INFLUENCE OF INTEREST RATE REGULATIONS ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA
Abstract
Despite the tight Interest rate regulations, Kenya continues to witness massive collapse of banks coupled with huge financial scandals. It’s evident that Interest rate regulations are critical issue in dealing with bank failures that has been discussed in different concepts and perspectives. Studies on interest rate regulations and financial performance have produced conflicting results hence there was need for further research with a bias in Kenyan banking sector. This study examined the influence of Interest rate regulations on financial performance of banks in Kenya. The population was 43 banks for the period 2014 to 2018. Descriptive research design was used since it’s suitable for description and measurement of phenomena with high level of accuracy. Survey methodology was applied to all 43 banks since this enhances validity of data obtained by addition of relevant information and cases to the study. Secondary data obtained from CBK annual reports and banks end year financial statement was used since data obtained was valid. SPSS was used to analyze data and presented using tables since this could easily communicate the findings to readers. The study findings showed a positive correlation between Interest rate regulations and financial performance (R= 0.547 with ROE and ROA). It was evident from results that Interest rate regulations have positively contributed to financial performance of commercial banks in Kenya and there was variation on financial performance due to changes in interest rate regulations. The study recommended that commercial banks should adhere to Interest rate regulations to ensure financial stability and increased financial performance coupled with increased volume of business. It also recommended that shareholders should play critical role of ensuring banks management adhere to and implement good corporate governance. The study concluded that interest rate regulations influenced financial performance of commercial banks in Kenya.
KEY WORDS: Interest Rate Regulations, Financial Performance, Commercial Banks
CITATION: Musabi, A. B., & Otuya, W. (2019). Influence of interest rate regulations on financial performance of commercial banks in Kenya. The Strategic Journal of Business & Change Management, 6 (4), 194 – 201.
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DOI: http://dx.doi.org/10.61426/sjbcm.v6i4.1381
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