Macroeconomic Factors and Financial Stability of Commercial Banks in Rwanda
DOI:
https://doi.org/10.47604/ijfa.3560Keywords:
Exchange Rates, Interest Rates, Inflation, Financial StabilityAbstract
Purpose: The general objective of this study is to assess the influence of macroeconomic factors on the financial stability of commercial banks in Rwanda. The study is grounded on theories such as the Interest Rates Theory, Inflation and Deflation Theory, the Liquidity Preference and the Financial Intermediation Theory.
Methodology: A descriptive research design was employed, focusing on nine commercial banks in Rwanda operating between 2015 and 2023. Explanatory research design was adopted.
Findings: Based on the panel regression analysis, it was established that interest rates, exchange rates and inflation had significant effect on financial stability of commercial banks in Rwanda.
Unique Contribution to Theory, Practice and Policy: The study recommends that the National Bank of Rwanda should adopt a gradual but properly calibrated interest rate policy that is required to solidify bank intermediation spreads, as well as the need to maintain cheap credit accessibility. In particular, regular reviews of the policy rate that are in synch with liquidity and risk perceptions in the banking sector should be embedded so that rate adjustments remain supportive of stability without unnecessarily hindering private sector lending.
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Copyright (c) 2025 Nsengiyumva Eric , Malgit Amos Akims, PhD, Gabriel Kamau
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