The Determinants of Non-Performing Loans Ratio: Empirical Evidence From Participation Banks in Turkey

In this study, the macroeconomic and microeconomic factors that have impact on non-performing loan ratio of Turkish participation banks between 2005 and 2011. According to the results; the ratio of non-performing loans is low in those banks where the ratio of loans to total assets is low. Asset size also found to have negative impact on non-performing loan ratio. Among the macroeconomic factors; the decrease in GDP increase has increased the ratio of non-performing loans both in the same term and in the following terms, whereas foreign exchange rate and inflation rate have no significant impact. When the GDP is replaced with unemployment rates, it was observed that any increase in the unemployment rates would increase these problematic loans in a significant way.