Reserch Project

Factors Effect on Loan
Recovery in Financial Sector

During Post-Pandemic A Case
Study Of LOLC
Assignment Brief
Student Name /ID Number M.Jeewa Prashan / E165872
Unit Number and Title Unit 19 – Research Project
Academic Year 2021-22
Unit Tutor Ms Hiranthi Rathnayake
Assignment Title Devise a project report based on the project proposal
Issue Date
Submission Date 30/4/2023
IV Name & Date
Submission Format:
The submission should be in the form of an individual written report based on the research proposal made
in Assessment 01. This should be written in a concise, formal business style using single spacing and font
size 12. You are required to make use of headings, paragraphs and subsections as appropriate, and all
work must be supported with research and referenced using the Harvard referencing system.
Report format- Please provide a referencing list using the Harvard referencing system. The recommended
word limit is mini of mum 4,500 words.
M.JEEWA PRASHAN RESEARCH PROJECT ASSIGNMENT1 2

Contents
List of Tables....................................................................................................................5
List of Figures..................................................................................................................6
Research Proposal Form.......................................................................................................7
Section 01: (Title, Objective, Responsibilities)...................................................................7
1.1. Background of Study.............................................................................................7
1.2. Research Problem..................................................................................................8
1.3. Introduction to the Organization..........................................................................10
1.4. Research Objectives............................................................................................10
1.5. Research Questions..............................................................................................11
1.6. Role of the Researcher.........................................................................................11
Section 02: Reasons for Choosing this Research Project...................................................12
2.1. Purpose of the Research......................................................................................12
2.2. Benefits of the Research......................................................................................12
2.2.1. Benefits to the Researcher............................................................................12
2.2.2. Benefits to the Organization.........................................................................13
Section 03: Literature Review............................................................................................14
2.1. Introduction.........................................................................................................14
2.2. Effect of Independent Factors on Business and loan recovery............................15
Section 04: Activities and Timescales...............................................................................16
1.1. Project Activities.................................................................................................16
1.2. Milestone Chart...................................................................................................17
1.3. Conceptual Framework........................................................................................17
Section 05: Research Approach and Methodologies..........................................................18
5.1. Research Hypothesis............................................................................................18
5.2. Research Processes..............................................................................................18
5.1.1. Philosophy....................................................................................................19
5.1.2. Approach......................................................................................................19
5.1.3. Strategy.........................................................................................................19
5.1.4. Choice...........................................................................................................19
5.1.5. Time Horizon...............................................................................................20
5.1.6. Data Collection Methods..............................................................................20
Comments and Agreement from Tutor..............................................................................20
6. Section 06: Data Presentation and Analysis...............................................................21
6.1. Reliability and Validity of the Pilot Study..........................................................21
6.2. Descriptive analysis.............................................................................................22
6.3. Inferential Statistics.............................................................................................24
6.3.1. Correlation coefficient..................................................................................24
6.3.2. Multiple Regression Analysis......................................................................25
6.4. Hypotheses testing...............................................................................................27
7. Section 07: Conclusion and Recommendations.........................................................28
7.1. Conclusion...........................................................................................................28
7.2. Recommendations...............................................................................................30
Research Ethics Approval Form........................................................................................31
Section 01- Basic Details...................................................................................................31
Section 02 – Project Summary...........................................................................................31
Section 03 – Participants....................................................................................................32
Section 04 – Data Storage and Security.............................................................................34
Section 05 – Ethical Issues.................................................................................................35
Section 06 – Declaration....................................................................................................37
References..........................................................................................................................39
Appendices.........................................................................................................................43
Appendix I – questionnaire............................................................................................43
Appendix II – Frequency Tables....................................................................................44
Appendix III - SPSS Outputs of Reliability Tests..........................................................45
Appendix IV – SPSS outputs of validity tests................................................................46

List of Tables
Table 0-1: Non-performing loans rate of LOLC Finance PLC.....................................9
Table 6-1: Reliability and Convergent Validity Results...............................................21
Table 6-2: Correlation of variables.................................................................................24
Table 6-3: Model summary.............................................................................................25
Table 6-4: Statistical Significance...................................................................................25
Table 6-5: Regression coefficients...................................................................................25
Table 6-6: Acceptance of Hypotheses.............................................................................27
List of Figures
Figure 3-1: Conceptual Framework of Study1
Figure 6-1: Gender...........................................................................................................22
Figure 6-2: Marital Status...............................................................................................22
Figure 6-3: Age.................................................................................................................23
Figure 6-4: Education......................................................................................................23
Figure 6-5: Normal P-P Plot for normality of residuals...............................................26

Research Proposal Form
Student Name; M.Jeewa Prashan Student Number; E165872
Center Name; Colombo Date; 30/04/2023
Tutor; Ms Hiranthi Rathnayake
Unit; Research project
Proposal Title: Factors Effect on Loan Recovery in Financial Sector During Post-Pandemic: A Case Study of
LOLC

1.1. Background of the Study
The World Health Organization estimates that there had been over 200 million verified COVID-19 cases and
nearly 5 million deaths globally as of November 2021. Every nation on earth has been impacted by this
epidemic. Governments implemented mitigation measures centered on travel restrictions, lockdowns,
isolation, and the closure of non-essential companies to control the spread (Kunt, et al., 2021).
A
‌ s a result of the COVID-19-induced economic downturn, bank profitability is threatened, bank revenue is
decreased, and bank losses result from debtors who are unable to make payments (Wu & Olson, 2020). Major
foreign organizations and banks were forced to reduce their growth projections (Elnahass, et al., 2021).
Sri Lanka also faces the same situation as a result of the Covid-19 pandemic. Similarly, to other emerging
countries, Sri Lanka experienced a sell-off in the stock market and a capital outflow as a result of concerns
about an economic slowdown (Central Bank of Sri Lanka, 2020). The capacity of financial service providers
to maintain extending credit to support the recovery presents a different challenge (World Bank, 2022).
Most of the time, some of the funds provided as credits are not paid, which hurts the financial industry and
prevents the funds from being made accessible to others. The subsequent variables influence credit recovery
(Peters, 2003).
This specific research subject was chosen because credit recovery has been a very difficult and pressing issue
for the financial sector of Sri Lanka. It appears the hat non-purfling loans rate increased year over year when
looking at central bank reports and other financial source documents. For example, it was 2.5, 3.4, 4.7, 4.9,
and 4.5 in 2017, 2018, 2019, 2020 and 2021 respectively. As a result, the author has acknowledged that it is a
major issue for the nation.
These problems lead to a decline in the financial sector's earnings. The business can't operate correctly due to
its low profits. The severe financial catastrophe is caused by these financial problems in addition to the
economic sphere. Because of this, the nation’s growth has stagnated (Schreiner, 2003). In light of all the
variables, we believe that loan rehabilitation techniques play a significant role in a nation's economic
development. As a result, it is significant to study the top factors’ effect on loan recovery in the financial
sector during the post-pandemic period “.
1.2. Research Problem

Loans are the major source of income for banks. Hence, loans have to be recovered to maintain their existence
and the liquidity position of the banks. Banks need to be prepared to handle circumstances where loans are not
repaid because doing so could result in liquidity problems or capital losses, which could cause financial
distress. It will be discovered that bank loans have a significant impact on economic growth, making this an
avenue they may employ to both make money for their organizations and stimulate the economy.

A robust banking system is crucial for the stability of the financial system and the macroeconomy. The level
of the banking system affects how much credit is available to the corporate segment of the economy. The
COVID-19 pandemic's limitations led to an increase in the need for liquidity among crisis-affected companies
(Acharya & Steffen, 2020).
LOLC Finance PLC is one of the leading financial companies in Sri Lanka that has been able to increase its
loan recovery rate, thereby reducing non-performing loans (refer to table 1.1). Even though the post-COVID
situation has created numerous troubles for the income of certain banks, the income of LOLC PLC has
increased over previous years (LOLC Finance PLC, 2022). Because the significant buildup of non-performing
loans has historically been linked to the occurrence of financial crises.
Table 0-1: non-performing loans rate of LOLC Finance PLC
Non-performing loan
Year
rate
2019 15%
2020 12.61%
2021 6.53%
Source: (LOLC Finance PLC, 2020), (LOLC Finance PLC, 2021), (LOLC Finance PLC, 2022)
Many nations immediately began to de-globalize as a result of the lockdown decisions taken during the
COVID-19 outbreak. As a result, the movement across borders and between nations, as well as the flow of
capital and commerce, have all suffered. According to the literature, financial institutions are more susceptible
to shocks than other institutions in both domestic and global economic systems, particularly when it comes to
credit recovery (Fu et al., 2014; Montgomery et al., 2014; Safiullah & Shamsuddin, 2019; Kwabi et al., 2020)
(Kunt et al., 2021; Elnahass et al., 2021; Assous & Al-Najjar, 2021; Dunbar, 2022; Foglia et al., 2022).
However, a few studies have found that due to strict government policies during the COVID-19 outbreak,
there is no appreciable negative effect on bank loan recovery (Demirgüç-Kunt et al., 2021; Demir &
Danisman, 2021). Furthermore, according to Elnahass et al. (2021), banks in the Asian region are better
equipped to reduce risks than banks in other regions. But only a few studies have been done to examine how
the pandemic has affected the recovery of bank loans, especially in Sri Lanka (Srirangan, 2020; KPMG, 2021;
Silva & Perera, 2021). A few studies have found that the COVID-19 outbreak in Sri Lanka hurts bank debt
recovery (Srirangan, 2020; KPMG, 2021). The comprehensive empirical evidence for the detrimental effect of
COVID-19 on Sri Lanka's financial institutions is still inadequate, though. Therefore, there is a need for a
study to examine Factors affecting loan recovery affecting the financial sector during the post-pandemic
period: A case study of LOLC. Thus, the main objective of this study is to analyze the factors affectless
loans coeffect the financial sector during the post-pandemic period - A Case Study of LOLC.
1.3. Introduction to the Organization
LOLC Finance PLC is a non-banking finance institution with headquarters in Sri Lanka. The final parent
organization of LOLC Finance is LOLC Holdings. In 2001, the business was established as LOLC Finance
Company Limited. The business started operating under the name Lanka ORIX Finance Company in 2003
(Senewiratne, 2008). When Lanka ORIX Finance Company was listed on the Colombo Stock Exchange in
2011, it officially became a public entity. The business changed its name in 2015. One of Sri Lanka's LMD
100 businesses is LOLC Finance. The business ranks among the top 100 most valuable names in the nation.
Since the latter part of 2021, LOLC Financial has been a part of the S&P Sri Lanka 20 Index. In 2022, LOLC
Finance and its sister entity, Commercial Leasing & Finance PLC, merged. The merger made LOLC Finance
the biggest non-banking finance organization in the nation (LOLC Finance, 2023).
1.4. Research Objectives

Main Objective
 To identify the factors that left loan recovery in the n financial sector during the post-pandemic.
Sub Objectives
 To identify the effect of economic conditions on loan recovery in the financial sector during post-
pandemic.
 To identify the effect of government policies on loan recovery in the financial sector doorpost-
pandemic emic.
 To identify the effect of loan type on loan recovery in the financial sector doorpost-pandemic emic.
 To identify the effect of collection strategies on loan recovery in the financial sector doorpost-
pandemic emic.
1.5. Research Questions

Main Research Question
 What are the factors that affect loan recovery in finance finances during post-pandemic?
Sub Research Questions
 What is the effect of economic conditions on loan recovery in the financial sector doorpost-pandemic
emic.?
 What is the effect of government policies on loan recovery in the financial sector doorpost-pandemic
emic.?
 What is the effect of loan type on loan recovery in the financial sector doorpost-pandemic emic.?
 What is the effect of collection strategies on loan recovery in the financial sector doorpost-pandemic
emic.?

1.6. Role of the Researcher
Some of the key roles of the researcher during this research project can be concluded as below;
The researcher needs to develop a clear and specific research question that defines the scope and objectives of
the study is the main role of the researcher while the researcher will review the existing literature on the topic
to identify the relevant theories, concepts, and findings that could inform the research. The researcher will be
designing an appropriate research methodology that could effectively address the research question. This
includes selecting the appropriate research design, sampling method, data collection tools, and data analysis
techniques. Based on the methodology, collecting and analyzing data is the next role of the researcher;
relevant data on the factors affecting loan recovery in the financial sector during the post-pandemic period.
This includes both quantitative and qualitative data, which may be collected through surveys, interviews,
focus groups, or secondary data sources. The researcher also needs to analyze the data using appropriate
statistical techniques to derive meaningful insights. Further, the researcher will be interpreting the research
findings and presenting thin clearly and concisely including writing a research report, creating visualizations,
and presenting the findings to responsible parties of LOLC.
Next, ensure ethical standards that the research is conducted ethically and in compliance with the relevant
ethical and legal standards. This includes obtaining informed consent from participants, maintaining data
confidentiality, and avoiding any conflicts of interest.
Overall, the researcher plays a critical role in conducting high-quality research on the factors affecting loan
recovery in the financial sector during the post-pandemic period, which could inform policy and practice in
this area.

Section 02: Reasons for Choosing this Research Project
2.1. Purpose of the Research
The researcher plays a crucial role in the success of a research project. The researcher needs to have a clear
understanding of the research objectives and conduct the research accordingly. The researcher should possess
adequate knowledge and understanding of the research background and must ensure that the research is
completed within the given time frame. The researcher should conduct both primary and secondary research
to gather relevant information and use appropriate project management tools and techniques to analyze the
data. Ethics and good practices must be taken into consideration throughout the research process, and the
researcher should ensure the reliability and validity of the data collected. The researcher should collect
authentic data and maintain its integrity, without engaging in any misconduct.
Identifying issues and providing appropriate solutions is also the responsibility of the researchers to help
LOLC overcome any problems. Additionally, providing meaningful recommendations and suggestions to
improve employee performance is important. Finally, communicating the research findings effectively is
crucial.
2.2. Benefits of the Research
2.2.1. Benefits to the Researcher
This project provides the researcher with an opportunity to acquire knowledge and experience in managing a
successful business project. The researcher can develop essential skills such as research, time management,
and project management skills that can be utilized in future projects. Additionally, the researcher can improve
their academic writing skills and gain exposure to the industry, providing valuable practical information for
future endeavours.
2.2.2. Benefits to the Organization
Researching the factors that affect loan recovery in the financial sector during the post-pandemic period, as in
the case study of LOLC, can provide several benefits to the organization, such as:
Insights into customer behaviour: The research can help the organization gain a better understanding of
customer behaviour during the post-pandemic period, which can help them develop strategies to improve loan
recovery.
Improved risk management: The research can identify the factors that increase the risk of default or delay in
loan repayment, allowing the organization to implement better risk management practices.
Enhanced decision-making: The research findings can help the organization make informed decisions about
loan approvals, risk assessment, and loan recovery strategies.
Competitive advantage: By conducting research and implementing effective loan recovery strategies, the
organization can gain a competitive advantage over other financial institutions.
Increased profitability: Effective loan recovery strategies can lead to an increase in the organization's
profitability by reducing losses from defaulting loans.
Overall, researching the factors affecting loan recovery in the financial sector during the post-pandemic period
can provide several benefits to the organization, including better risk management, enhanced decision-making,
and increased profitability.
Section 03: Literature Review

3.1Introduction
This chapter reveals past facts on each independent and dependent variable of the study and it includes
literature from a diverse range of sources.
Loan recovery is a critical issue in the financial sector, particularly in the context of the COVID-19 pandemic,
which has significantly impacted borrowers' ability to repay their loans. Several studies have examined the
factors that affect loan recovery, including economic conditions, borrower behaviour, collection strategies,
and loan characteristics.
One study by Farooq, Naeem, and Ullah (2020) examined the impact of economic conditions on loan recovery
in Pakistan's banking sector. The authors found that a decline in economic growth and an increased inflation
hurt loan recovery, as borrowers faced difficulties in repaying their loans. Similarly, another study by Kohn,
Leibovici, and Szkup (2017) found that macroeconomic conditions, such as changes in interest rates and
unemployment rates, can affect loan recovery in the United States. Borrower behaviours that can affect loan
recovery. While by Berger and DeYoung (1997) found that loan recovery rates were lower during economic
recessions when borrowers were likely to experience financial difficulties.
According to a study by Allen, Saunders, and Udell (1991), borrowers with higher credit scores and more
collateral are more likely to repay their loans, while those with lower credit scores and less collateral are more
likely to default. Furthermore, a study by Bhushan and Rai (2016) found that borrower education and financial
literacy can also affect loan recovery, as more financially literate borrowers are more likely to repay their
loans. Collection strategies employed by financial institutions can also affect loan recovery. A study by Gao et
al., 2019) found that collection practices, such as phone calls and home visits, can improve loan recovery
rates. Another study by (Black and Morgan, 1998) found that early intervention and proactive measures, such
as restructuring loans or providing temporary relief, can help improve loan recovery rates.
Finally, loan characteristics, such as loan type and size, can also affect loan recovery. A study by Ozili and
Arun (2020) found that secured loans, such as mortgages and auto loans, are more likely to be recovered
compared to unsecured loans, such as credit card debt. Furthermore, the study found that larger loans are less
likely to be recovered, as they represent a higher risk for lenders.
2.1. Effect of independent factors on Business and loan recovery

The majority of loans are given out under the improper sway of governmental entities, claim Choudhury and
Raihan in their 2000 study, leading to bad loans. In reality, ineffective debt classification, provisioning, and
accounting processes, along with a dysfunctional legal and judicial system, have made the problem worse
(Rehman, 2000). Reaz and Arun (2006) determined that the following elements were significant causes of the
commercial banking sector's substandard credit performance: poor credit management, ongoing development
in non-performing assets, a lack of funding, a capital deficit, political-group-protected corruption, subpar loan
recovery, unsatisfactory asset quality, ineffective bank management, extreme government involvement, and a
lack of regulatory and supervisory oversight of associated parties.
Podder and Mamun (2004) assert that the consistently high NPL may be detrimental to overall economic
growth. Compared to nationalized commercial banks, private commercial banks appear to recover debts at a
much higher rate. Currently, rules and regulations, credit management, managerial effectiveness, and
company governance could all use improvement (Podder and Mamun, 2004; Chowdhury, 2002 b).
The primary contributing factors influencing the credit performance of Bangladesh's commercial banking
industry have been identified by Ahmed (2007 a); Alam et al. (2007); Bies (2002); Podder and Mamun
(2004); Raquib (1999); Islam; and Ahmed et al. (2006). These include poor practices in credit management
systems, such as poor loan risk assessment, inadequate secured debt management, and a lack of utilization of
information systems for management, as well as ineffective bank management, unsatisfactory corporate
governance practices, ineffective banking laws, the incapability to enforce transparent banking regulations,
and substantial governmental and political influence. The survival of Bangladesh's commercial banking
industry is now dependent on the improvement of these contributing factors.

Section 04: Activities and Timescales
4.1Project Activities
This section outlines the planning and scheduling of activities required to achieve the research project
objectives. The researcher has allotted a timeframe of 2.5 months (75 days) for completing the research
project. The structure below illustrates the breakdown of the main and sub-activities involved in the project.
The structure identifies six main activities, each consisting of several sub-activities.
Activity Dependent Duration

Activity
No. On (Days)
1 Submit the Research Project Proposal 16
1.1 (A) Select a topic - 2
1.2 (B) Get the confirmation for the topic - 1
1.3 (C) Background Study A 5
1.4 (D) Complete the Research Project Proposal C 7
Get the approval for the Research Project
1.5 (E) D 1
Proposal
2 Conduct Secondary Research 8
2.1 (F) Identify the reliable sources A 2
2.2 (G) Collect secondary data F 4
Develop research objectives and research
2.3 (H) G 2
questions
3 Research Methodology 4
3.1 (I) Develop the conceptual framework H 1
3.2 (J) Define research approach and research design H, I 2
3.3 (K) Decide the population and sample E, J 1
4 Conduct Primary Research 19
4.1 (L) Select a primary data-collecting method J 2
4.2 (M) Develop the research questionnaire L 5
4.3 (N) Collect Data M 12
5 Data Analysis 10
5.1 (O) Select a proper method L 2
5.2 (P) Conduct data analysis N, O 8
6 Final project report submission 15
6.1 (Q) Provide the conclusion G, P 4
6.2 (R) Provide the recommendations Q 4
6.3 (S) Complete the final research project report Q, R 7

i.1. Milestone Chart
The Milestones chart depicts the critical points of the research project, indicating the starting time of each
major task that must be accomplished.
No Milestones Deadline
1 Submit the Research Project Proposal
2 Conduct Secondary Research
3 Research Methodology
4 Conduct Primary Research
5 Data Analysis
6 Final project report submission
Milestone one: .........................................................................................

Target date (set by tutor): .........................................................................................
Milestone two: .........................................................................................
Target date (set by tutor): .........................................................................................
i.2. Conceptual Framework

Economic Conditions
Government Policies
Loan recovery
Loan Type
Collection Strategies
Figure 0-1: Conceptual framework of the study

Source: Developed by the author

Section 05: Research Approach and Methodologies
5.1. Research Hypothesis
H1 There is a positive effect of economic conditions on loan recovery in the n

financial sector post-antiacademic
H2 There is a positive effect of government policies on loan recovery in the n
financial sectopostst-pandemicndemic
H3 There is a positive effect of loan type on loan recovery in the n financial sector
doorpospandemic emetic
H4 There is a positive effect of collection strategies on loan recovery in the n
financial sector during pospandemicic
5.2. Research Processes

The onion model, first developed by Saunders, serves as the foundation for the study design (Melnikovas,
2018).
Figure 0-2: Onion Model

Source: (Saunders, et al., 2016)
5.1.1. Philosophy
The positivistic paradigm holds that belief in the reality of an outside social situation and its important
characteristics should be tested rather than just assumed. Furthermore, positivists think that truth is constant,
observable, and unadulterated from an objective perspective which encourages statistical analysis (Collins,
2010). Subsequently, positivism affirms that a study never reaches 2 distinct conclusions, irrespective of the
type employed or the researcher who carried out the investigation (Dash, 2005). The Positivism Research
Philosophy was employed in the performance of this study. This is a quantitative and impartial statement. This
analysis will make use of the positivism justification, which is founded on standardized approaches that can
combine both objective and subjective processes. (Mackey & Gass, 2015)
5.1.2. Approach
The deductive approach and the inductive approach are two major thinking methods that academics might
employ to convey inferences and conclusions from their findings. To assess the level of the business and loan
recovery, this examines the effects of independent variables on dependent variables. The first step would be to
develop the article's hypothesis. To reassure overall completeness, the assumptions are subsequently verified
using suitable statistical tools like correlation analysis and regression analysis. As a possible consequence, the
same investigation applies the deductive method (Saunders et al., 2016).
5.1.3. Strategy
A research strategy is a description of how an author intends to respond to the research questions. The
empirical investigation would design a questionnaire survey regarding important factors from the literature
survey and distribute it to the study's selected participants to gather data (Kumar, 2011). The orchestration will
make use of a predetermined team of individuals to gather information via a questionnaire (Saunders et al.,
2016).
5.1.4. Choice
The quantitative mono technique is used in this study specifically. As the primary method of data collection
for this study would be structured questionnaires, it will mostly use assessed data to identify statistical
associations and attributes (Silverman, 2013).
5.1.5. Time Horizon
The study's main time horizon is the Cross-Sectional Time Horizon Principle (Magnavita et al., 2021). The
gathering and processing of data would take some time.
5.1.6. Data Collection Methods
Primary and secondary data sources will be used in the study. The primary data source will be a structured
questionnaire which will be used to collect deformer the m target sample group. The questionnaire is better as
a primary data collection source. Since the feature of anonymity is the major reason. Additionally, it is the
most effective, feasible, and qualitative method for collecting data about respondent license distant areas
(Kumar, 2011). And secondary data sources including, journals, books, websites, reports, conference
proceeding papers, newspaper articles and so on will be used to develop literature.

Comments and Agreement from Tutor
Comments (Optional):
I confirm that the project is not work which has been or will be submitted for another
qualification and is appropriate.
Agreed………… Name………………. Date…………………...
Comments and Agreement from Project Proposal Checker (If applicable)
Comments (Optional):
I confirm that the project is appropriate.
Agreed………… Name………………. Date…………………...

6. Section 06: Data Presentation and Analysis
6.1. Reliability and Validity of the Pilot Study
Accordingly, table 6.1 depicts the reliability and validity of the collected data of the study.
Table 6-2: Reliability and Convergent Validity results
Reliability Validity
Variable Cronbach’s P value Bartlett’s
KMO
Alpha Test
Threshold value 0.6 0.5 Sig. value 0.5
Economic Conditions 0.760 .953 0.000
Government Policies 0.575 .806 0.000
Loan Type 0.672 .750 0.000
Collection Strategies 0.757 .951 0.000
Loan recovery 0.571 .277 0.000
Source: Developed by the Author
As per Goforth (2015), a Cronbach's alpha value greater than 0.5 is acceptable, and a Cronbach's alpha value
between 0.65 and 0.8 is highly acceptable in a study. In addition, Nwana (2007) suggests that the KMO value
as well as Bartlett’s significance value for the sphericity test should be greater than 0.5 to be accepted in a
study.
As a result, it can be said that the reliability and KMO value for each variable is higher than the predetermined
level (Refer to pappendixIII and IV). It means that the questionnaire's measurement criteria and the entire
questionnaire have been approved.

6.2. Descriptive analysis
Figure 6.1 depicts the gender distribution

among respondents. Thus, females are
dominant with 63.67%, while males represent
only 36.13% of the entire sample.
Figure 6-1: Gender

Source: extracts from SPSS software
Figure 6.2 depicts the marital status of

respondents; thus, the majority are
married (61.62%), while the least are
single ones (38.38%).
Figure 6-2: Marital Status


Figure 6.3 depicts the age distribution of
respondents; thus, the majority are between 18 and
25 years (36.69%), while the least are between 36
and 45 years (17.65%). Furthermore, people aged
26 to 35 account for 20.73%, while those aged 46
to 55 account for 24.93%.
Figure 6-3: Age

Figure 6.4 depicts the educational level of

respondents; thus, the majority have a degree
(31.09%), while the least have a master's degree
(12.04%). Furthermore, only 26.69% have passed
O/L or A/L, and only 29.97% have obtained a
diploma or certificate.
Figure 6-4: Education

Note: Refer to Appendix II for frequency tables of the above demographic factors.

6.3. Inferential statistics
6.3.1. Correlation coefficient
Table 6-3: Correlation of variables
LR EC GP L CS
Pearson
1 .193** .169** .108* .192**
Correlation
LR
Sig. (2-tailed) .000 .001 .042 .000
N 357 357 357 357 357
Pearson
.193** 1 .683** .618** .986**
Correlation
EC
Sig. (2-tailed) .000 .000 .000 .000
N 357 357 357 357 357
Pearson
.169** .683** 1 .467** .681**
Correlation
GP
Sig. (2-tailed) .001 .000 .000 .000
N 357 357 357 357 357
Pearson
.108* .618** .467** 1 .610**
Correlation
L
Sig. (2-tailed) .042 .000 .000 .000
N 357 357 357 357 357
Pearson
.192** .986** .681** .610** 1
Correlation
CS
Sig. (2-tailed) .000 .000 .000 .000
N 357 357 357 357 357
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
The correlation between two variables expresses the association between the two variables and whether the
association is positive, negative, or non-linear.
As per Table 6.2, every independent variable of the study, namely, economic conditions (B = 0.193, P value =
0.000), government policies (B = 0.169, P value = 0.001), loan type (B = 0.108, P value = 0.042), and
collection strategies (B = 0.192, P value = 0.000), has a positive as well as significant relationship with loan
recovery, which is the dependent variable of the study. Because the correlation coefficient (B) of each variable
is positive, its significance is less than the prescribed value of 0.05. Hence, there is enough evidence to prove
the relationships between variables.

6.3.2. Multiple Regression Analysis
Multiple regression analysis is used in the study to test the hypotheses.

Table 6-4: Model summary
Mode R R Square Adjusted R Std. The

l Square error in the
Estimate
1 .200a .040 .029 .58984
a. Predictors: (Constant), CS, L, GP, EC
b. Dependent Variable: LR
As per Table 6.3, the R square value is 0.040, which indicates that 4% of the variability of the dependent
variable explains the entire model, which is not a greater variability or prediction.
Table 6-5: Statistical Significance
Model Sum of df Mean F Sig.

Squares Square
Regression 5.123 4 1.281 3.681 .006b
1 Residual 122.465 352 .348
Total 127.588 356
a. Dependent Variable: LR
b. Predictors: (Constant), CS, L, GP, EC
Table 6.4, depicts the statistical significance of the entire model. Accordingly, the entire model is significant,
the as the significance value is 0.006 which is below the threshold limit of the significance value of 0.005.
Table 6-6: Regression coefficients
Model Unstandardized Standardized t Sig.

Coefficients Coefficients
B Std. Error Beta
(Constant) 2.938 .235 12.522 .000
EC .100 .282 .112 .355 .000
1 GP .070 .070 .072 1.002 .000
L -.023 .065 -.024 -.355 .723
CS .042 .280 .047 .148 .882
a. Dependent Variable: LR

The regression coefficient expresses how well the independent variable predicts the dependent variable and its
nature of prediction (positive or negative).
As per Table 6.2, three independent variables of the study, namely, economic conditions (B = 0.100, P value =
0.000), government policies (B = 0.070, P value = 0.001), and collection strategies (B = 0.042, P value =
0.882) have a positive impact on loan recovery, which is the dependent variable of the study. However, only
economic conditions and government policies have a significant positive impact on loan recovery. But loan
type (B = -0.023, P value = 0.042) has no positive or significant impact on loan recovery.
Figure 6-5: Normal P-P Plot for normality of residuals

Figure 6.1 denotes that the residuals of the study are normally distributed because, according to the P-P plot,
the residuals follow the middle line and any strong deviations cannot be found. Hence, residuals are normally
distributed.

Figure 6-6: Histogram Dependent Variable

6.4. Hypotheses testing
Thus, the first and second hypotheses of the study demonstrated that section 5.1 can be accepted and the t of
the hypotheses are rejected.
Table 6-7: Acceptance of hypotheses
Hypotheses Correlation P value Regression P value Accept/

coefficient coefficient reject
H1 There is a positive
effect of
economic 0.193 0.000 0.100 0.000 Accept
conditions on loan
recovery
effect of
government 0.169 0.001 0.070 0.000 Accept
policies on loan
recovery
effect of loan type 0.108 0.042 -0.023 0.723 reject
on loan recovery
effect of
collection 0.192 0.000 0.042 0.882 reject
strategies on loan
recovery
Source: Developed by the Author

7. Section 07: Conclusion and Recommendations
7.1. Conclusion
The COVID-19 pandemic has had a devastating impact on the world economy. Nearly all of the world's main
and minor economies are struggling as a result of this pandemic. However, in terms of the economic impact of
the pandemic, this crisis may present a chance for many economies. Because of this, the COVID-19 issue is
changing the world's environment and allowing us to predict how the global economy will develop over the
years to come.
Especially this study was conducted to fill the existing study gap about the study topic and analyze the factor’s
effects on loan recovery in the financial sector during the post-pandemic period—A Case Study of LOLC.
Accordingly, four factors were identified as being most influential: economic conditions, government policies,
loan type, and collection strategies. LOLC, which is a reputed and popular bank among people in the country,
it is critical to investigate such a company and address the post-pandemic situation towards the participating
bank. As a result of the negative impact on the country's currency market, the COVID pandemic has caused
many disruptions and closures in the finance sector, particularly in banks and financial institutions.
The data analysis and findings from the analysis revealed that only two factors out of four affect loan
recovery. Meanwhile, the first two hypotheses developed about these two factors were accepted. As a result,
the study discovered that economic conditions and government policies have a positive and significant impact
on loan recovery in the financial sector following the pandemic.
A nation's financial and economic progress directly affects how profitable banks are. The need for loans
decreases along with the need for investments during a recession. In addition, as a result of the steep rise in
unemployment and the decrease in asset prices, there are increased loan defaults, charge-offs, and loan loss
provisions. The demand for loans grows, albeit slowly, as the economy starts to revive. Additionally,
improved economic conditions and balance sheet repair raise the creditworthiness of the borrowers, enabling
banks to pull out loan reserves (Federal Reserve Bank of Chicago, 2014). Castro (2013) has demonstrated that
the credit recovery of loans from financial institutions depends primarily on the economic climate
(employment and unemployment), long-term interest rates, and the worth of the stock exchange index because
the profitability of banking institutions and the risk associated with credit conditions faced by the debtors are
closely linked. Moreover, Khieu et al. (2012), Mileris (2015), Wang et al. 2020), Visaria (2009), S.G. et al.
(2018), and so on have all confirmed that the economic conditions of a country also influence credit recovery
or loan recovery.
Although the government's immediate reaction to the crisis was mostly effective in stabilizing output and
safeguarding incomes, it also made some already present financial risks to the balance sheets of households,
businesses, the financial sector, and the public sector worse, which may jeopardize a more balanced recovery
in the long run. These financial risks are interconnected through several direct and indirect relationships rather
than existing in isolation (World Bank, 2023). One of the major consequences is that most individuals are not
in a position to pay their loans. Sudden increments in interest rates and the loss of employment have caused
them to reduce their monthly income, which is even not enough to cover their living expenses (Central Bank
of Sri Lanka, 2023). The studies and repo report sealed by the OECD in 2021, the International Monetary
Fund and the World Bank in 2001, Chen et al. in 2022, Mansour et al. in 2021, the Financial Stability Board
in 2022, Nikolopoulos & Tsalas in 2017, Ashraf & Shen in 2019, Xu et al. in 2020, and Zeng in 2012 also
proved that government policies have an influence over loan recovery and that some bad government policies
increase the number of non-performing loans, making banks in a harder situation to recover their loans.
Hence, it can be concluded that economic conditions and government policies can have a strong impact on the
loan recovery of LOLC Bank, and the bank must therefore be concerned with these two policies when
implementing its plans and strategies related to loans.
7.2. Recommendations
 The bank must focus on the cost and benefit of the loans to their borrowers. And they should not
maximize the cost of loans, which makes a huge burden for loan borrowers, and no benefit will be
granted to them.
 The bank must provide training for loan recovery officers on successfully collecting, supporting
people to pay, and influencing people to repay loans.
 The government must regulate the economic system through government policies without letting
anyone suffer. For instance, if they increase interest rates, income should also increase to match
increasing expenses, including interest.
 Government policies on providing subsidies must be discouraged and should encourage giving
subsidies to loans and other debts that are taken for productive purposes, like business loans.

Research Ethics Approval Form
All students conducting research activity that involves human participants or the use of data collected from
human participants are required to gain ethical approval before commencing their research. Please answer all
relevant questions and note that your form may be returned if incomplete.
Section 01- Basic Details

Project title: Factors Effect on Loan Recovery in Financial Sector During Post-Pandemic: A Case Study of
LOLC
Student name:
Student ID number:
Program:
School:
Intended research start date:
Intended research end date:
Section 02 – Project Summary

Please select all research methods that you plan to use as part of your project:
 Interviews:
 Questionnaires:
 Observations:
 Use of Personal Records:
 Data Analysis:
 Action Research:
 Focus Groups:
 Other (please specify):

Section 03 – Participants
Please answer the following questions, giving full details where necessary.
Will your research involve human participants? Yes,
Who are the participants? Tick all that apply:
Ages 12-16: Young People aged 17–18 Adults:
How will participants be recruited (identified and approached)?
Population
The population can be explained as an all-inclusive group of people, things, objects, and other single items
that a researcher wishes to study (Peck, et al., 2008). As a result, the study population is comprised of the
employees working at LOLC Finance.
Population Size
Hence, there are 4,771 employees at LOLC Finance in Sri Lanka (LOLC Finance, 2021) which is the
population of the study.
Sample
A sample is a representation of the entire population. Research is done in terms of predicting findings from a
sample for the relevant population. As a result, the most frequent justification for choosing a sample is a lack
of resources, as it is typically impractical to observe an entire population due to time or financial constraints.
(Peck, et al., 2008). The sample for the population of 4,771 employees is 357 as per the Morgan table of
sampling.

Figure 0-3: Morgan table of sampling
Source: Developed by the author
Sampling procedures
The researcher has adapted to utilize a simple random sampling method which is a probability sampling
method. This sampling method is valid and generalizability is higher across other settings.
Describe the processes you will use to inform participants about what you are doing:
Studies involving questionnaires: Will participants be given the option of omitting questions they do not
wish to answer?
Yes: No:
(If no please explain why below and ensure that you cover any ethical issues arising from this)
Studies involving observation: Confirm whether participants will be asked for their informed consent
to be observed.
Yes: No:

Will you debrief participants at the end of their participation (i.e. give them a brief explanation of the
study)?
Yes: No:
Will participants be given information about the findings of your study? (This could be a summary of
your findings in general)
Yes: No:
Section 04 – Data Storage and Security

Confirm that all personal data will be stored and processed in compliance with the Data Protection Act
(1998)
Yes: No:
Who will have access to the data and personal information?
Only t he researcher is having access to the information and the researcher is not going to expose the
collected data and information to outside parties for unethical matters.
During the research:
Where will the data be stored?

The researcher is going to store and keep the data securely in both a laptop and a USB pen drive.
Will mobile devices such as USB storage and laptops be used?
Yes: No:
During the research project, the researcher will ensure secure storage of data in both a laptop and a USB
pen drive. This is to prevent data loss in case of any mishaps or corruption of the USB drive. Additionally,
the researcher will use a strong password to ensure that the collected data remains confidential and
protected from unauthorized access.

After the research:
 Where will the data be stored?

Following the completion of the research project, the researcher will store the data securely on both the laptop
and USB pen drive. Furthermore, a strong password will be added to prevent any unauthorized access to the
collected data. Additionally, the researcher will encrypt the data to ensure that the files remain unreadable to
any outside party.
 How long will the data and records be kept and in what format?
The researcher plans to collect data through a questionnaire that will be distributed to all respondents as a
paper document. To maintain confidentiality, all documents containing personal identifying information, such
as consent forms, printouts, and case tracking sheets, will be securely stored in a locked file cabinet that is
solely accessible by the researcher.
The collected data and records will be securely kept for a period of two years, until the completion of the
HND business management program. After this period, all paper documents and electronic files will be
destroyed.
 Will data be kept for use by other researchers?
Yes: No:
(If yes, please provide further details)

Section 05 – Ethical Issues
Are there any particular features of your proposed work which may raise ethical concerns? If so, please
outline how you will deal with these:
As per Research-methodology (2020), ethical considerations are essential in research to ensure good practices.
The researcher must follow ethical standards and address ethical issues while conducting the research.
Informed consent is a significant ethical concern, and the researcher must obtain permission before collecting
data. To minimize risks, the researcher plans to meet the HR manager, submit a request letter, and obtain
approval to conduct the research.
Crandall (1978) highlights four ethical principles: harm to participants, lack of consent, invasion of privacy,
and deception in research. To adhere to ethical standards, the researcher plans to maintain the confidentiality
of the participants, not include sensitive information, and refrain from pressurizing the participants to answer
questions. The questionnaire will not include demographic questions to protect privacy, and participants can
withdraw their answers if they wish. The researcher will ensure that respondents are treated well and not
coerced into providing specific answers.
Bell (2011) emphasizes that ethical issues in research are related to how participants are treated and the
activities researchers engage in while interacting with them. The researcher will allow participants to provide
their opinions and omit to answer specific questions if they wish. Data collected will be stored securely on a
pen drive and laptop, and a strong password will be used to prevent unauthorized access.
Y. Iijima (2011) emphasizes the importance of respecting and protecting the interests of research participants
by maximizing benefits and minimizing risks. The researcher guarantees that the information collected will
only be used for academic research purposes, and the data will not be altered or modified to ensure its
integrity. The researcher will not engage in any unethical activities with the collected data.
Validity
The researcher has taken several measures to ensure the validity of this research project. Firstly, the
Morgan table has been utilized to determine an appropriate sample size, which ensures accurate and reliable
data collection. Furthermore, the respondents are not being pressured to provide specific information,
thereby guaranteeing the authenticity of the data. The use of reliable sources for data collection also adds to
the validity of the research.
To analyze the data, the researcher used the SPSS software to ensure accurate results, further adding to the
validity of the research. By implementing these measures, the researcher has demonstrated the validity of
the research through the careful and appropriate use of these techniques.

Reliability
To ensure the reliability of this research project, the researcher has taken several steps. Firstly, the researcher
has utilized reliable sources of information when conducting secondary research, ensuring the accuracy and
credibility of the data. Additionally, the researcher has taken care to use up-to-date sources of information,
with all data collected from the year 2006 onwards, thereby reducing the possibility of including outdated
information in the research. Furthermore, to enhance the accuracy and reliability of the findings, the
researcher has used the SPSS software to analyze the primary data collected. This software is a reliable tool
for data analysis, and its use further strengthens the reliability of the research findings. By implementing these
measures, the researcher has ensured the reliability of this research project through the careful and appropriate
use of reliable sources and analysis techniques.
Generalizability
The generalizability of the research findings is a crucial aspect of this project. By applying the research
findings based on a sample to the entire population of manufacturing companies, the researcher has
established that the results can be transferable to other similar situations. The population represented in this
research comprises all manufacturing companies, and the findings apply to this entire population.
Additionally, the recommendations and suggestions made in this project can be useful for other companies
as well, indicating a high level of generalizability in this research. Overall, this research has significant
practical implications for the manufacturing industry, as the findings and recommendations can be used to
enhance organizational performance and productivity in a wide range of contexts. The transferability and
generalizability of the research findings further support the value and relevance of this project for the
broader manufacturing community.

Section 06 – Declaration
I have read, understood and will abide by the institution’s Research and Ethics Policy:
Yes: No:
I have discussed the ethical issues relating to my research with my Unit Tutor:
Yes: No:
I confirm that to the best of my knowledge:
The above information is correct and this is a full description of the ethical issues that may arise in the
course of my research.
Name:
Date:
Please submit your completed form to:

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Appendices
Appendix I – questionnaire
Appendix II – Frequency tables
Gender

Frequency Per cent Valid Percent Cumulative
Percent
Male 129 36.1 36.1 36.1
Valid Female 228 63.9 63.9 100.0
Total 357 100.0 100.0
Marital Status
Frequency Per cent Valid Percent Cumulative

Percent
Single 137 38.4 38.4 38.4
Valid Married 220 61.6 61.6 100.0
Total 357 100.0 100.0
Age
Frequency Percent Valid Percent Cumulative

Percent
18 to 25 years 131 36.7 36.7 36.7
26 to 35 years 74 20.7 20.7 57.4
Valid 36 to 45 years 63 17.6 17.6 75.1
46 to 55 years 89 24.9 24.9 100.0
Total 357 100.0 100.0
Education
Frequency Percent Valid Percent Cumulative

Percent
O/L or A/L 96 26.9 26.9 26.9
Diploma or certificate course 107 30.0 30.0 56.9
Valid Degree 111 31.1 31.1 88.0
Master's Degree 43 12.0 12.0 100.0
Total 357 100.0 100.0
Appendix III - SPSS outputs of Reliability tests

Economic Conditions
Reliability Statistics
Cronbach's N of Items
Alpha
.760 4

Government Policies
Alpha
.575 4
Loan Type
Alpha
.672 4
Collection Strategies
Alpha
.757 4
Loan recovery
Alpha
.571 5
Appendix IV – SPSS outputs of validity tests
KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .755

Approx. Chi-Square 1675.677
Bartlett's Test of Sphericity df 10
Sig. .000
Communalities

Initial Extraction
EC 1.000 .909
GP 1.000 .650
L 1.000 .562
CS 1.000 .905
LR 1.000 .077
Extraction Method: Principal

Component Analysis.
Total Variance Explained
Component Initial Eigenvalues Extraction Sums of Squared Loadings
Total % of Variance Cumulative % Total % of Variance Cumulative %
1 3.103 62.052 62.052 3.103 62.052 62.052

2 .951 19.016 81.068
3 .541 10.818 91.885
4 .392 7.835 99.720
5 .014 .280 100.000
Extraction Method: Principal Component Analysis.
Component Matrix
Component
EC .953
GP .806
L .750
CS .951
LR .277
Extraction Method:
Principal Component
Analysis.
a. 1 component
extracted.

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Factors Effect on Loan

Recovery in Financial Sector

Unit Number and Title Unit 19 – Research Project

Academic Year 2021-22

Unit Tutor Ms Hiranthi Rathnayake

Assignment Title Devise a project report based on the project proposal

Submission Date 30/4/2023

IV Name & Date

M.JEEWA PRASHAN RESEARCH PROJECT ASSIGNMENT1 2

M.JEEWA PRASHAN RESEARCH PROJECT ASSIGNMENT1 4

M.JEEWA PRASHAN RESEARCH PROJECT ASSIGNMENT1 5

Student Name; M.Jeewa Prashan Student Number; E165872

Center Name; Colombo Date; 30/04/2023

Tutor; Ms Hiranthi Rathnayake

Unit; Research project

M.JEEWA PRASHAN RESEARCH PROJECT ASSIGNMENT1 6

1.2. Research Problem

M.JEEWA PRASHAN RESEARCH PROJECT ASSIGNMENT1 7

Table 0-1: non-performing loans rate of LOLC Finance PLC

1.4. Research Objectives

1.5. Research Questions

M.JEEWA PRASHAN RESEARCH PROJECT ASSIGNMENT1 9

M.JEEWA PRASHAN RESEARCH PROJECT ASSIGNMENT1 10

2.1. Purpose of the Research

2.2. Benefits of the Research

2.2.1. Benefits to the Researcher

2.2.2. Benefits to the Organization

Section 03: Literature Review

2.1. Effect of independent factors on Business and loan recovery

M.JEEWA PRASHAN RESEARCH PROJECT ASSIGNMENT1 13

Activity Dependent Duration

M.JEEWA PRASHAN RESEARCH PROJECT ASSIGNMENT1 14

Milestone one: .........................................................................................

i.2. Conceptual Framework

Figure 0-1: Conceptual framework of the study

M.JEEWA PRASHAN RESEARCH PROJECT ASSIGNMENT1 15

H1 There is a positive effect of economic conditions on loan recovery in the n

5.2. Research Processes

Figure 0-2: Onion Model

5.1.5. Time Horizon

5.1.6. Data Collection Methods

M.JEEWA PRASHAN RESEARCH PROJECT ASSIGNMENT1 17

Agreed………… Name………………. Date…………………...

Comments and Agreement from Project Proposal Checker (If applicable)

I confirm that the project is appropriate.

Agreed………… Name………………. Date…………………...

M.JEEWA PRASHAN RESEARCH PROJECT ASSIGNMENT1 18

Table 6-2: Reliability and Convergent Validity results

M.JEEWA PRASHAN RESEARCH PROJECT ASSIGNMENT1 19

Figure 6.1 depicts the gender distribution

Figure 6-1: Gender

Figure 6.2 depicts the marital status of

Figure 6-2: Marital Status

M.JEEWA PRASHAN RESEARCH PROJECT ASSIGNMENT1 20

Figure 6-3: Age

Figure 6.4 depicts the educational level of

Figure 6-4: Education

M.JEEWA PRASHAN RESEARCH PROJECT ASSIGNMENT1 21

Table 6-3: Correlation of variables