Although credit assigned plays a central role in the maintenance of the growth and financial stability of the banking sector, little empirical studies have been conducted on the determinants of loan disbursement by the commercial banks in Bangladesh using the panel data analysis technique. This paper fills that gap by investigating factors that affect loan distribution in twenty commercial banks within a span of 10 years. The Hausman specification test follows a panel regression model, comprising common, random, and fixed effect specification; and concludes that the fixed-effect model is the most suitable estimator. The findings indicate a positive but insignificant effect of on loan disbursement by return on assets (ROA) and negative but insignificant effect on loan disbursement by return on equity (ROE). On the other hand, total assets, liquidity ratio and non-performing loans (NPL) have a statistically significant and positive impact on the loan distribution as compared to tangibility (LOG TAN). The relevance of the F-statistics and the Chi-square tests prove the excellent model. This has policy implications in which it is recommended that the commercial banks need to work on the efficiency of asset management and ensure optimum liquidity levels to reinforce credit capacity. Non-performing loans (NPL) management is very important to the quality of credit, as well as financial stability. The findings provide evidence knowledge to policy makers and regulators to create a balance between profitability and risk management to facilitate sustainable banking development.
Keywords: Commercial banks; Loan disbursement; Panel regression; Fixed effect model; non-performing loans (NPL); Bangladesh.
05-Sep-2026
