The Effect of Lending Interest Rates on Financial Performance of Commercial Banks in Kenya
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Date
2013-10Author
Okech, Franckie O
Type
ThesisLanguage
enMetadata
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The research sought to determine the effect of lending interest rates on the financial
performance of the commercial banks in Kenya. The study involved a census survey of
all the 43 commercial banks registered and in operation as at 31st December 2012
licensed to carry out the banking business in Kenya under the banking Act of Kenya CAP
486.
The collected data was edited and cleaned for completeness in preparation for coding.
Once the data was coded, it was entered into the Statistical Package for Social Sciences
(SPSS) version 17 for analysis. ROE was regressed against the Lending interest rate,
Operating cost efficiency and Management Efficiency.
The study found out that a weak but positive relationship (R= 0.378) exists between
lending interest rates and financial performance of commercial banks. The study also
revealed that 14.3% of financial performance in commercial banks can be explained by
lending interest rates. Analysis of variance also proved that the relationship was
statistically significant. The findings were also verified through analysis of variance
(ANOVA) statistics which gave a p-value of 0.132 which was far much above the
recommended p-value of 0.05.
The research recommends that commercial banks should judiciously manage their
interest rate to improve their financial performance since it has a positive effect on the
bank’s financial performance and also recommends for income source diversification by
banks since lending interest rate only account for 14.3% which leaves a clean 85.7%
revenue to be sourced through other means.
Citation
Okech,Franckie O.;October,2013.The Effect Of Lending Interest Rates On Financial Performance Of Commercial Banks In Kenya.Publisher
University of Nairobi School of Business