Influence of Interest Rates and Performance of Lending Institution in Africa. A Critical Literature Review
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Date
2023
Authors
Kariuki, Robert
Journal Title
Journal ISSN
Volume Title
Publisher
Cari Journals
Abstract
Purpose: Financial performance is a key determinant of assessing organization success. The
financial performance is geared toward determining whether the firms have generated enough
income for maximizing shareholder’s wealth as opposed to the mere maximization of the firm’s
net profit. The overall objective of this study was to examine influence of interest rates and
performance of lending institution in Africa. A critical literature review
Methodology: The paper used a desk study review methodology where relevant empirical
literature was reviewed to identify main themes and to extract knowledge gaps.
Findings: The study also concluded that interest rates on loans and advances became significant
in affecting performance in terms of profits before tax and exceptional items (PBTEI) and also
returns on equity (ROE). This conforms to the study by Kibuthu (2005) that those who borrow
from lending institutions are sensitive to interest on loans, borrow more when rates are low and
favourable allowing banks to make more in profits.
Unique Contribution to Theory, Policy and Practice: The study recommends that since majority
of African banks continued making huge income from loans then the information on total cost of
loans to the borrowers should be made very clear on all platforms that hold this information.
Diversification to other non- interest revenue sources is a way to reduce banks’ overreliance on
interest income.
Description
Article
Keywords
Influence, Interest Rates, Performance, Lending Institution, Africa
Citation
Kariuki, R. K. (2023). Influence of interest rates and performance of lending institution in Africa. A Critical Literature Review. International Journal of Modern Statistics, 3(1), 1–11. https://doi.org/10.47941/ijms.1170