Main Article Content


Defaulting on a loan is the failure of a borrower to pay the principal or interest on security or loan. The consequences of defaulting on a loan depend on whether the loan is unsecured (student loans, credit cards, or personal loans) or secured (car loans or mortgages). In either case, it is suggested that consumers opt for debt consolidation plans as a means of satisfying creditors in order to avoid the repercussions of loan default. This study reviews related literature on the effects of loan default on the financial performance of Ecobank. Personal loans are regarded as high-cost, high-risk unsecured loans. Defaulting on one can cause your credit score to plunge. As your credit score drops interest rates on your adjustable-rate loans, such as credit cards, increase significantly. Loan default is the inability to repay the loan by either failing to complete the loan as per the loan agreement or neglecting to service the loan. The types of loan default review adopted for this study as they fall within the purview of this study are; technical default and debt services default. The provisions for loan defaults reduce the total loan portfolio of banks and as such affects interest earnings on such assets. This constitutes a huge cost to banks. A study of the financial statement of banks indicates that unsecured loans have a direct effect on the profitability of banks. This is because the charge for bad debts is treated as expenses on the profit and loss account and as such impact negatively on the profit position of banks. Despite the above research-related evidence on the effect of bad loans on banks, it is realized that the general contribution to the academic debate on the subject is weak.


Loan default loans financial statement banking Ecobank.

Article Details

How to Cite
Animah Ofosu-Hene, V. (2022). Literature Reviews on Loan Default’s Impact on Ecobank Finances. Journal of Engineering Applied Science and Humanities, 7(1), 24–36.


  1. Aballey, F.B. (2009). Bad loan portfolio: A case study of Agricultural Development Bank. Unpublished master’s dissertation, Kwame Nkrumah University of Science & Technology, Kumasi, Ghana.
  2. Abaidoo, A. (2015). Determinant of loan default and its effect on financial performance of commercial banks in Ghana. A case study of Fidelity Bank Limited. Munich, GRIN Verlag. Retrieved from
  3. Abledu, G.K., Akuffo, B., Adade, T., & Kwofie, S. (2016). Comparison of logistic regression and linear discriminant analyses of the determinants of financial sustainability of bank banks in Ghana. American Journal of Theoretical and Applied Statistics, 5(2), 49-57.
  4. Addae-Korankye, A. (2014). Causes and control of loan default/delinquency in microfinance institutions in Ghana. American International Journal of Contemporary Research, 4(12), 36-45.
  5. Antwi, S, Atta Mills, E. F. E., Atta Mills, G., & Zhao, X. (2021). Risk Factors of Loan Default Payment in Ghana: A case study of Akuapem Bank Bank (Electronic version). International Journal of Academic Research in Accounting, Finance and Management Sciences, 2(4), 376-387.
  6. Appiah, N. B. (2011). Factors influencing loan delinquency in small and medium enterprises’ in Ghana commercial bank ltd. Unpublished master’s dissertation, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana.
  7. Araka, H., Mogwambo, V., & Otieno, S. (2018). Effect of non-performing loans on financial performance of commercial banks in Kenya. International Journal of Finance, Accounting and Economics (IJFAE), 1(3), 44-51.
  8. Asantey, J. O. & Tengey, S. (2014). An empirical study on the effect of Bad Loans on banks’ lending potential and financial performance: The case of SMEs lending in Ghana. International Journal of Research in Business Management (IMPACT: IJRBM), 2(11), 18-40.
  9. Asari, F.F.A.H., Muhamad, N.A., Ahmed, W., Latif, N.I.A., Abdullah, N., & Jusoff, K. (2011). An Analysis of Non-Performing Loan, Interest Rate and Inflation Rate Using Stata Software. World Applied Sciences Journal, 12, 41-48.
  10. Ayanda, A.M., Christopher, E.I., & Mudashiru, M.A. (2020). Determinants of banks’ profitability in a developing economy: evidence from Nigerian banking industry. Institute of Interdisciplinary Business Research, 4(9), 155-181.
  11. Awunyo-Vitor, D. (2021). Determinants of loan repayment default among farmers in Ghana, Journal of Development and Agricultural Economics, 4(13), 339-345.
  12. Awo, J. P. & Akotey, J. O. (2021). Financial performance of bank banks in Ghana: A Case Study of Naara Bank Bank: Journal of Development and Agricultural Economics 1-25
  13. Balogun, E.D., & Alimi, A. (1988). Loan Delinquency among Small Farmers in Developing Countries: A Case Study of Small-Farmer Credit Programme in Lagos State of Nigeria. CBN Economic and Financial Review, 26, 3 September.
  14. Banos-Caballero, S., Garcia-Teruel, P. J., & Martinez-Solano, P. (2021). How doesworking capital management affect the profitability of Spanish SMEs? SmallBusiness Economics 39, 517-529.
  15. Bluman, G.A. (2009), Elementary statistics: A step by step approach (7th ed.). St Louis, USA. Von Hoffman Press.
  16. Brockwell, P. J., & Davis, R. A. (1991). Time Series: Theory and Methods. (2nd edn.) Springer, New York.
  17. Bryman, A., & Bell, E. (2007). Business research methods. London: Oxford University Press.
  18. BusinessDictionary.Com, (2011). Definition of Default, Retrieved from [
  19. Central Bank of Kenya (2021). Bank supervision annual report. Central Bank of Kenya, Kenya.
  20. Chatfield, C. (1996). The analysis of time series (5th ed.) Chapman and Hall, New York, USA.
  21. Chelagat, K. N. (2021). Determinants of loan defaults by small and medium enterprises among commercial banks in Kenya. Unpublished master’s dissertation, University of Nairobi, Kenya.
  22. Chi, C. G., & Gursoy, D. (2009). Employee satisfaction, customer satisfaction and financial performance: An empirical examination. International Journal of Hospitality Management, 28(2), 245-253.
  23. Cooper, D., & Schindler, P. (2003). Business research methods, Irwin McGraw-Hill, Singapore.
  24. El-Maude, J.G., Abdul-Rehman, A., & Ibrahim, M. (2017). Determinants of Non-Performing Loans in Nigeria’s Deposit Money Banks. Archives of Business Research, 5(1), 74-88
  25. Engle, R. F., & Granger, C. W. J. (1987). Cointegration and error correction: Representation, estimation and technique, Econometrica, 55(2), 251-276
  26. European Central Bank (2021). Beyond RoE: How to measure bank performance. Frankfurt am Main, Germany.
  27. Falavi, M., & Abdoli, M. R. (2015). The efficiency of data mining models in determiningthe effect of working capital management on corporate performance.
  28. Feng, H., Morgan, N. A., & Rego, L.L. (2015). Marketing department power and firmperformance. Journal of Marketing, 79(5), 1-20.
  29. Fidrmuc, J., & Hainz, C. (2009). Default rates in the loan market for SMEs: Evidence from Slovakia, 2nd Working Meeting of the CESIUK, Comenius University in Bratislava, Faculty of Philosophy, January 14, 2009.
  30. Flynn, B.B., Sakakibara, S., Schroeder, R.G., Bates, K.A., & Flynn, E.J. (1990). Empirical research methods in operations management, Journal of Operations Management, 9(2), 250-84
  31. Francis, T. (2009). The effect of corporate governance on the risk management among Nigerian Banks. Strategic Management Journal, 52(3), 122-136.
  32. Ghana Banking Survey (2014). The future of banking in Ghana: What’s next? PricewaterhouseCoopers (Ghana) Ltd: 59-66.
  33. Golafshani, N. (2003). Understanding reliability and validity in qualitative research. The qualitative report, 8(4), 597 - 606.
  34. Greve, H. R. (2003). Organizational learning from performance feedback. Cambridge, UK: Cambridge University Press.
  35. Hair, J. F., Babin, B., Money, A. H., & Samouel, P. (2003). Essentials of business research methods. Hoboken N.J, Great Britain: Wiley.
  36. Hauser, J., & Katz, G. (1998). You are what you measure. European Management Journal, 16(5), 516-528.
  37. Hawaldar, I.T., Lokesh, M.C., Biso, S.S. (2016). An empirical analysis of financial performance of retail and wholesale Islamic banks in Bahrain. American Scientific Research Journal for Engineering, Technology, and Sciences, 20(1), 137-147.
  38. Hipel, K.W., & Mcleod, A. I. (1994), Time Series Modelling of Water Resources and Environmental Systems, Elsevier Science B.V, Amsterdam, 1012pp.
  39. Jensen, G., & Payne, Y. (2006). Risk management practices in German firms, Managerial Finance, 19, 71–97.
  40. Johansen, S. (1988). Statistical analysis of cointegration vectors, Journal of Economic Dynamics and Control, 12, 231-254
  41. Johansen, S., & Juselius, K. (1992). Testing structural hypotheses in a multivariate cointegration analysis at the purchasing power parity and the uncovered interest parity for the UK, Journal of Econometrics, 53, 211 – 244.
  42. Karim, M. Z. K, Chan, S., & Hassan, S. (2021). Bank efficiency and non-performing loans: Evidence from Malaysia and Singapore, Prague; Economic Papers, 2, 118-132.
  43. Keisidou, E., Sarigiannidis, L., Maditinos, D. I., & Thalassinos, E. I. (2020). Customer satisfaction, loyalty and financial performance. International Journal of Bank Marketing, 31(4), 259-288.
  44. Korankye A.A. (2014), Causes and control of loan default or delinquency in microfinance institutions in Ghana. Published MBA Thesis, Central University College Accra, Ghana. American International Journal of Contemporary Research 4(12), 36-45.
  45. Krakah, A.K., & Ameyaw, A. (2021). The determinants of bank’s profitability in Ghana: The case of Merchant Bank Ghana Limited (MBG) and Ghana Commercial Bank (GCB). Unpublished master’s thesis, Blekinge Institute of Technology, Sweden.
  46. Kuo, H., Wang, L., Lai, Y., Yu, H., & Wu, C. (2021). Loan policy and bank performance: evidence from Taiwan, Banks and Bank Systems, 5(2), 108-120.
  47. Mabvure, T. J., Gwangwava, E., Faitira, M., Mutibvu, C., & Kamoyo M. (2021). Non-Performing loans in commercial banks: A case of CBZ bank limited in Zimbabwe. Interdisciplinary Journal of Contemporary Research in Business, 4(7), 1138-1171.
  48. Mansoori, E., & Muhammad, J. (2021). The effect of working capital management onfirm's profitability: Evidence from Singapore. Interdisciplinary Journal of Contemporary Research in Business, 472-486.
  49. Matthew N.G., & Laryea, A.E. (2021). A financial performance comparison of foreign vs local banks in Ghana. International Journal of Business and Social Science, 3(21), 82-87.
  50. Margaretha, F., & Supartika, N. (2016). Factors affecting profitability of small-mediumenterprises (SMEs) listed in Indonesia stock exchange. Journal of Economics,Business and Management, 4(2), 131-137.
  51. Murray, J. (2011). Default on loan. United States Business and Taxes Guide, USA.
  52. Muriithi, M.W. (2020). Causes of nonperforming loans in commercial banks in Kenya. University of Nairobi.
  53. Nawaz, M., Munir, S., Siddiqui, S. A., Afzal, F., Asif, M., & Ateeq, M. (2021). Credit Risk and the Performance of Nigerian Banks, Interdisciplinary Journal of Contemporary Research in Business, 4(7), 51-63.
  54. Ncube, M. (2009). Efficiency of the banking sector in South Africa, African Economic Conference 2009 Fostering Development in an Era of Financial and Economic Crises, Addis Ababa.
  55. Nsobilla, T. (2015). The effect of non-performing loans on the financial performance of selected bank banks in the Western and Ashanti regions of Ghana. Unpublished master’s thesis to the Kwame Nkrumah University of Science and Technology, Kumasi, Ghana.
  56. Ntiamoah, E. B., Oteng, E., Opoku, B., & Siaw, A. (2014). Loan Default Rate and its Impact on Profitability in Financial Institutions (Electronic version). Research Journal of Finance and Accounting, 5(14), 67-72.
  57. Nguta, M. H., & Huka, G. S. (2020). Factors Influencing Loan Repayment Default in Micro-Finance Institutions: The Experience of Imenti North District, Kenya, International Journal of Applied Science and Technology, 3(3), 80-84
  58. Nyaliet, C. A.M. (2017). Factors affecting non-performing loans: A case study of KCB Bank Kenya Limited Nairobi Region. Unpublished master’s dissertation, Catholic University of Eastern Africa, Kenya.
  59. Obamuyi, T. M. (2007). An Exploratory Study of Loan Delinquency among Small and Medium Enterprises (SMEs) In Ondo State of Nigeria, Labour and Management in Development, 8, 2-8.
  60. Onwumere, J. U., Ibe, I. G., & Ugbam, O. C. (2021). The impact of working capitalmanagement on profitability of Nigerian firms: A preliminary investigation.European Journal of Business and Management, 4(15), 192-201.
  61. Otoo, H., Takyi Appiah, S., & Wiah, E. N. (2015). Regression and Time Series Analysis of Loan Default at Minescho Cooperative Credit Union, Tarkwa. International Journal of Scientific & Technology Research 4(08), 188-195
  62. Pearson, R., & Greef, M. (2006). Causes of default among housing micro loan clients, FinMark Trust Bank Housing Loan Fund. National Housing Finance Corporation and Development Bank of Southern Africa, South Africa.
  63. Palečková, I. (2014). Relationship between profitability and Efficiency in the Czech Banking Sector.
  64. Patton, M. (1990). Qualitative evaluations and research methods. Newberry Park: Sage Publications.
  65. Poudel, R. P. S. (2021). The impact of credit risk management on financial performance of commercial banks in Nepal. International Journal of Arts and Commerce, 1(5), 9-15
  66. Saunders, M., Lewis, P., & Thornhill, A. (2021). Research methods for business students. Essex: Prentice Hall.
  67. Saunders, M., Lewis P., & Thornhill A. (2007). Research methods for business
  68. students, (4th ed.). Financial Times Prentice Hall, Edinburgh, UK
  69. Vartanian, T. P. (2011). Secondary data analysis. New York: Oxford University Press.
  70. Wang, F., Feng. T., & Lawton, A. (2016). Linking ethical leadership with firmperformance: A Multi-dimensional perspective. Journal of business ethics, 1, 1-12.
  71. Yazdanfar, D., & Öhman, P. (2014). The impact of cash conversion cycle on firmprofitability. International Journal of Managerial Finance, 10, 442-452.
  72. Yin, R. K. (2009). Case study research: Design and methods, London: Sage Publications.
  73. Zablon, E., Sambiri, M. J., & Otieno, O. D. (2015). Evaluation of the factors leading to loan default at Equity Bank, Kenya. Journal of Economics and Sustainable Development, 6(9), 251-259.