The objective of this study is to analyze the performance of two selected commercial banks over a period of six years (2008-2013) in the Rwandan banking sector. For this purpose, CAMEL approach has been used and it is established that I&M Bank and BPR are at the top of the list, with their performances in terms of soundness being the best, but the commercial bank like BPR has taken a backseat and display low economic soundness in comparison. The study found that overall bank performance increased considerably in the first three years of the analysis. A significant change in trend is noticed at the onset of the global financial crisis in 2007, reaching its peak during 2008-2009. This resulted in falling profitability, low liquidity and deteriorating credit quality in the Rwandan Banking sector in general and BPR and I&M Bank particularly.
Table of Contents
CHAPTER ONE GENERAL INTRODUCTION
1.1 Background of the study
1.2 Statement of the problem
1.3 Objectives of the study
1.4 Variables of the study
1.4.1 Dependent variables:
1.4.2 Independent variables:
1.5 Research questions
1.6 Hypotheses of the research
1.7 Significance of the study
1.8 Justification (or Rationale) of the Study
1.9 Scope and limitations of the study
1.9.1 Scope of the study
1.9.2 The limitations of the study
2.0 Structure of the study
CHAPTER TWO LITERATURE REVIEW
2.0 Introduction
2.1 Definitions of concepts and key terms
2.1.1 Analysis
2.1.2 Financial Performance
2.1.3 Banking
2.1.4 Commercial banks
2.2. Commercial Banks in Rwanda
2.2.1 Problems faced by commercial banks in Rwanda
2.2.2 The role of commercial banks within economy
2.2.2.1 Mobilization of savings
2.2.2.2 Creation of credit
2.2.2.3 Finance government
2.2.2.4 Productive investment
2.2.2.5 Fuller utilization of resources
2.2.3 Services offered by commercial banks
2.2.3.1 Loans and advances
2.2.3.2 Term loans
2.2.3.3 Deposits of money
2.2.3.4 Non-performing loans.
2.2.3.5 Loan policy
2.3 Bank Performance indicators
2.3.1 Return on Equity (ROE
2.3.2 Return on Asset (ROA)
2.3.3 Net Interest Margin (NIM)
2.4 Determinants of Bank Performance
2.4.1 Bank Specific Factors/Internal Factors
2.4.2 External Factors/ Macroeconomic Factors
2.5. Liquidity
2.5.1 Concept and meaning of liquidity risk
2.5.1.1 Credit risk
2.5.1.2 Current risk
2.5.1.3 Cash flow and fair value interest rate
2.5.1.4 Legal and regulatory risk
2.5.1.5 Operational risk
2.5.2 Causes of liquidity risk
2.5.3 Liquidity Position Analysis
2.6. Financial statements
2.6.1 Financial Statement Analysis
2.7 Finance
2.7.1 Types of financial performance analysis
2.7.1.1 External analysis
2.7.1.2 Internal analysis
2.7.1.2.1 Horizontal Analysis
2.7.1.2.2 Vertical Analysis
2.7.1.3 Ratio Analysis
2.7.1.3.1 Liquidity ratios:
2.7.1.3.2 Profitability ratios
2.7.1.3.3 Leverage ratios: Leverage
2.8 CAMEL Model
2.8.1 Camel framework
2.8.1.1 Capital Adequacy
2.8.1.2 Asset Quality
2.8.1.3 Management efficiency
2.8.1.4 Earning quality
2.8.1.5 Liquidity management
2.8.2 Student T-test
2.8.3 Previous studies
CHAPTER THREE RESEARCH METHODOLOGY
3.0 Introduction
3.1 Definition of the methodology
3.1.1 CAMEL Model
3.1.1.1 Parameters used
3.1.1.2 Study design
3.1.2 Methods of data collection
3.1.2.1 Sources of data
3.1.2.2 Secondary source data
3.1.3 Sample of the study
3.1.4 Data Presentation
3.1.5 Data Analysis techniques and methods
3.1.5.1 Statistical Treatment of Data
3.1.5.1.1 Mean and Standard deviation
3.1.5.1.2 Horizontal and Vertical analysis
3.2 PROFILE OF BPR SA
3.2.1 Historical background
3.2.2 Mission & Vision
3.2.2.1 Mission
3.2.2.2 Vision:
3.2.3 Core values: Authentically Rwandan
3.2.4 Goals and objectives
3.2.5 Achievements
3.2.6 Shareholders of BPR
3.2.7 Chief Executive Members of BPR
3.2.8 Boards Directors of directors
3.2.9 BPR Correspondents banks
3.2.10 Branches Network of BPR
3.3 PROFILE OF I&M BANK (BCR)
3.3.1 Historical background
3.3.2 Mission and Vision at I&M Bank Rwanda
3.3.2.1 Vision
3.3.2.2 Mission
3.3.2.3 Objectives
3.3.3 Core values
3.3.4 Achievements
3.3.5 The Future
3.3.6 I&M Bank Shareholders& Stock ownership
3.3.7 I&M Bank Chief executive Members
3.3.8 Management team
3.3.9 Branches of I&M Bank (BCR)
3.3.10 I&M Bank correspondent Banks
3.3.11 Services offered by both I&M BANK and BPR
CHAPTER FOUR. PRESENTATION OF FINDINGS, ANALYSIS AND INTERPRETATION
4.1 Introduction
4.2 Financial performance analysis
4.2.1 Capital adequacy
4.2.2 Analysis of Assets Quality
4.2.3 Management quality
4.2.4 Analysis of Earning Quality
4.2.5 Analysis of Liquidity
4.3 Hypotheses testing
CHAPTER 5: CONCLUSION AND RECOMMENDATIONS
5.1 Conclusions
5.2 Recommendations and suggestions for policy change
5.3 Recommendations for further research
BIBLIOGRAPHY
A. text books and Articles
B. Reports
C. Electronic sources
APPENCICES
Research Objectives and Topics
The primary objective of this study is to evaluate and compare the financial performance of two leading Rwandan commercial banks, BPR and I&M Bank (formerly BCR), during the period from 2008 to 2013 using the CAMEL supervisory framework.
- Analysis of financial performance indicators (Capital adequacy, Asset quality, Management capability, Earnings, Liquidity).
- Application of the CAMEL model to assess banking soundness and efficiency.
- Statistical validation of performance differences between the two selected banks using the Student T-test.
- Evaluation of the impact of the 2007-2009 global financial crisis on Rwandan bank profitability and liquidity.
- Formulation of recommendations to improve financial management and regulatory compliance in the Rwandan banking sector.
Excerpt from the book
1.1 Background of the study
The main objective of financial institutions is to act as an intermediary between those who have funds and those who seek funds for running their business or for personal use. For performing well these activities, the financial institution needs to have a proper management that is efficient in mobilizing the banks resource in proper manner, a capital that is used as resource to render the service, proper amount of revenue that will exceed the cost of operation, a proper system that will safeguard the asset of the business and an adequate financial position to settle claims at the time of liquidity, (Kolade Sunday Adesina, 2012). Financial sector is imperative for economic growth and industrialization via channeling funds, providing proficient financial system, sociable investor’s treatment, and optimal utilization of resources (Raza, 2011). Banking sector in any economy is performing the major role in these regards. Banking sector plays a significant role in channeling funds to industries and contributing towards economic and financial growth and stability. A well-established and managed banking sector can absorb major financial crisis in the economy and can provide a plat form for strengthening the economic system of the country (Aburime, 2009). Bank financial performance is vitally important for all stakeholders, such as the owners, the investors, the debtors, the creditors, the depositors, the managers of banks, the regulators and the government (Podder, 2012).
The study of Podder (2012) also provided evidence that concentration of commercial banks in the industry has a positive impact on the performance of commercial banks. According to the study, high concentration in the banking industry allows for a high monopolistic power of the banks and this means the banks can charge higher prices for their products. This leads to higher margins and therefore better performance. It gives direction to the debtors and the investors to make decision whether they should invest money in bank or invests somewhere else; It also flashes direction to bank managers whether to improve its finance and Regulatory agencies and government are also interested in financial performance for the regulation purposes.
Summary of Chapters
CHAPTER ONE GENERAL INTRODUCTION: Provides the research foundation, detailing the importance of bank performance, the problem statement regarding bank insolvencies, and the specific objectives focused on BPR and I&M Bank.
CHAPTER TWO LITERATURE REVIEW: Explores existing theories and definitions concerning financial performance, the banking sector in Rwanda, the CAMEL model, and various determinants of bank profitability and liquidity.
CHAPTER THREE RESEARCH METHODOLOGY: Outlines the research design, data collection methods, and the specific statistical tools (such as the Student T-test) used to analyze the financial performance of the selected banks.
CHAPTER FOUR. PRESENTATION OF FINDINGS, ANALYSIS AND INTERPRETATION: Presents the empirical analysis of the banks' financial data, evaluating them against CAMEL metrics, and interprets the results regarding capital adequacy, asset quality, and liquidity.
CHAPTER 5: CONCLUSION AND RECOMMENDATIONS: Synthesizes the study's findings, concluding that I&M Bank demonstrated stronger performance metrics compared to BPR, and offers strategic policy suggestions for long-term improvement.
Keywords
Financial Performance, Commercial Banks, Rwanda, CAMEL Model, Liquidity Management, Capital Adequacy, Asset Quality, Profitability, BPR, I&M Bank, Banking Sector, Financial Crisis, Student T-test, Non-Performing Loans, Economic Growth.
Frequently Asked Questions
What is the core focus of this thesis?
The study focuses on the comparative financial performance of BPR and I&M Bank (formerly BCR) in Rwanda over the six-year period from 2008 to 2013.
What are the central thematic fields?
The central themes include bank profitability, liquidity risk management, capital adequacy, and overall asset quality within the context of the Rwandan banking sector's regulatory environment.
What is the primary objective of the research?
The objective is to evaluate and compare the financial health of the two selected commercial banks using the CAMEL framework to determine their relative efficiency and soundness.
Which methodology does the author apply?
The research employs the CAMEL rating system (Capital adequacy, Asset quality, Management capability, Earnings, Liquidity) and utilizes quantitative financial ratio analysis supplemented by the Student T-test to compare means.
What does the main body of the work cover?
The main body covers the literature review of financial theories, detailed profiles of BPR and I&M Bank, the systematic application of CAMEL ratios to their financial statements, and a hypothesis testing section.
How can this study be characterized by its keywords?
It is characterized by keywords such as Financial Performance, CAMEL Model, Rwanda, Liquidity Management, Capital Adequacy, and Commercial Banking.
Why did BPR perform poorly in specific years?
The study attributes BPR's poor performance in 2012 and 2013 to factors such as core banking system crashes (T24), inefficient internal controls, fraud issues, and reconciliation backlogs.
How does the I&M Bank compare to BPR according to the CAMEL results?
The findings indicate that I&M Bank consistently outperformed BPR in most CAMEL dimensions, particularly in Return on Assets (ROA), Return on Equity (ROE), and overall liquidity management during the study period.
What is the significance of the 2007-2008 financial crisis in this study?
The study uses this period to illustrate a shift in trends within the Rwandan banking sector, noting that the crisis contributed to falling profitability and deteriorating credit quality for the studied banks.
- Citar trabajo
- Sylvain R. Ntuite (Autor), 2015, Analysis of Financial Performance of Commercial Banks in Rwanda, Múnich, GRIN Verlag, https://www.grin.com/document/428620
