Bank Non-Performing Loan Determinants: A Comparison of European and African Countries

Abstract The study investigates the determinants of bank non-performing loans (NPL) in European and African countries, focusing on 32 European and African countries from 2010 to 2021. The results based on the two-stage least squares regression methodology show that the number of commercial bank branch, bank liquid reserves to bank assets ratio, inflation rate, exchange rate, real interest rate and the lending rate are significant determinants of bank NPL in the full sample. Size of domestic private credit, bank capital to asset ratio, bank liquid reserve to bank asset ratio, unemployment rate, inflation rate, exchange rate, real interest rate and lending rate are significant determinants of bank NPL in European countries. Bank capital to asset ratio, bank liquid reserve to bank asset ratio and inflation rate in Africa are significant determinants of bank NPL in African countries. The implication of the results is that the determinants of bank NPL in European countries are not necessarily the drivers of bank NPL in African countries.