INFLUENCE OF INTEREST RATE RISK MANAGEMENT PRACTICES ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA, A CASE OF BANKS IN KAKAMEGA COUNTY
Abstract
Following the global economic crisis in 2008, which led to the collapse of several financial institutions, there is a heightened emphasis on risk management practices in financial institutions in the world. Banks and their supervisors have spent considerable time and effort in recent years developing systems for monitoring and managing interest rate risk. Unfortunately, there is little data available concerning the interest rate risk for banks. Also, there are limited comprehensive empirical studies, particularly in emerging markets, that critically analyze the interest rate risk exposures of commercial banks as well as quantitative approaches of evaluating interest rate risk. The general objective of this study was to determine the influence of interest rate risk management practice on performance of commercial banks in Kenya. This study adopted a descriptive research design and a panel data analysis. The target population was all 9 commercial banks that were licensed and allowed to carry out business of banking in Kakamega County. The study was census because the target population was small. This study used both primary data and secondary data from the financial statements of the banks. Primary data was collected through issuance of questionnaires. Primary data analysis was done using SPSS version 23.0 and the panel data was analyzed using STATA version 12.0. Data was presented in tables and models. The study revealed that interest rate risk management had a significant influence on financial performance of commercial banks after introduction of lagged dependent variable (Financial performance). The study recommended that it was important for banks to have a robust framework that effectively manage financial risks because they affect financial performance of commercial banks.
Keyword: Financial Risk Management, Interest Rate Management, Performance, Commercial Banks
CITATION: Wamalwa, M. F. (2020). Influence of interest rate risk management practices on financial performance of commercial banks in Kenya, A case of banks in Kakamega County. The Strategic Journal of Business & Change Management, 7(3), 1662 – 1672.
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DOI: http://dx.doi.org/10.61426/sjbcm.v7i3.1848
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