Interest rates and the performance of commercial banks in Uganda: A case study of Centenary bank

Abstract

The study evaluates the effect of interest rates on the performance of commercial banks in Uganda and was carried out in Centenary bank at the headquarters. It was based on the following research questions; how do real interest rates influence the performance of commercial banks and to what extent does the level of nominal interest rates affect the performance of commercial banks.The study sought to determine the effect of interest rates on the performance of commercial banks in Uganda. The research adopted was a case study design that included a time dimension that was cross sectional backed on largely qualitative and some quantitative views. Data was collected from 45 respondents from Centenary bank headquarters which was analysed using SPSS (Statistical Package for Social Scientists). The study found that there is a relationship between real interest rates and performances of commercial banks. The study also found that nominal interest rates affect performance assets in banks as it increases the cost of loans charged on the borrowers. The study recommends there is need for government to regulate interest rates as this would help to safeguard borrowers from exploitation by commercial banks. In conclusion real interest rates and nominal interest rates affect the performance of commercial banks in Uganda as there is a relationship between the two