Abstract:
The long-term viability of rural banks is heavily reliant on their profitability, which is
affected by a variety of factors, including firm-specific and macroeconomic variables.
Previous research on the impact of these factors has mainly concentrated on mainstream
banks, often overlooking the context of rural banks in Ghana. The inquiry examined
the relationship between NPL and financial performance of rural banks, investigate the
effect of liquidity risk on the financial performance of rural banks and finally, to
examine the nexus between policy rate and financial performance of rural banks in
Ghana. The investigation used the explanatory research design, quantitative approach
and employed the purposive sampling technique to draw 14 rural banks. The robust
least square estimation technique was employed to analyze 11years data. Results
revealed a positive statistically significant relationship between NPL and financial
performance. Again, the inquiry discovered a negative effect of liquidity risk on
financial performance.
Finally, the investigation found a positive statistically
significant nexus between policy rate and financial performance of rural banks. The
outcome of the study shed more light in the bank performance literature while
enlightening managers of rural banks in Ghana. The inquiry implores rural banks
should invest in advanced risk management systems and training to better anticipate
and respond to changes in policy rates. Also, the bank of Ghana should ensure rural
banks regularly comply with regulatory standards and maintain adequate capital
reserves to manage the risks associated with high NPLs and sustain profitability.
Description:
A dissertation in the Department of Applied Finance and Policy Management,
School of Business, submitted to the School of
Graduate Studies in partial fulfillment
of the requirements for the award of the degree of
Master of Business Administration
(Finance)
in the University of Education, Winneba
