dc.description.abstract | Financial systems should promote economic growth by diversifying all aspects of an
economy, be it accomplishing portfolios or even meeting liquidity requirements for
financial institutions. In Kenya, the central bank recognizes efficiency in the banking
sector as the precondition for macroeconomic stability and the existence of effective
monetary policy execution. In Kenya the interest rate have been varying greatly
affecting the Financial Performance of banking institutions. The objective of this study
was to determine the effect of interest rate variation on the Financial Performance of
Commercial Banks in Kenya. A descriptive design was used in this study, to show
trends and comparative analysis of the Interest Rate Variations over the years. All 42
operational Commercial Banks in Kenya as at the year 2015 were considered.
Therefore, a census will be used. To achieve the objective of this study, secondary data
sources were used to gather information. The study covered a period of 10 years, from
the year 2006 to 2015. The data obtained from the secondary sources was analyzed
using statistical package for social sciences (SPSS). The findings on the regression
coefficients established that interest rate variation had an insignificant positive
relationship with the Financial Performance of Commercial banks but a negative
relationship was witnessed in the case of credit risk and inflation. The findings also
established an insignificant positive relationship between GDP growth and Financial
Performance of Commercial Banks. The study concluded that interest rates variation,
credit risk and inflation have an inverse relationship with Financial Performance of
Commercial banks while GDP growth rate has a direct relationship with the Financial
Performance of Commercial Banks in Kenya. The study recommended that
Commercial Banks in Kenya should come up with appropriate strategies on Interest
Rate Variation and Credit Risk to ensure that they do not reduce their Interest Income
hence Financial Performance. | en_US |