Determining the relationship between non-performing loans, economic growth, and asset size: An application in Turkish Participation Banking Sector

Year 2019, , 106 - 123, 31.03.2019

Mehmet Apan , Mehmet İslamoğlu

https://doi.org/10.33722/afes.494510

Cited By: 7

Abstract

Participation Banks are an alternative financial
institution that contributes to the development and deepening of the financial
system in the Turkish Banking Sector. In this study, the relationship between participation banks,
non-performing loans, gross domestic product, and asset size in the period
2005: Q1-2018: Q2 was investigated by using the co-integration, Granger
causality tests and regression analysis methods. The results of the Granger
causality test show that there is a one-way causality relationship between
non-performing loans to gross domestic product and the gross domestic product
to asset size, but there is a double causality relationship between
non-performing loans and asset size. In the results of empirical analysis, a
statistically significant relationship was found between both gross domestic
product and asset size, and non-performing loans. In this context, it is
determined that there is a negative relationship between non-performing loans
and gross domestic product. On the other hand, it was determined that the asset
size of the participation banking sector increased and the non-performing loans
were affected in the same direction.

Keywords

Non-performing Loans, Participation Banking, Interest-Free Banking, Economic Growth, Asset size.

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