Publication Details
Abstract
This study investigates the determinants of non-performing loans (NPLs) in the banking sector of Uzbekistan. The primary objective is to assess the impact of macroeconomic conditions and bank-specific characteristics on loan quality. Using panel data, both Fixed Effects (FE) and Random Effects (RE) models are estimated, with clustered standard errors applied to address autocorrelation and heteroskedasticity. Robustness is ensured through the Hausman test, which supports the RE specification. The results show that macroeconomic factors such as GDP growth and inflation have no significant effect on NPLs. In contrast, cost inefficiency, diversification, and high loan-to-deposit ratios are positively associated with NPLs, reflecting weak monitoring, ineffective diversification, and aggressive lending practices. Capital adequacy and bank size exhibit negative and significant effects, confirming that well-capitalized and larger banks are more resilient to credit risk. Other variables, including coverage ratio, ownership, and profitability, display unstable or insignificant effects across models.