The Importance of the External Private Banking Environment Factors in Making the Decision to Grant Credit to Libyan Commercial Banks

Abstract

The external environmental factors of private banking represent key elements that directly affect the performance of banks; they pose threats that the banks must be prepared to face. The difficulty is that all external environmental factors are subject to unpredictable changes at any time. The current study aims  to identify the impact of the external environment factors, including customers, competitors, suppliers, and sponsors, on the decision-making process in Libyan commercial banks to grant credit to their customers. To achieve the objectives of the study, we identified one major assumption and four minor assumptions, and three Libyan commercial banks were considered. A detailed questionnaire was developed to collect the required data, and data were analyzed using descriptive and inferential statistical analysis. Results showed that the external environment had a significant effect on decisions made by the Libyan commercial banks to grant credit to their customers. The study emphasized the importance of conducting an external environment analysis to enable banks to make informed and risk-free decisions. The study also recommended that the three studied commercial banks should take external environmental factors into account when evaluating investment opportunities and to avoid, or minimize, risks posed by such a banking environment.