Troubled Credit Determinants at the Palestinian Banks‎

This study aimed to identify the most important factors affecting the problem of the troubled loans at Palestinian banks as well as the relative importance of these factors, and thus enabling the banks to find solutions for the determined problems. The study used a descriptive approach. Data was collected through a questionnaire that was distributed to a selected sample of credit officers of banks operating in Palestine in addition to another sample of defaulted clients. The factors causing troubled loans problem were divided into three categories: bank’s credit policy, market conditions and client’s behavior. This study highlighted the most important factors within each category. As for the credit policy, the study revealed that the credit analysis was inadequate and there was a lack of information in this regard. It was also found that follow up of clients after being granted credit facilities was not sufficient. Pertaining to the market conditions, it was found that the prolonged closure policy and the military roadblocks caused a loss of markets, the economic recession, lack of security and the weak legal system were main reasons for the troubled facilities. In regards to the clients’ behavior, it was found that the failure to use the loan for the main purpose that was granted to, the unplanned expansion in investment, the increase of indebtedness, change of behavior and clients’ credibility had all led to the troubled debts. It was found that there was a statistically significant difference in the responses concerning the importance of factors related to the credit policy and clients’ behavior between credit officers on one side and the defaulted clients on the other. However, no statistical difference was found concerning the importance of the market conditions in causing the troubled debts. Finally, the study recommended that banks are called to concentrate more on credit analysis and depend on accurate and reliable information for extending loans.