A Dissertation Submitted in Partial Fulfillment of the Requirements for the Degree
of Master of Business Administration in Corporate Management (MBA-CM) of
Mzumbe University
This entails the study on factors affecting liquidity levels in development finance
institutions (DFIs) in developing countries. The study was guided by seven predicting
variables which are divided into micro and macro factors. The micro factors include loan
growth, capital adequacy, non-performing loans and asset quality. Also, the macro
factors include gross domestic product (GDP), lending rate and inflation which were all
together tested on liquidity as the dependent variable. The study used explanatory
designs with facts collected through causal relationship approach. The study employed
secondary data which were obtained from the audited financial statements of the bank to
perform the relationship between variables of the study which comprised the period from
1999-2018. The data were computed and tested to generate relevant statistics to present
the results using E-views and Stata software whereas the results indicated that among the
micro variables two of them which are asset quality and capital adequacy were found
positive with significant effect to the dependent variable. In addition to that, loan growth
and non-performing loans as predictors were positive with insignificant effect on
liquidity as the dependent variable. However, with the macro factors lending rate as the
predicting variable was found positive with significant effect on liquidity and the
dependent variable. However, inflation and gross domestic product (GDP) were positive
with insignificant effect on liquidity as the dependent variable. The implication of the
results is that liquidity level is an important component prior to the development of
financial institutions as the banks because it is the measure that assures lending and all
important bank aspects such as credit lending and others. In that case, it is vivid that
liquidity should be emphasized and assured that all banks are liquid enough to assure the
practices and operations of the banks are executed.