The impact of interest rates on the profitability of commercial banks in Uganda
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Date
2018-09
Authors
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Publisher
Kampala International University.College Of Economics and Management
Abstract
The core objective of this project is to analyze the impact of interest rates changes on the
profitability of commercial banks being operated in Uganda by examining the fmancial
statements of the banks and to suggest solutions thereof. Recent movements in interest rates,
inflation and exchange rates present real dangers to economic stability commercial banks in
Uganda continue to report increase in profits due to the increase in the interest rates. The study
done is descriptive in nature and it is based on secondary reliable data obtained from commercial
banks websites, armual fmancial reports, and personal interactions with banks officials such as
Uganda commercial bank Uganda branch. Since the efficiency of banking sector is considered
most important for economic growth, monetary policy implementation and macro-economic
stability. From the past few years, interest rates spread of banking sector of Uganda implying
that the higher the interest rates, the better the performance of commercial banks. The study also
found that the model containing interest rates and size of commercial bank can explain 64% of
the changes in commercial banks profitability. The study recommended that policies to be put in
place to shield bank lending rates and ensure monitoring the same. Fmther, so as to cushion
consumers from exploitation by commercial banks, the Central Bank need exercise their
monitoring roles strictly and discipline any cormnercial banks that may be increasing the interest
rates arbitrary to boost their profitability. The study also recommends that in times of poor
performance of commercial banks and the need to boost their profitability may be necessary for
their role in economy, Central Bank of Uganda should come up with monetary policy that will
lead to rise in interest rates and hence improving banks profitability.
Description
Research dissertation submitted to the College of Economics and Management in partial fulfillment of the requirements for the a ward of the bachelors degree of Business Administration accounting and Finance of Kampala International University
Keywords
Interest rates, Profitability, Commercial banks, Uganda