Camel Rating System and Financial Performance of Rwandan Commercial Banks
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Date
2021
Authors
Ngoboka, Jean Paul Hakizakubana
Journal Title
Journal ISSN
Volume Title
Publisher
IOSR Journals
Abstract
Financial institutions hugely contribute to Rwandan economic development. However, different studies showed
that they expose to risks that limit them from attaining their objectives. The banking sector’s liquidity, efficiency,
and profitability in Rwanda have weakened in the past four years – 2015 to 2018 and its performance indicators
collapsed. This study intended to examine the effect of the CAMEL rating model on the financial performance of
commercial banks in Rwanda for the period ranging from 2014 to 2018. It was underpinned by four theories
namely; cash management theory, agency theory, liability management theory, and market power theory. This
paper covered11 commercial banks operating in Rwanda and adopted secondary data published by the Central
Bank of Rwanda and the official websites of mentioned the 11 banks.Descriptive research design and panel
regression were employed to evaluate the correlation between the predictor and outcome variables. The
findings concluded that capital adequacy and asset quality are positively correlated to determine the value of
financial performance. Liquidity management, management efficiency, and earnings management have a
negative correlation. However, capital adequacy, asset quality, management efficiency are statistically
significant to predict the ROA at a 5% level. This paper recommends that both the banks’ management and
financial regulatory body should work together to formulate policies that would help improving banking sector
efficiency without violating the right of their clients. When it comes to the evaluation of financial institutions, all
the CAMEL model factors should be considered.
Description
A research article published in IOSR Journal of Economics and Finance (IOSR-JEF)
Keywords
Capital Adequacy, Asset Quality, Management Efficiency, Earnings Management, Liquidity Management, Financial Performance
Citation
HakizakubanaNgoboka, J. P., & Gatauwa, J. Camel Rating System and Financial Performance of Rwandan Commercial Banks.
URI
https://www.researchgate.net/profile/Jean-Paul-Ngoboka-2/publication/349570395_Camel_Rating_System_and_Financial_Performance_of_Rwandan_Commercial_Banks/links/6036745a4585158939c9d24a/Camel-Rating-System-and-Financial-Performance-of-Rwandan-Commercial-Banks.pdf
http://ir-library.ku.ac.ke/handle/123456789/21952
http://ir-library.ku.ac.ke/handle/123456789/21952