The Determinants of Non-Performing Loans in Commercial Banks of Afghanistan

This study looks at the main reasons for Non-Performing Loans (NPLs) in commercial banks in Afghanistan. It studies how economic conditions, bank practices, rules and regulations, political and security problems, and borrower behavior affect loan repayment. The study collected data from 105 credit and risk management staff in Kabul and used simple analysis methods like descriptive statistics, correlation, and regression. The results show that borrower problems—such as irregular income, bad credit history, misuse of loan money, and lack of business experience—are the main causes of NPLs. Political instability and security issues also make it harder for borrowers to repay loans. Economic problems, like inflation, unemployment, slow economic growth, and currency changes, increase the risk of defaults. Bank practices and rules can help reduce NPLs, but they are less effective when the external situation is unstable. The study uses theories like Information Asymmetry, Principal-Agent, Institutional, and Business Cycle to explain how both internal and external factors affect loan performance. In conclusion, this research helps understand why NPLs happen in Afghan banks and gives practical ideas to reduce defaults, improve financial stability, and make banks stronger in a risky environment.