise as declining finances of distressed borrowers and the interest rates directly affect borrowers' ability to service loan. In addition, the collapse of financial property asset values substantially reduced the value of the collateral for many bank loans. As a result, most financial institutions experienced declining in profits. The financial institutions" capital base was affected by increased losses from loan defaults, thus requiring them to seek re-capitalization. This paper aims at finding out the determinants of Macroeconomic Variables to the Non Performing Loan (NPLs); a study of Asean Countries. A non-performing loan is a ban that is in default or close to being in default. The variables considered are Gross Domestics Product (GDP), Inflation Rate (IR), Base Lending Rate (BIR), Unemployment Rate (UR), Money Supply (M2) and Real Interest Rate (RIR). All relevant data collected from Worn Bank Data. The data is collected from year 2000-2008 and the sample is selected from four Asean countries which are Malaysia, Singapore, Indonesia and Thailand. The data for this in form Panel Data. This research will be using multiple linear regression method. The results of the research paper would provide us with an indicative view and could form an important basis for investors policy makers in their investment strategies and policy decision respectively