The relationship between regulation and financial performance of rwanda Commercial Banks

Abstract

The objective of this study was to establish the relationship between Regulation and Financial Performance of commercial banks in Rwanda. The study had three specific objectives of establishing how capital requirement ratio, liquidity ratio and management efficiency ratio affect financial performance of commercial banks in Rwanda. The study adopted a descriptive research design which assisted to examine the relationship between regulation and financial performance of commercial banks. The sample size as well as the population of the study was ten commercial banks. The response rate was eighty percent which comprised eight commercial banks. Data was gathered using a data collection schedule and analysed using SPSS 17. The findings of the study in some areas concur with past studies while in others it contradicts past findings by other scholars. The overall finding and conclusion of the study was that all the measures of regulation used in this study are not significant redictors of financial performance of commercial banks in Rwanda. The capital requirement was found to be insignificant in explaining profitability of commercial banks in Rwanda. The liquidity ratio and management efficiency ratio were also found not to explain the profitability. Based on the findings another study can be conducted in Rwanda but should really explain what are the variables that. Other variables that affect financial performance of commercial banks. Regulation is a key pillar of financial institution operations in Rwanda and by extension pillar to financial prosperity and stability. Every year banking system contribute a good percentage in the total budget of the country, the study recommends the Government of Rwanda to develop policy which will help banks to operate in a conducive environment and this can create financial stability of financial institution in Rwanda