The effects of non-performing loans on bank stability and economic performance in Zimbabwe

This study explores the impact of non-performing loans (NPLs) on Zimbabwean banking industry’s stability and economic performance during dollarization era. The panel vector autoregressive (PVAR) model was applied using annual data from 2009 to 2017. findings indicated that short-run NPL shocks negatively risk-adjusted return, while capitalization is positive but dies off in long run. paper further show NPLs have a strong negative significant effect loan growth short run remain muted results also bi-directional causality between industry NPLs. In summary, affect stability, Zimbabwe. A possible implication formulation sound regulatory framework curbs increase NPLs, promotes within industry, improves performance. practical banks must get it right first time regarding bank lending policies. Thus, recommends proactively manage their exposure by implementing rigorous credit risk assessment processes.