Bank-specific determinants of non-performing loans in Qatar: Conventional vs Islamic Banks

Abstract

To achieve stability in the banking sector, non-performing loans (NPLs) growth must be kept relatively low. Some banklevel factors signal the NPL situation of a bank, and studies in this area within the Qatari economy are limited. This study
investigate bank-specific factors that determine the rate of NPLs and control for some macroeconomic variables in
Qatar. This was done using quarterly data from listed sample of Islamic and conventional banks within Q42017-Q32022.
The factors considered in the study include loan growth, profitability, income diversification, capital adequacy,
efficiency, and bank-type dummy. The study also controlled for money supply and oil prices. The estimations were done
by applying the OLS regression modelling approach. The results show that loan growth and ROA (Return on asset)
significantly have negative impact on NPLs. This indicates that the profitability and loan growth of the banks in Qatar will
decrease when the NPL rate increases. Also, the level of NPLs increase is influenced by the money supply within the
Qatari economy. Finally, there is no significant difference between bank-specific determinants of NPLs between
Conventional and Islamic banks in Qatar. The findings imply that policymakers should put measures in place to ensure
that profitability and loan growth are monitored to achieve low NPL for the sustainability of the banking sector in Qatar.