Determinants of Lending Interest Rate in Ethiopian Private Banks
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Date
2024-01-13
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Publisher
AAU
Abstract
The aim of the study was to investigate the determinants of lending interest rate in Ethiopian
private commercial banks by taking their audited financial times series data from 2010 to 2021.
To meet the purpose of the study the researcher has been used an explanatory research design
,and quantitative research approach is employed to determine the effect of each independent
variable on the dependant variable. To conduct analysis SPPSS (Version 26) and Stata version
17 statistical software were used in this study. The study’s dependant variable is lending interest
rate, and the independent variables are Bank Size, profitability ratio, liquidity ratio, Deposit rate
and inflation rate. The classical linear regression analysis result revealed that Bank Size,
profitability ratio, and liquidity ratio are the significant independent variables to explain the
dependant variable and these variables are inversely related with lending interest rate. On the
other hand, Deposit rate and inflation rate are directly related with lending interest rate. Here,
Deposit rate and inflation rate are statically significant in explaining the dependent variable.
The study recommends, private commercial banks have to consider lending interest rate
determinants in their lending rate determination while improving their internal inefficiencies.
And also the central bank has to makes policies that encourage competition among the private
commercial banks