The Impact of central bank of Kenya rates on Market interest rates of Commercial Banks in Kenya
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Date
2012-09Author
Muchiri, Edith N
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
Financial liberalization and deepening entails a variety of measures such as liberalization of
interest rates, establishing freedom of entry into and procedures for orderly exit from the banking
industry, reducing reserves and liquidity requirements, eliminating or minimizing credit
allocation directives, eliminating preferential credit at concessional interest rates, and removing
controls on the capital account of the balance of payments.
The objective of this study was to investigate the impact of Central Bank of Kenya rates on
market interest rates of commercial banks in Kenya. The research design adopted in this study
was descriptive research design. In addition the researcher carried out a correlation study. The
study was to determine whether or not Central Bank Rates and market interest rates of
Commercial Banks in Kenya are correlated. Further, the researcher sought to determine which
variable mainly determined the market interest rate of commercial banks.
The population of study consisted of all the 43 commercial banks that were fully registered with
Central Bank of Kenya by December 2011. Both primary and secondary data were collected for
the study. Primary data was collected through the use of a structured questionnaire. Secondary
data was derived from various sources which include the annual financial statement and data
from the CBK. Data analysis was done using SPSS to generate quantitative reports which were
presented in the form of tabulations, percentages, mean and standard deviation.
The results of the survey were presented using tables. The study further correlated the variables
using the Pearson correlation moment product. From the findings it was indicated that there was
improvement in the allocation of credits in the banks; the commercial banks developed a healthy
money market and that the banks used indirect framework that allow the Central Bank to
influence the general level of interest rates through open markets opinions. The study concludes
that there was a positive significant relation between market interest rate and market power and
competition (p=0.042), effect of foreign ownership (p=0.031) and inflation rates (p=0.091). The
findings conclude that Central Bank of Kenya rates influenced interest rates of Commercial
Banks in Kenya.
Citation
MBA Thesis 2012Sponsorhip
University of NairobiPublisher
School of Business, University of Nairobi
Description
Master Thesis