Macroeconomic factors affecting the loan follow-up rates of SMEs in participation and conventional banks

Small and medium-sized enterprises (SMEs) are among the important building blocks of both the national economy and the banking sector. One of the most crucial functions of the banking sector is providing loans. However, the lending function, despite its significance, also entails important financial risks such as credit risk. When facing financial difficulties, SMEs often prefer bank loans to overcome them. Therefore, this study examines the relationship between non-performing loan ratios in SME loans provided by participation banks and conventional banks, as well as the macroeconomic factors that influence these ratios. In our study, macroeconomic factors such as interest rates, exchange rates, industrial production index, unemployment rates, inflation rates and manufacturing PMI index are used as independent variables. The dependent variables are the non-performing loan ratios in SME loans in participation banks and conventional banks. The data consists of monthly observations from January 2008 to December 2022. The relationship between non-performing loan ratios in SME loans and macroeconomic variables is examined using ARDL bound tests. According to the analysis findings, both participation banks and conventional banks are influenced by macroeconomic factors in terms of non-performing loan ratios in SME loans. In the long run, there is a relationship between non-performing loan ratios in SME loans provided by participation banks and macroeconomic factors such as loan interest rates and unemployment rates. In the short run, only the unemployment rate is found to be related. In the case of non-performing loan ratios in SME loans provided by conventional banks, there is a relationship in the long run with inflation, exchange rates, and unemployment rates, and in the short run with factors other than the policy interest rate and industrial production index.