Non-economic factors that affect non performing loans in the banking system in Albania

Gisjana TAHIRI

Abstract Banks serve as a catalyst for the economy by sharing funds from surplus resources to deficit ones. Failure in managing loans lead to the episode of the high level of nonperforming loans. A non-performing loan is any loan on which interest and principal payments are not paid in more than 90 days. The main purpose of this paper is to identify the importance of non-economic factors in the level of NPL in Albania. Additionally of the theoretical treatment based on the foreign literature review, we have done a descriptive analysis of social factors in our country’s banks which add value by modeling the impact of NPL, ownership in cost efficiency, to continue further study relations that exist between them by Granger test. Our results show that there is a positive correlation between NPL and XEFF. While strong negative relationship that exists between CAP and LTA confirms the hypothesis “moral hazard”.
Key words non profitability loans, banks, cost efficiency, socioeconomic factor, management
JEL classification B22, F33, G21