Monetary policy and financial performance of commercial banks in Kigali, Rwanda
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Date
2017-10
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Kampala International University, College of Economics and Management
Abstract
This study investigated the effect of monetary policy on the financial performance of
commercial banks in Rwanda. The following objectives guided the study: i) to evaluate
the effect of Central Bank’s open market operations on the financial performance of
Commercial Banks in Rwanda; ii) to examine the effect of Central Bank Rate (CBR) on
the financial performance of Commercial Banks in Rwanda; and iii) to investigate the
effect of Reserve Requirement ratio on the financiL~ performance of Commercial Banks
in Rwanda. The study adopted cx post facto research design. The data source was fi~orn
annual report publications by the National Bank of Rwanda. Data was analysed using
multiple regression model. The study found no significant effect of Central Bank’s Open
Market Operations on the financial performance of commercial banks in Rwanda
(p=O.200>O.05). Similarly, the study found no significant effect of the central bank iate
on the financial performance (Return on Assets) of commercial banks in Rwanda
(p=O.53 1>0.05). In addition, the study found no significant effect of reserve requirement
ratio on the financial performance (return on assets) of commercial banks in Rwanda
(p0.605>0.05).The study concluded that monetary policy has no significant effect on
return of assets of commercial banks in Rwa1~J~~ The study made the following
recommendations: the need for commercial banks not to keep excess reserve on which
they can draw in the event of a restrictive monetary policy because it affects open market
operations, the need for the monetary authorities to make efforts towards having a
relative stability in the level of interest rate and the need for the central bank of Rwanda
to make reserve requirement ratio a major fulcrum on which monetary policy would be
based in order to improve the effectiveness of the monetary policy on the commercial
banks.
Description
A thesis submitted to the college of economics and management in partial fulfillment of the requirement for the award of a master’s degree in business administration of Kampala International University
Keywords
Monetary policy, Financial performance, Commercial banks, Rwanda