Monetary Policy and Financial Performance of Commercial Banks in Kenya
Loading...
Date
2022-06
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
The International Journal of Business & Management
Abstract
This study has been done to address the research gaps in the effect of monetary policy of commercial bank’s financial
performance. The key objectives of the study were to establish the following; the effect of changes in central bank rate
on financial performance of commercial banks in Kenya, the effect of reserve ratio requirement on financial
performance of commercial banks in Kenya and, the effect of repo rate on financial performance of commercial banks
in Kenya. The study was carried out covering a five-year time frame period from 2016 to 2020. The independent
variables of the study involved: cash reserve ratio, Central bank rate, and the repo rate. Return on equity was used as
the dependent variable. The study used descriptive longitudinal research design. The total population consisted of all
the commercial banks, which is forty-two in number, licensed to operate in Kenya by the Central Bank of Kenya. The
study employed various research tests; Durbin-Watson, quantile-quantile plot and normality test were applied in
research finding analysis.
The study found out that a negative relationship exists between both Central Bank rate and cash reserve ratio
requirement and return on equity (financial performance) of commercial banks in Kenya. The research findings also
showed that a positive relationship exists between repo rate and the return on equity (financial performance) of
commercial banks in Kenya. In Conclusion, the study concluded that monetary policy affects profitability and
financial performance of commercial banks in Kenya. The study recommends that, for central bank to stimulate
economic growth, central Bank rate needed to be monitored and maintained low.
Description
Journal Article
Keywords
Monetary policy, Contractionary Monetary Policy, Expansionary Monetary Policy, Inflation, Open Market Operations, Repo rate
Citation
Kithandi, C. K., (June, 2022). Monetary Policy and Financial Performance of Commercial Banks in Kenya. The International Journal of Business & Management. Vol 10 Issue 6 DOI No.: 10.24940/theijbm/2022/v10/i6/BM2206-007