| dc.description.abstract | Interest rates offered by commercial banks globally and locally attract
customers to purchase products and services of financial institutions. The
magnitude of interest rate spread, however, varies across the world. It is
inversely related to the degree of efficiency of the financial sector, which is an
offshoot of a competitive environment. The objective of this study was to
determine the effect of lending interest rates on financial performance of
Commercial Banks in Kenya. The study utilized descriptive research design.
The study used a census where all the 43 Commercial Banks operating in
Kenya and registered by Central Bank of Kenya were selected. The study
entailed the use of secondary data. The data collected was analyzed using the
multiple regression analysis models. The study established that lending rates
has a positive influence on the financial performance of financial institution
because it is the main determinant of interest income. The study further
concludes that management plays a key role in the financial performance of
commercial banks because it is the one charged with the responsibility of
organizing other sources of production. An efficient management will ensure
that the operating expenses of the Bank are kept at their optimal minimum
hence promote the financial performance recorded. The study recommends
that commercial banks evaluate their lending rates properly to ensure that they
have adequate loan disbursement but also high returns that would improve the
financial performance. The study also recommends that financial institutions
increase their management efficiency because unless this is done, the high
interest income earned from loans could easily be wiped out by high operating
costs. In order to adhere to recommended non performing loans ratios and earn
optimal interest income, this study recommends that commercial banks
accurately evaluate loan applicants to ensure that bad debts are eliminated. | en_US |
