DETERMINANTS OF NON-PERFORMING LOANS IN SERVICE SECTOR LENDING AND CREDIT RISK MITIGATION MECHANISMS
DOI:
https://doi.org/10.5281/zenodo.20632184Keywords:
service sector, non-performing loans, credit risk, commercial banks, credit portfolio, credit monitoring, digital credit scoring, risk management, early warning systems, loan quality.Abstract
This article examines the determinants of non-performing loans (NPLs) in the process of lending
to service sector enterprises, their impact on the quality of banks’ credit portfolios, and the organizational
and economic mechanisms for reducing the share of problematic loans. Taking into account the specific
characteristics of the service sector, the study analyzes the underlying causes of credit risk formation and the
factors contributing to loan repayment difficulties. Particular attention is paid to the role of credit monitoring,
digital credit scoring systems, early warning mechanisms, and credit portfolio diversification in mitigating nonperforming
loans. The findings indicate that insufficient cash flow stability, weak financial discipline, inadequate
collateral, and market-related risks are among the key determinants of NPL formation in service sector lending.
Based on the research results, scientific conclusions and practical recommendations have been developed to
improve the effectiveness of credit risk management and enhance the quality of lending practices in the service
sector.
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