The Impact of Interest Rates On the Performance of Financial Institutions in Uganda. A Case Study of Kenya Commercial Bank-Kampala Road Branch.

TABLE OF CONTENTS

Declaration .................................................................................................. .i

Approval ..................................................................................................... .ii

Dedication ................................................................................................. .iii

Acknowledgment ........................................................................................ .iv

Table of Contents ......................................................................................... v

List of acronyms ........................................................................................ viii

List of tables ............................................................................................... ix

List of figures .............................................................................................. x

Abstract ...................................................................................................... xi

CHAPTER ONE ............................................................................................ 1

INTRODUCTION ........................................................................................... 1

1.1 Background of the study ......................................................................... 1

1.2 Statement of the problem ........................................................................ 1

1.3 Purj::x)reofthestudy ..................................................................................................... 2

l.4Oqjed:ives of the study ................................................................................... 2

1.5 Research questions ................................................................................. 2

1.6 Scope of the study .................................................................................. 2

1.6.1 Geographical scope .............................................................................. 3

1.6.2 Content scope ..................................................................................... 3

1.6.3 Time scope .......................................................................................... 3

1. 7 Significance of the study ......................................................................... 3

1.8 Conceptual framework. ........................................................................... .4

CHAPTER TWO ............................................................................................ 5

LITERATURE REVIEW .................................................................................. 5

2.0 Introduction ........................................................................................... 5

2.1 Defining interest rates ............................................................................ 5

2.2 Functions of interest rates in the economy ............................................... 5

V

2.3 Determinants of interest rates ................................................................. 7

2.3.1 Demand for loan .................................................................................. 7

2.3.2 Supply for loanable funds .................................................................... 7

2.3.3 Investment subsidiary .......................................................................... 7

2.3.4 Change in the preference ..................................................................... 7

2.3.5 Government spending .......................................................................... 7

2.3.6 Tax on interest income ......................................................................... 7

2.3.7 Discounting rate factor. ....................................................................... 8

2.4 The impact of interest rates in the financial institutions ............................ 8

2.5 INDICATORS OF PERFORMANCE ............................................................ 9

2.5.1 Profitability ......................................................................................... 9

2.5.2 Number of defaulters ........................................................................... 9

2.5.3 Liquidity level. ................................................................................... 10

2.5.4 Growth of the bank. ........................................................................... 10

2.6 The relationship between interest rates and performance of financial

institution .................................................................................................. 10

CHAPTER THREE ...................................................................................... 11

METHODOLOGY ........................................................................................ 11

3.0 Introduction ......................................................................................... 11

3.1 Research Design ................................................................................... 11

3.2 Area and population of study ................................................................. 11

3.3 Sample framework. ............................................................................... 11

3.4 Sample size .......................................................................................... 12

3.4.1 Sample technique .............................................................................. 12

3.4.2 Sample procedure .............................................................................. 12

3.5 Data collection instruments ................................................................... 13

3.6 Source of data collection ....................................................................... 14

3.7 Data processing and analysis ................................................................ 14

3.7.1 Editing .............................................................................................. 15

3.7.2 Coding .............................................................................................. 15

Vl

3. 7.3 Tabulation ......................................................................................... 15

3.8 Ethical procedure ................................................................................. 15

3.9 Anticipated limitations of the study ........................................................ 15

CHAPTER FOUR. ....................................................................................... 18

PRESENTATION, ANALYSIS AND DISCUSSION OF THE FINDINGS ............... 18

4.0 Introduction ......................................................................................... 18

4.1 Socio-demographic Characteristics ........................................................ 18

4.1.1 Age of the respondents ...................................................................... 18

4.1.2 Marital Status of the respondents ...................................................... 19

4.1.3 Sex of the respondents ...................................................................... 21

4.1.4 Educational status of the respondents ................................................ 22

4.2 The impact of interest rates in KCB JINJA ROAD ................................... 24

4.3 Factors considered when setting interest rates in KCB JINJA ROAD ....... 26

4.4: The relationship between interest rates and performance of KCB JINJA

ROAD ........................................................................................................ 27

CHAPTER FIVE .......................................................................................... 29

SUMMARY, CONCLUSION AND RECOMMENDATIONS ................................. 29

5.0 Introduction ......................................................................................... 29

5.1 Summary of the study ........................................................................... 29

5.2 Conclusions ......................................................................................... 30

5.4 Areas for further research ..................................................................... 31

REFERENCES ............................................................................................ 32

APPENDICES ............................................................................................. 33

APPENDIX: RESEARCH INSTRUMENTS ....................................................... 33

APPENDIX II: INTERVIEW GUIDE ............................................................... 36

APPENDIX III: TIME FRAMEWORK. ............................................................. 37

APPENDIX IV: BUDGET .............................................................................. 38