AN ANALYSIS OF MONETARY POLICY ON PUBLIC FINANCIAL MANAGEMENT IN KARAMOJA A CASE STUDY OF CENTENARY BANK MOROTO

Table of Contents

DECLARATION

APPROVAL

DEDICATION

ACKNOWLEDGEMENT iv

LIST OF ABREVIATIONS~ viii

ABSTRACT ix

CHAPTER ONE 10

INTRODUCTION TO THE STUDY 10

1.0 Introduction 10

.1 Background of the Study 10

1.2 Statement of the Problem 12

1.3 Purpose of the study 13

1.4 Objectives of the Study 13

1 .5 Research questions 13

1.6 Hypotheses 13

1.7 Significance of study 13

CHAPTER TWO 15

LITERATURE REVIEW 15

2.0 Introduction 15

2.1 Theoretical Review 15

2.2 The empirical evidence 17

CHAPTER THREE 25

METHODOLOGY 25

3.0 Introduction 25

3.1 Research Design 25

3.2 Research Population 25

3.3 Sample size .25

3.4 Sampling techniques 25

3.5 Sources of data 26

3.6 Data collection instruments 26

3.7 Reliability of the instruments of data collection 27

3.7 Data Gathering Procedures 28

3.8 Data collection methods or techniques 28

3.9 Data Analysis 28

3.10 Ethical Considerations 29

3.1 1 Limitations of research 29

CHAPTER FOUR 30

PRESENTATION, INTERPRETATION AND DATA ANALYSIS 30

4.0 Introduction 30

4.1. Response Rate 30

4.2 Demographic Characteristics of the Respondents 31

4.2.1 Gender 31

4.2.2 Marital Status 32

4.2.3 Age

4.2.4 Education 34

4.2.5 Working Experience 35

4.3 Monetary Policy Management Practices 35

4.4 Determinants of Liquidity in Financial Institutions 38

4.4.2 Macro economic factors 41

4.5 Effect of Liquidity Management on profitability of banks commercial banks in Uganda 43

CHAPTER FIVE 46

SUMMARY, DISCUSSIONS, CONCLUSIONS AND RECOMMENDATIONS 46

5.0 Introductions 46

5.1 Summary of the Study 46

5.1.1 Different liquidity management practices in commercial banks of Uganda 46

5.1.2 Determinants of Liquidity in Financial Institutions 46

5.1.3 Effect of Liquidity Management on profitability of Centenary Bank 47

5.2 Discussion of findings 47

5.2.1 Different liquidity management practices in commercial banks 47

5.2.2 Determinants of Liquidity in Commercial Banks of Uganda 48

5.2.3 Effect of Liquidity Management on Profitability of Commercial Banks in Uganda 49

5.3 Conclusions 49

5.3.1 Different Liquidity Management Practices in Commercial banks 49

5.3.2 Determinants of Liquidity in Commercial Banks of Uganda 49

5.3.3 Effect of Liquidity Management on Profitability of Commercial Banks in Uganda 50

5.4 Recommendations 50

REFERENCES 51

APPENDIX I 56

BUDGET ESTIMATE 56

APPENDIX III 57

Time frame 57

APPENDIX ii 58

QUESTIONNAIRE TO RESPONDENTS 58

APPENDIX 2: INTERVIEW GUIDE 64

APPENDIX 3: SAMPLE SIZE DETERMINATION 65

ABSTRACT 

This study was undertaken to assess the effect of monetary policy on public financial management of commercial banks taking a case of Centenary bank Uganda Limited, The study was guided by a cross sectional case study research design. The researcher used simple random sampling for banking/credit/loan officers and clients of Centenary bank and purposive sampling for branch managers and heads of departments. The researcher selected 70 participants as the sample for the study. The study found out that liquidity management practices at Centenary bank limited include; storage of cash, supply or withdraws of liquidity consistent with desired level of reserve money from market, daily assessment of liquidity conditions, as well as daily analysis and detailed estimation of the size and timing of cash inflows and outflows. It also found out that~; Centenary bank regularly monitors the quality of its assets, and also continuously captures large maturity mismatches to enhance profitability potential, Centenary bank; has a team that regularly monitors international financial trends, as well as closely monitoring liquidity in macroeconomic platform; Centenary bank has a system that improves capital adequacy, governance and liquidity risk, the bank also enhances transparency of its operations of credit as well as ensuring that reserves of liquid assets are sufficient to withstand adverse liquidity shocks. The study also found out that liquidity; is a precondition for daily operation, it affects bank operation, may lead banks to miss on incentives given by suppliers of credit, service and goods; adoption of liquidity strategies increases ROA, liquidity management ensures successful operations. improves earnings and capital; distressed banks only access funds from market at high interest rates which reduces profitability and the ration of liquid assets to customer and short term funding is positively related to ROA. From the findings, the following recommendation were therefore made; (i)There is a need to invest the excess of liquidity available at the banks; (ii) Commercial banks should adopt a general framework for liquidity management; (iii) Banks need to adopt of a scientific methods in detection of the strengths and weaknesses points of liquidity; (iv) Bank managers should identify and monitor key business drivers; (v) Bank officials should be trained in the areas of liquidity management; (v) Bank managers should be forward looking, and focus on operational efficiency of the banking industry; (vi) High quality liquidity assets buffer sufficient to hedge sudden liquidity outflows should be maintained; and (vii) Banks should adopt optimum liquidity model for maximum return on investment, survival, stability, growth and development of banking system in Uganda.