The effect of financial repression on the financial performance of commercial banks in Kenya

Abstract

The study sought to establish the impact of financial repression on the financial performance of commercial banks in Kenya. There is limited empirical literature on the relationship between financial repression and financial performance of financial institutions in Kenya. The dependent variable in the study was financial performance measured by the return on assets. The independent variables used in the study were interest rate caps, cash reserve requirements and domestic credit uptake by the government of Kenya. Descriptive research design was used in this study. The population comprised of all the 42 commercial banks in Kenya. The study period was 5 years between years 2014 – 2019. Secondary data was used in this research. Data on interest rate caps, cash reserve ratio requirements and domestic credit uptake was obtained from the central bank of Kenya. Data on return on assets by the commercial banks was obtained from the financial statements of the financial institutions. Regression analysis and ANOVA were used to analyze the data and establish the significance levels respectively. The findings revealed that interest rate caps cash reserve requirements and domestic credit uptake negatively affect the financial performance of commercial banks in Kenya.