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The Effect of Interest Rates Caps on Bank Perfomance Amongst Kenyan Commercial Banks

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dc.contributor.author Ochanda, Clare A.
dc.date.accessioned 2018-11-09T06:47:54Z
dc.date.available 2018-11-09T06:47:54Z
dc.date.issued 2018
dc.identifier.uri http://erepo.usiu.ac.ke/11732/4097
dc.description A Project Report Submitted to the Chandaria School of Business in Partial Fulfillment of the Requirement for the Degree of Masters in Business Administration (MBA) en_US
dc.description.abstract This study sought to investigate the effect of interest rates caps on the performance of commercial banks. The specific objectives of the study were to investigate the effect of interest rate caps on financial performance of commercial banks, analyze the effect of interest rates caps on customers and employee’s satisfaction. The study was conducted with Nairobi County. The study adopted a descriptive research design using a population of 43 drawn from the commercial banks regulated by Central Bank of Kenya. A census study was conducted drawing one respondent from each of banks for employees and 3 customers. Data was collected using questionnaires for primary data and data collection sheets for secondary data. Inferential statistics used was Pearson’s correlation coefficient. Analysis was done using SPSS vs 22. Analyzed data is presented using tables and figures (refer to chapter 4). The study found that the introduction of interest rates led to a reduction in the interest income of commercial banks, interest rate margins and total loans of commercial banks. This effectively led to higher liquidity levels and operational costs for commercial banks. Secondly, the study found that interest rates caps affected customer satisfaction to a large and very large extent. Customers perceived that there was a reduction on the cost or loans. However, accessing these loans was not easy. Nevertheless, the customers were satisfied with the financial performance of commercial banks as well as the brand image. Thirdly, this study found that interest rates caps affected employee satisfaction to a large extent. This was mainly influenced by increased automation of processes by commercial banks as well as reduced earnings which put the job security of employees at risk. Furthermore, there was decreased expenditure on employee recruitment and selection. This study concluded that interest rates caps have led to reduced financial performance of commercial banks. The net interest income as well as the net profit margin has reduced as a result of interest rate caps. This could have been occasioned by lower levels of lending by commercial banks. Lower lending resulted into higher levels of liquidity. Customers are satisfied with the customer service levels offered by commercial banks as well as pricing of loans leading to increased satisfaction with the brand image and financial performance of the banks. Nevertheless, customers find it hard to access loans. Employees are generally satisfied in their places of work. This is mainly driven by the fact that commercial banks remain profitable even after the introduction of interest rates caps. On the other hand, employees are concerned by the high level of automation and investment in IT by commercial banks after the introduction of caps coupled with the reduced expenditure on employee recruitment and selection. Employees are concerned about their job security. This study recommends that commercial banks must diversify their revenue basis to ensure that interest rates caps do not lead to losses in commercial banks. Secondly, commercial banks must address key issues on access to finance by customers by embracing innovative products like mobile credit and use of credit scoring to reduce the requirements and barriers towards access to finance. Finally, it is imperative for commercial banks to assure its employees that increased investment in IT and reduced expenditure on recruitment and selection does not lead to loss of jobs by employees. en_US
dc.language.iso en en_US
dc.publisher United States International University - Africa en_US
dc.subject Interest Rates Caps en_US
dc.title The Effect of Interest Rates Caps on Bank Perfomance Amongst Kenyan Commercial Banks en_US
dc.type Thesis en_US


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