Effectiveness of bank of Uganda interest rates in influencing the operations of Centenary Bank (U) Limited
Abstract
The purpose of the study was to examine the effectiveness of Bank of Uganda interest rates in influencing the operations of the Centenary Bank in Uganda. The objectives were to establish the effectiveness of BOU interest rates in determining the amounts of loans disbursed by Centenary bank, the effectiveness of BOU interest rates in influencing the recovery of loans by Centenary bank and finally the effectiveness of BOU interest rates in determining the profitability of Centenary bank.
The results indicated that loan amount disbursement, profitability of loans and loan recovery at Centenary Bank were largely affected by the BOU interest rates. The study held that amounts of loans demanded were largely affected by the interest rates charged by Centenary bank. The findings further indicated that profitability of loans at Centenary Bank was highly affected by BOU interest rates due to high levels of non-performing loans. The researcher found out that customers principally default in paying back loans because of high interest rates although Centenary bank always puts measures of recovering loans from defaulters.
The study recommended the Bank of Uganda should control the lending rates through use of proper monetary policy tools and also continue to engage Centenary Bank to lower its lending rates in relation to the Central bank lending rates.