To read this content please select one of the options below:

Applying the breaks to non-performing loans in Ghana

Anthony Amoah (School of Sustainable Development, University of Environment and Sustainable Development, Somanya, Ghana)
Rexford Kweku Asiama (DSI/NRF SARChI in Industrial Development, University of Johannesburg, Johannesburg, South Africa) (Department of Economics, Central University, Accra, Ghana)
Kofi Korle (Department of Economics, Central University, Accra, Ghana)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 26 July 2021

Issue publication date: 11 August 2023

345

Abstract

Purpose

This paper acknowledges the rising levels of non-performing loans (NPLs) and the consequences associated with such patterns to an emerging economy like Ghana. In theory, one would expect rising NPLs to have a negative impact on an economy, especially regarding credit creation and private sector growth. This research, consistent with empirical literature, constructs a measure of financial market development to investigate its effect on Ghana's NPLs.

Design/methodology/approach

The fully modified ordinary least squares (FMOLS) econometric technique is used as a way of addressing common time series identification issues such as endogeneity and serial correlation.

Findings

The study finds that the growth of the financial market has a negative and statistically significant relationship with NPLs in Ghana. Therefore, building a stable financial sector is key to addressing Ghana’s rising rates of NPLs.

Practical implications

Applying the breaks to Ghana's NPLs would involve deepening credit and improving efficiency through good governance. The study suggests that such a mechanism would increase financial sector performance and reduce the growth risks arising from the industry.

Originality/value

The study analyzes the influence of financial market development on the quarterly growth of NPLs in Ghana. Most studies only focus on annual growth of NPLs.

Keywords

Acknowledgements

The authors acknowledge the Department of Economics, Central University, Accra. Ghana.

Citation

Amoah, A., Asiama, R.K. and Korle, K. (2023), "Applying the breaks to non-performing loans in Ghana", International Journal of Emerging Markets, Vol. 18 No. 8, pp. 1978-1993. https://doi.org/10.1108/IJOEM-03-2020-0287

Publisher

:

Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

Related articles