Effect of Capital Management on the Performance of Private Commercial Banks in Rwanda: A Case Study of Bank of Kigali

Sazir Nsubuga Mayanja; Kato Mahazi; Twesige Daniel

doi:doi:10.11648/j.sjbm.20200803.14

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Effect of Capital Management on the Performance of Private Commercial Banks in Rwanda: A Case Study of Bank of Kigali

Sazir Nsubuga Mayanja, Kato Mahazi, Twesige Daniel

Published in Science Journal of Business and Management (Volume 8, Issue 3)

Received: 7 September 2019 Accepted: 15 October 2019 Published: 22 July 2020

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Abstract

The study was about capital management and performance of the banking sector with Bank of Kigali as the case study. The study was motivated by the various episodes of private bank failures in many parts of the world. This study therefore, examined the role of capital management on the performance of banking sector. To achieve, this objective, the following specific objectives guided this study: To explore the capital management techniques used by bank of Kigali; To examine the level of performance of Bank of Kigali To analyse a relationship between capital management and performance of the bank of Kigali and to examine challenges in the capital management and solution to the mentioned challenges. A multi-method approach composed of both qualitative and quantitative research design was used. Data was collected from both primary and secondary sources using questionnaire and documentation were used. A population comprised of 50 bank employees was selected, from which a sample of 32 respondents was determined using the Kreijcie and Morgan formula. Data was captured using the statistical package for sciences (SPSS) and presented into frequency tables. A regression analysis was carried out using SPSS. A significance test t≤5% was assumed. The findings indicated that a variation of 70.8%, 42%, 63%, 71.6% and 64% in the capital adequacy, asset quality, management efficiency, earnings and liquidity of the bank is caused by capital management and other variables. More still, the findings from the survey indicated that the bank encounters a number of challenges which include, but not limited to capital modelling, quantification of risks and interpretation Basing on the results the study concluded that capital management is a key component in the performance management of the banking sector. The study suggested the following policies for the effective performance management of the bank; establishing the internal capital assessment process committee, capital buffers to cover the unexpected losses, use of stress and back-testing and active involvement of the board of directors in the capital management.

Published in	Science Journal of Business and Management (Volume 8, Issue 3) This article belongs to the Special Issue Business Policy& Strategic Management
DOI	10.11648/j.sjbm.20200803.14
Page(s)	132-140
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2020. Published by Science Publishing Group

Keywords

Capital, Capital Management and Performance, Bank, Basel III, Banking Supervision, Risk

References

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[2]	Serge Piabuo Mandiefe (2016) How Working Capital Affects the Profitability of Commercial Banks: Case of Afriland Cameroon, Arabian Journal of Business and Management Review.
[3]	Matten, C. (2001): Managing Banking Capital, Capital Allocation and Performance Measurement: Wiley New York.
[4]	Basel Committee on Banking Supervision (2009): Range of practices and issues in economic capital frameworks.
[5]	James R. Barth and Stephen Matteo Miller (2018) The Rising Complexity of Bank Regulatory Capital Requirements: From Global Guidelines to their United States (US) Implementation, Journal of Risk and Financial Management.
[6]	Basel Committee on Banking Supervision (2004): International Convergence of Capital Measurement and Capital Standards: A Revised Framework. Bank for Basel Committee on Banking Supervision Basel.
[7]	Grant, C. & Osanloo, A. (2014). Understanding, Selecting, and Integrating a Theoretical Framework in Dissertation Research: Creating the Blueprint for ‘House’. Administrative Issues Journal: Connecting Education, Practice and Research, Pp. 12-22 DOI: 10.5929/2014.4.2.9 1.
[8]	Basel Committee on Banking Supervision (2003): The New Basel Capital Accord, Consultative Document. Basel Committee on Banking Supervision Basel.
[9]	FSI (2016): “Literature review on integration of regulatory capital and liquidity instruments”, BCBS Working Papers, no 30, March.
[10]	Basel Committee on Banking Supervision (2016). Standardised measurement approach for operational risk. Bank for International Settlements.
[11]	https://www.risk.net>definition>internal-ratings-based-irb-approach.
[12]	Bank of Japan (2009): Economic Capital Workshop Summary Record, Http://Www.boj.or
[13]	KPMG (2011): Basel III Issues and Implication. KPMG,
[14]	https://www.bis.org>fsi>fsisummaries>nfsr
[15]	BCBS 2010: https://www.bis.org
[16]	Tobias Beck (2010): A Market Model Approach for Measuring Counterparty Credit Risk of Interest Rate Derivatives,
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[18]	Mugenda, A. (2013). Qualitative research methods: introduction. (1st ed.). Nairobi: Applied Research & Training Services (ARTS Press).
[19]	TAHERDOOST, H. (2016). Sampling Methods in Research Methodology; How to Choose a Sampling Technique for Research. International Journal of Advance Research in Management, 5 (2), 18-27.
[20]	Krejcie, R. V., & Morgan, D. W. (1970). Determining Sample Size for Research Activities. Educational and Psychological Measurement, 30, 607-610.

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APA Style

Sazir Nsubuga Mayanja, Kato Mahazi, Twesige Daniel. (2020). Effect of Capital Management on the Performance of Private Commercial Banks in Rwanda: A Case Study of Bank of Kigali. Science Journal of Business and Management, 8(3), 132-140. https://doi.org/10.11648/j.sjbm.20200803.14

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ACS Style

Sazir Nsubuga Mayanja; Kato Mahazi; Twesige Daniel. Effect of Capital Management on the Performance of Private Commercial Banks in Rwanda: A Case Study of Bank of Kigali. Sci. J. Bus. Manag. 2020, 8(3), 132-140. doi: 10.11648/j.sjbm.20200803.14

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AMA Style

Sazir Nsubuga Mayanja, Kato Mahazi, Twesige Daniel. Effect of Capital Management on the Performance of Private Commercial Banks in Rwanda: A Case Study of Bank of Kigali. Sci J Bus Manag. 2020;8(3):132-140. doi: 10.11648/j.sjbm.20200803.14

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@article{10.11648/j.sjbm.20200803.14,
  author = {Sazir Nsubuga Mayanja and Kato Mahazi and Twesige Daniel},
  title = {Effect of Capital Management on the Performance of Private Commercial Banks in Rwanda: A Case Study of Bank of Kigali},
  journal = {Science Journal of Business and Management},
  volume = {8},
  number = {3},
  pages = {132-140},
  doi = {10.11648/j.sjbm.20200803.14},
  url = {https://doi.org/10.11648/j.sjbm.20200803.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.sjbm.20200803.14},
  abstract = {The study was about capital management and performance of the banking sector with Bank of Kigali as the case study. The study was motivated by the various episodes of private bank failures in many parts of the world. This study therefore, examined the role of capital management on the performance of banking sector. To achieve, this objective, the following specific objectives guided this study: To explore the capital management techniques used by bank of Kigali; To examine the level of performance of Bank of Kigali To analyse a relationship between capital management and performance of the bank of Kigali and to examine challenges in the capital management and solution to the mentioned challenges. A multi-method approach composed of both qualitative and quantitative research design was used. Data was collected from both primary and secondary sources using questionnaire and documentation were used. A population comprised of 50 bank employees was selected, from which a sample of 32 respondents was determined using the Kreijcie and Morgan formula. Data was captured using the statistical package for sciences (SPSS) and presented into frequency tables. A regression analysis was carried out using SPSS. A significance test t≤5% was assumed. The findings indicated that a variation of 70.8%, 42%, 63%, 71.6% and 64% in the capital adequacy, asset quality, management efficiency, earnings and liquidity of the bank is caused by capital management and other variables. More still, the findings from the survey indicated that the bank encounters a number of challenges which include, but not limited to capital modelling, quantification of risks and interpretation Basing on the results the study concluded that capital management is a key component in the performance management of the banking sector. The study suggested the following policies for the effective performance management of the bank; establishing the internal capital assessment process committee, capital buffers to cover the unexpected losses, use of stress and back-testing and active involvement of the board of directors in the capital management.},
 year = {2020}
}

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TY  - JOUR
T1  - Effect of Capital Management on the Performance of Private Commercial Banks in Rwanda: A Case Study of Bank of Kigali
AU  - Sazir Nsubuga Mayanja
AU  - Kato Mahazi
AU  - Twesige Daniel
Y1  - 2020/07/22
PY  - 2020
N1  - https://doi.org/10.11648/j.sjbm.20200803.14
DO  - 10.11648/j.sjbm.20200803.14
T2  - Science Journal of Business and Management
JF  - Science Journal of Business and Management
JO  - Science Journal of Business and Management
SP  - 132
EP  - 140
PB  - Science Publishing Group
SN  - 2331-0634
UR  - https://doi.org/10.11648/j.sjbm.20200803.14
AB  - The study was about capital management and performance of the banking sector with Bank of Kigali as the case study. The study was motivated by the various episodes of private bank failures in many parts of the world. This study therefore, examined the role of capital management on the performance of banking sector. To achieve, this objective, the following specific objectives guided this study: To explore the capital management techniques used by bank of Kigali; To examine the level of performance of Bank of Kigali To analyse a relationship between capital management and performance of the bank of Kigali and to examine challenges in the capital management and solution to the mentioned challenges. A multi-method approach composed of both qualitative and quantitative research design was used. Data was collected from both primary and secondary sources using questionnaire and documentation were used. A population comprised of 50 bank employees was selected, from which a sample of 32 respondents was determined using the Kreijcie and Morgan formula. Data was captured using the statistical package for sciences (SPSS) and presented into frequency tables. A regression analysis was carried out using SPSS. A significance test t≤5% was assumed. The findings indicated that a variation of 70.8%, 42%, 63%, 71.6% and 64% in the capital adequacy, asset quality, management efficiency, earnings and liquidity of the bank is caused by capital management and other variables. More still, the findings from the survey indicated that the bank encounters a number of challenges which include, but not limited to capital modelling, quantification of risks and interpretation Basing on the results the study concluded that capital management is a key component in the performance management of the banking sector. The study suggested the following policies for the effective performance management of the bank; establishing the internal capital assessment process committee, capital buffers to cover the unexpected losses, use of stress and back-testing and active involvement of the board of directors in the capital management.
VL  - 8
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Author Information

Sazir Nsubuga Mayanja

School of Post Graduate Studies, University of Kigali, Kigali, Rwanda
Kato Mahazi

School of Post Graduate Studies, University of Kigali, Kigali, Rwanda
Twesige Daniel

School of Business, INES-Ruhengeri, Ruhengeri, Rwanda

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APA Style

Sazir Nsubuga Mayanja, Kato Mahazi, Twesige Daniel. (2020). Effect of Capital Management on the Performance of Private Commercial Banks in Rwanda: A Case Study of Bank of Kigali. Science Journal of Business and Management, 8(3), 132-140. https://doi.org/10.11648/j.sjbm.20200803.14

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ACS Style

Sazir Nsubuga Mayanja; Kato Mahazi; Twesige Daniel. Effect of Capital Management on the Performance of Private Commercial Banks in Rwanda: A Case Study of Bank of Kigali. Sci. J. Bus. Manag. 2020, 8(3), 132-140. doi: 10.11648/j.sjbm.20200803.14

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AMA Style

Sazir Nsubuga Mayanja, Kato Mahazi, Twesige Daniel. Effect of Capital Management on the Performance of Private Commercial Banks in Rwanda: A Case Study of Bank of Kigali. Sci J Bus Manag. 2020;8(3):132-140. doi: 10.11648/j.sjbm.20200803.14

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@article{10.11648/j.sjbm.20200803.14,
  author = {Sazir Nsubuga Mayanja and Kato Mahazi and Twesige Daniel},
  title = {Effect of Capital Management on the Performance of Private Commercial Banks in Rwanda: A Case Study of Bank of Kigali},
  journal = {Science Journal of Business and Management},
  volume = {8},
  number = {3},
  pages = {132-140},
  doi = {10.11648/j.sjbm.20200803.14},
  url = {https://doi.org/10.11648/j.sjbm.20200803.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.sjbm.20200803.14},
  abstract = {The study was about capital management and performance of the banking sector with Bank of Kigali as the case study. The study was motivated by the various episodes of private bank failures in many parts of the world. This study therefore, examined the role of capital management on the performance of banking sector. To achieve, this objective, the following specific objectives guided this study: To explore the capital management techniques used by bank of Kigali; To examine the level of performance of Bank of Kigali To analyse a relationship between capital management and performance of the bank of Kigali and to examine challenges in the capital management and solution to the mentioned challenges. A multi-method approach composed of both qualitative and quantitative research design was used. Data was collected from both primary and secondary sources using questionnaire and documentation were used. A population comprised of 50 bank employees was selected, from which a sample of 32 respondents was determined using the Kreijcie and Morgan formula. Data was captured using the statistical package for sciences (SPSS) and presented into frequency tables. A regression analysis was carried out using SPSS. A significance test t≤5% was assumed. The findings indicated that a variation of 70.8%, 42%, 63%, 71.6% and 64% in the capital adequacy, asset quality, management efficiency, earnings and liquidity of the bank is caused by capital management and other variables. More still, the findings from the survey indicated that the bank encounters a number of challenges which include, but not limited to capital modelling, quantification of risks and interpretation Basing on the results the study concluded that capital management is a key component in the performance management of the banking sector. The study suggested the following policies for the effective performance management of the bank; establishing the internal capital assessment process committee, capital buffers to cover the unexpected losses, use of stress and back-testing and active involvement of the board of directors in the capital management.},
 year = {2020}
}

Copy | Download

TY  - JOUR
T1  - Effect of Capital Management on the Performance of Private Commercial Banks in Rwanda: A Case Study of Bank of Kigali
AU  - Sazir Nsubuga Mayanja
AU  - Kato Mahazi
AU  - Twesige Daniel
Y1  - 2020/07/22
PY  - 2020
N1  - https://doi.org/10.11648/j.sjbm.20200803.14
DO  - 10.11648/j.sjbm.20200803.14
T2  - Science Journal of Business and Management
JF  - Science Journal of Business and Management
JO  - Science Journal of Business and Management
SP  - 132
EP  - 140
PB  - Science Publishing Group
SN  - 2331-0634
UR  - https://doi.org/10.11648/j.sjbm.20200803.14
AB  - The study was about capital management and performance of the banking sector with Bank of Kigali as the case study. The study was motivated by the various episodes of private bank failures in many parts of the world. This study therefore, examined the role of capital management on the performance of banking sector. To achieve, this objective, the following specific objectives guided this study: To explore the capital management techniques used by bank of Kigali; To examine the level of performance of Bank of Kigali To analyse a relationship between capital management and performance of the bank of Kigali and to examine challenges in the capital management and solution to the mentioned challenges. A multi-method approach composed of both qualitative and quantitative research design was used. Data was collected from both primary and secondary sources using questionnaire and documentation were used. A population comprised of 50 bank employees was selected, from which a sample of 32 respondents was determined using the Kreijcie and Morgan formula. Data was captured using the statistical package for sciences (SPSS) and presented into frequency tables. A regression analysis was carried out using SPSS. A significance test t≤5% was assumed. The findings indicated that a variation of 70.8%, 42%, 63%, 71.6% and 64% in the capital adequacy, asset quality, management efficiency, earnings and liquidity of the bank is caused by capital management and other variables. More still, the findings from the survey indicated that the bank encounters a number of challenges which include, but not limited to capital modelling, quantification of risks and interpretation Basing on the results the study concluded that capital management is a key component in the performance management of the banking sector. The study suggested the following policies for the effective performance management of the bank; establishing the internal capital assessment process committee, capital buffers to cover the unexpected losses, use of stress and back-testing and active involvement of the board of directors in the capital management.
VL  - 8
IS  - 3
ER  -

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