EFFECT OF INTEREST RATE CAPPING ON MARKET PERFORMANCE IN LISTED COMMERCIAL BANKS IN MOMBASA COUNTY, KENYA
Abstract
The study sought to establish how interest rate capping influences market performance of listed Banks in Kenya focusing on Commercial Banks located in Mombasa County. The specific variables of the study were: mortgage interest rate capping, interest rate capping on savings products, term loan interest rate capping and overdraft interest rate capping on market performance of Listed Commercial Banks. The study target included 80 senior mamagement of all the listed commercial banks who were selected through stratified and simple random sampling techniques. The study collected both primary and secondary data. This study used descriptive and inferential statistics in data analysis. Collected data was analyzed using Statistical Package for Social Sciences (SSPS 21). Pearson correlation and linear regression analysis test were also computed. The study concluded that there exists a weak positive significant relationship between mortgage interest rate capping and market performance. The study concluded that there exists a weak negative insignificant relationship between term loan interest rate capping and market performance Interest rate capping on savings products had significant effect on market perfomance. Banks would encourage opening of savings account to take advantage of the liabilities which are cheaper than overnight borrowing. In addition, banks were in better positions to carry out financial intermediation role and banks would put stringent rules for operating savings account to discourage its demand as it is costly to the banks. Overdraft interest rate capping had significant effect on market perfomance. The study recommended that Capping of interest rate should be scrapped off because it had reduced banks’ market capitalization, market turnover as well as overall growth of listed banks among others.
Key terms: Financial Performance, Interest Rate Cap, Mortgage Interest, Overdraft, Term Loan, Term-loan
CITATION: Mlati, E. M., Mukhongo, A., & Datche, E. (2019). Effect of interest rate capping on market performance in listed commercial banks in Mombasa County, Kenya. The Strategic Journal of Business & Change Management, 6 (2), 522 – 538.
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DOI: http://dx.doi.org/10.61426/sjbcm.v6i2.1126
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