Effect of interest rates on profitability of commercial banks in Kampala, Uganda: a case study of bank of baroda ltd
Loading...
Date
2018-06
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Kampala International University, College of Economics and Management
Abstract
The purpose of this study was , to investigate the effect of interest rates on profitability of Bank of Baroda Ltd, Uganda. The study was based on the following 3 objectives; (i) to determine the effect of lending interest rates on profitability of Bank of Baroda Ltd, Uganda; (ii) to find out the effect of saving interest rates on profitability of Bank of Baroda Ltd, Uganda and (iii) to assess the effect of market interest rates on profitability of Bank of Baroda Ltd, Uganda. The study employed ex-posto facto research design and employed panel data for Bank of Baroda Ltd, Uganda for over the period of 2007-2016. The findings revealed that lending interest rates negatively (~=-0.001) and does not significantly (p-value=0.950) affect profitability of Baroda Ltd, Uganda; saving interest rates negatively (~=-0.002) and does not significantly (p-value=0.508) affect profitability of Baroda Ltd, Uganda; and market interest rates positively W=0.000) and does not significantly (p-value=0.979) : affect profitability of Baroda Ltd, u9anda. The study concluded that; lending interest rates have no significant effect on profitability of bank of Baroda; saving interest rates have no significant effect on profitability of bank of Baroda; and market interest rates have no significant effect on profitability of bank of Baroda. The study recommended that; in regard to lending interest rates, government should review and strengthen bank lending rate policies through effective and efficient regulation and supervisory framework; In regard to saving interest rates, bank's management should create the conditions for an efficient banking system devoid of information asymmetry to adapt to changing macroeconomic variables of deposit saving interest rates. Banks' management must efficiently manage their deposits in order to earn savings from amounts due from other banks and all deposits. In regard to market .interest rates, Bank's management should obtain bank borrowings from other banking institutions at less interest rates to increase its profitability. In regard to contribution of knowledge, apart from lending interest rates, saving interest rates and market interest rates, other variables that include market size, macro-economic conditions and monetary policy contribute towards the profitability of the bank. The study developed great ideas that the management of the bank should have priorities set to meet its objectives by using some specific interest rates and not all.
Description
A research report submitted to the College of Economics and Management in partial fulfillment of the requirement for the Award of Bachelor's Degree in Business Administration-Finance and Accounting of Kampala International University
Keywords
Interest rates, Profitability, Commercial banks, Bank of baroda