Moderating Effect of Political Risk on the Relationship between Bank Characteristics and Lending Rates among Commercial Banks in Kenya
Maubi, Andrew Mokaya
Ouma, Duncan O.
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Low lending rates would encourage increased uptake of loan facilities hence fostering investments that in turn would be expected to spur economic growth. Increase in investments is expected to yield good returns hence resulting in multiplier effects. After the 1990s when financial liberalization had taken root, commercial banks in Kenya stood related in terms of not only other aspects of their trading but also with lending rates. The benefits expected of Financial Liberalization and deepening of the financial sector is narrowing of lending rates. Political risk is the risk faced by commercial banks that include political decisions events conditions or pronouncements which significantly affect their commercial banks profitability. In this context, the effect on profitability would have an effect on lending rates in return. The Political risk index is computed based on twelve items entailing social and political constructs within a country. The study sought to establish the moderating effect of political risk on the relationship between bank characteristics and lending rates among commercial banks in Kenya. The research philosophy for this research was positivism. Explanatory non-experimental research design was employed. The target population was thirty nine (39) commercial banks from whom secondary data was collected by way of census since these are the banks from which complete information could be obtained for meaningful analysis for the study period 2006-2015. Descriptive Statistics including Mean, Standard deviation, inferential statistics (Panel regression analysis and Correlation analysis) were carried out. Data analysis was run on the Stata 13 package and findings presented in figures, tables, graphs and charts while deriving conclusions and recommendations from the findings of the study. Political risk was found to have insignificant moderating effect on the relationship between bank characteristics and lending rates among commercial banks in Kenya. Keywords: Political Risk, Bank, Characteristics, Lending Rates
- RP-Management Science