The determinants of non performing loans of commercial banks in Malaysia year 1985 until year 2014 / Nur Aisha Mohd Azman

The purpose of this research is to find out the determinants of non-performing asset or loan in Malaysia for the period of 2005-2014. It is important to identify the problem that may leads to non-performing loans because it will affect the ability of bank to perform in the development of the economy. The independent variables used are the (Gross Domestic Product (GDP) growth rate, unemployment rate and interest rate. From the regression analysis result, there is a significant relationship between interest rate and NPL rate. However, the result shows that there is no significant relationship between GDP growth rate and unemployment rate towards NPL. This study was limited to three variables as the causes of Non-Performing Loans in Malaysia. The interpretation of these results as concerns to the causes of non-performing loans should be restricted to variables under study. The second limitation is related to the period of study. Ten year was chosen due to availability of data on the Bank Negara Malaysia Monthly Statistical Bulletin and World Bank website. However there are few data missing from the period of study. The third limitation relates to study population. The study only covered commercial banks in Malaysia and did not consider other financial institutions across countries so as to provide a more broad based analysis. The study was limited to establishing the determinants of Non Performing Loans in Malaysia. Few studies have been done on causes and management of Nonperforming Loans in Malaysia.