The Determinants of Non Banking Financial Institutions Profitability

Abstract

This paper is focused on the development of Non-Banking Financial Institutions and the role and importance of their growing on Albanian Financial System .The role and the importance they have in the Albanian economy are great for the fact that most of them have the mission of self-employment growth and welfare in urban and rural areas. The financial performance of a financial institution essentially depends on several key financial factors. Factors that are taken in the study are: Loans / Total Assets; Loan Provisions / Total Loan ratio; Liabilities / Assets ratio; Operating expenses / Operating income and the Size of each institution. The most important variable, which affects more the ROE, is the Loans / Assets ratio, normally increasing the assets of an institution, increase the basis for the granting of loans and consequently the lending interest income. The second variable is the most important; with a high impact on the dependent variable is the ratio of operating expenses / operating income, followed later by the ratio liabilities / assets. Different statistical techniques such as regression and correlation were used to determine relationships between variables taken into consideration as well as the dependent variable impact on ROE. This research is an attempt to find out how many variables are statistically significant and what their impact on net profit of these institutions is.

Keywords: ROE, Non Banking Institutions, Profitability

JEl Code: G21; G33; E44;