Identifying and Prioritizing Systematic and Unsystematic Factors Increasing Non-Performing Loans in Iran’s Interest- Free (Riba-Free) Banking System; The case study of Sepah bank

Fazelian, Seyed Mohsen; Parvizian, Korous; Zakernia, Ehsan

Identifying and Prioritizing Systematic and Unsystematic Factors Increasing Non-Performing Loans in Iran’s Interest- Free (Riba-Free) Banking System; The case study of Sepah bank

Authors

¹ PhD of financial management and faculty member At Imam Sadegh University

² PhD of management and director of Sina Bank

³ PhD student of financial management at Imam Sadegh University

Abstract

The growing non-performing loans which are rooted in credit risk have increasingly intensified the importance of identification and resolution of this problem. Many systematic and unsystematic factors affect non-performing loans. By reviewing scientific sources, this study aims to identify these factors. As an initial step, approximately 90 factors from different sources were recognized as factors affecting the non-performing loans. After confirming and completing this list according to experts’ opinions, these factors were classified into 8 systematic and 7 unsystematic categories along with previous researches and conceptual similarity as well as banking experts’ opinions. To assess the extent of each factor’s impact on the non-performing loans and measuring inter-communication within a group the data was analyzed by using Multiple Criteria Decision Making techniques (Fuzzy TOPSIS and Fuzzy DEMATEL method).
The results indicate that among other factors the following have the most significant impact on the increasing of non-performing loans: increase in inflation, devaluation of the national currency and weakness in the process of evaluation of loan application. Also factors such as political and economic risks, sanctions, rising inflation, devaluation of the national currency, the increase in parallel market efficiency, government ownership over banks and their centralization are the most central factors affecting other factors and the rest of the factors are mostly included in affected group of factors. In general, it can be concluded that the participation of systematic factors in increasing non-performing loans are more than unsystematic factors, because they are ranked higher than unsystematic factors and also these factors have been identified as factors affect other factors.

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