“Factors Affecting Liquidity Levels In Development Finance Institutions (DFIs) In Developing Countries: A Case Study Of TIB Development Bank Limited
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Mzumbe University
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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.
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.
Keywords
Liquidity levels in development finance institutions (DFIs), Developing countries