Browsing by Author "Calvin Kiyengo Kamya"

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    The Impact of Interest Rates on the Profitability of Commercial Banks in Uganda. A Case Study of Development Finance Company of Uganda Bank Limited. (DFCU)
    (Uganda Christian University, 2023-09-20) Calvin Kiyengo Kamya
    Profit maximization is the core objective of any business and this doesn’t exclude commercial banks. The banks have come up with ways to try and maximize their profits such as digitalization, implementation of AI in the banking industry etc. The core objective of this study is to analyze the impact of interest rate changes on the profitability of commercial banks in Uganda by examining the financial statements of the banks and to suggest solutions thereof. The study is was also carried out to add to the knowledge bank of the similar studies carried out on banks and their operations. 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 of interest rates. The study done is commercial is descriptive in nature and it is based on secondary reliable data obtainable from several commercial bank websites by downloading their financial statements, annual financial reports and personal interactions with banking officials from commercial banks such as Centenary Bank and dfcu. 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. Furthermore, so as to cushion consumers from exploitation by commercial banks, the Central Bank need to exercise their monitoring roles strictly and discipline any commercial 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 the economy, Central Bank of Uganda should come up with monetary policy that will lead to rise in interest rates and hence improving banks profitability.