Factors affecting performance of commercial banks in Uganda
Abstract
The study seeks to establish the underlying factors responsible for performance of domestic
commercial banks in Uganda. The factors are analyzed in the light of structure–conduct
performance (SCP) and Efficiency hypothesizes (ES). This is supplemented by Global advantage
theory together with Home field theory.
The study analyses performance of all licensed domestic and foreign commercial banks
independently on average basis. Using Linear multiple regression analysis over the period
2000-2011, the study found that, management efficiency; asset quality; interest income; capital
adequacy and inflation are factors affecting the performance of domestic commercial banks in
Uganda over the period 2000-2011.
Policy implications emerged for commercial banks’ management includes; efficient
management; credit risk management; capital adequacy levels; diversification and commercial
bank investment. In addition, monetary policy regulations and instruments should not enforce
high liquidity and capital adequacy levels. Regulations on non-interest income activities should
be put in place to harmonize the impact of diversification on all commercial banks’
performance and to avoid exploitation of bank customers.