Moderating Effect of Gross Domestic Product on the Relationship between Camel Rating Model and Financial Performance of Deposit Taking Savings and Credit Cooperative Societies in Kenya

isara solutions, 2019

Banking sector is the key element in the financial sector and determines development of any country’s economic success. This paper aimed to analyse the financial performance of Ethiopian commercial banks by using CAMEL framework and to rank the banks according to their performance. Census sampling method were used and 15 banks were considered for the study. For measuring performance of the banks data was collected from National Bank of Ethiopia for the period of 2012 to 2017 and ROA and ROE are considered as dependent variables and, Capital adequacy, Asset quality, Management efficiency, Earning ratio and Liquidity ratio were considered as independent variables. Descriptive analysis were conducted by using ratio analysis and econometric analysis were conducted by constructing regression model by using e-views 9 software. The regression result for ROA is explained by independent variables is 62.11 percent, and ROE is explained by independent variables is 82 percent. Capital adequacy, asset quality, management efficiency are significant variables whereas the earning ability and the liquidity position ratios are insignificant in both models.

Financial institutions hugely contribute to Rwandan economic development. However, different studies showed that they expose to risks that limit them from attaining their objectives. The banking sector's liquidity, efficiency, and profitability in Rwanda have weakened in the past four years-2015 to 2018 and its performance indicators collapsed. This study intended to examine the effect of the CAMEL rating model on the financial performance of commercial banks in Rwanda for the period ranging from 2014 to 2018. It was underpinned by four theories namely; cash management theory, agency theory, liability management theory, and market power theory. This paper covered11 commercial banks operating in Rwanda and adopted secondary data published by the Central Bank of Rwanda and the official websites of mentioned the 11 banks.Descriptive research design and panel regression were employed to evaluate the correlation between the predictor and outcome variables. The findings concluded that capital adequacy and asset quality are positively correlated to determine the value of financial performance. Liquidity management, management efficiency, and earnings management have a negative correlation. However, capital adequacy, asset quality, management efficiency are statistically significant to predict the ROA at a 5% level. This paper recommends that both the banks' management and financial regulatory body should work together to formulate policies that would help improving banking sector efficiency without violating the right of their clients. When it comes to the evaluation of financial institutions, all the CAMEL model factors should be considered.

Research Journal of Finance and Accounting, 2020

A stable banking sector is significant in ensuring economic growth as well as sound, efficient and stable financial system. However, the banking sector in Kenya has been considered fragile and this is evident from the increasing trend of non-performing loans, fluctuating deposit trend of some commercial banks and fluctuations of foreign liabilities in commercial banks in Kenya, which is associated with financial stability. Furthermore the collapsing of some commercial banks and some being put under receivership is of great concern to the financial stability of the commercial banks in Kenya. The general objective of the study was to establish the effect of CAMEL variables on financial stability of commercial banks in Kenya. The specific objectives of the study were to determine the effect of operational efficiency, capital adequacy, bank liquidity, profitability and asset quality on financial stability of commercial banks in Kenya. The study was carried out in 17 fragile commercial b...

IJMRE, 2021

the international credit rating evaluation systems are used by global agencies to grade their lenders which can be nonfinancial or financial institutions. Also, international credit ratings are considerably platforms of evidence of private information possessed by banks. Credit rating evaluation to entities such as commercial banks, it is still under infant stage in Tanzania and other developing countries. This research paper examined the influence of CAMEL ratios on credit rating evaluation of Tanzanian Commercial Banks. The research opted time series research design in capturing the variables, quarterly data from 2009-2019 was estracted from banks' financial reports. In evaluating the commercial banks' credit rating, the study's sample sizes were 40 observations from CRDB and NMB commercial banks. The results indicated that, the influence of CAMEL ratios on credit rating of Tanzania Commercial Banks are likely to undergo significantly from capital adequacy, management quality, earning capability and liquidity. The study additional findings showed that, Tanzanian regulatory system (locally) considerers less indicators in credit rating evaluation with inferior standards as compared to international standards. CRDB and NMB banks combine had satisfactory view rating scores that signified basically accuracy with modest amendable limitation (rating average of '2'), nevertheless NMB appeared to be better in ratings than CRDB in the period of 10-years examined quarterly (insert statistical P-Values). The study suggests that local systems ensure the establishment of credit rating evaluation guidelines to reflect international standards to effect the credit rating evaluation of local firms. In order to meet international rating standards for local commercial banks, the international credit rating standards are crucial to be adopted.

Journal of Applied Finance & Banking, 2023

This study aims to evaluate the performance of the Sierra Leone banking sector using Camel rating framework. The study adopts a descriptive research design in which the Least Square regression method is used. The study covers the period from 2012 to 2021 inclusive. The variables considered for this study include capital adequacy, asset quality, earnings ability of the banks and liquidity management within the banking sector. From the findings of the study; all the variables used have positive relationships or coefficients except Asset Quality and Liquidity Management, which has a negative coefficient of-0.007021 and-0.03513 but these relationships are insignificant to banks' performance in Sierra Leone. The findings from the study also indicate that Capital Adequacy and Earning Ability are having positive and significant effect on bank`s performance in Sierra Leone.

Over the past few years, SACCO'S have made a significant push into the provision of credit in order to take advantage of the prevailing high levels of profitability. They have embarked on serious marketing strategies for various loan products they sell. Despite the increased sale of loan products, there are reported cases in literature of massive loan defaults by the members and borrowers. Even though extensive studies have been conducted in Kenya, it is noted that the findings are inconclusive thus posing research gaps. It is on this premise the study sought to investigate loan repayment among SACCO'S in Embu County, Kenya. The objective of the study was to establish the influence pf loan appraisal, on financial performance of deposit taking SACCO'S in Embu County, Kenya. The study employed descriptive research design and targeted a total population of 250 respondents selected from of 10 SACCO'S operating in Embu County, Kenya. Out of the 250 respondents, Slovin's formula was adopted to select 158 respondents to be the sample size of the study. The study used primary and secondary data. Primary data was collected using questionnaires through drop and pick later method. Secondary data was gathered by a review of existing materials that included financial statements and related empirical studies. The content validity was determined by lecturers that were drawn from department of Accounting and Finance of Kenyatta University and industry experts who were draws from SACCO's. Reliability of the study was tested using Cronbach Alpha method. Data was analysed using Statistical Packages for Social Sciences (SPSS) version 21. Data was analysed using descriptive statistics like mean, percentages, standard deviation and frequencies. Inferential statistics such as multiple regression was conducted to establish the statistical relationship between variables at 95% confidence level and 5% significance level. The findings of the study were presented using tables and graphs. After conducting descriptive, correlation and regression analysis, it was revealed that there was a statistical relationship between independent variables loan appraisal, and financial performance of deposit-taking Savings and Credit Cooperative Societies in Embu County, Kenya). The study concludes that unless SACCO's embrace models of minimizing financial risks such as loan appraisal, achieving financial performance will be an uphill task. The study recommends that SACCO's not only need to focus on non-performing loans but also seek to understand and review loan appraisal policies to encourage repayment within the stipulated timeframe.

Measurement of Bank’s performance has become increasingly important in recent times due to significant loan losses and the increasing effects of global financial crises. The need to have stable and robust financial system that will meet the financial needs of the economy is of prime interest to both investors and policy makers. The increasing liberalization of economies has given way for multinational companies including financial institutions to operate in foreign lands. They do this either by acquiring existing banks or opening foreign branches. Various Authors and stakeholders however hold different view as to the importance of foreign Banks entry. Whiles one group is the opinion that, the presence of foreign banks is detrimental to local banks, others are also of the opinion that, foreign banks will help improve the general banking systems in the developing through the offering of cutting edge products and services. This results in intense competition among the banks that compete for the bankable populace. This therefore calls for the need to analyze and compare the performance of these banks, and what actually underpins such performance. Various performance methods have been used to analyze Banks performance in worldwide. CAMEL rating system has become important means of measuring the overall soundness and safety of banks in the light of global financial crisis and bank failures. The system analyzes capital adequacy, asset quality, management quality, earnings, and liquidity of Banks incorporating relevant financial ratios. This study investigated the performance of local and foreign Banks using the CAMEL rating system with data from the bank’s annual report. For the purpose of generalization, twelve banks made of six foreign and six local banks were selected using simple random sampling method. The banks were selected based on their years of operation, market share, bank size, and nature of business. The performance of the banks were then analyzed using the CAMEL rating system with ROA, and ROE as dependent variables and selected accounting ratios as independent variables. A multiple regression analysis was employed to draw inference for the results of the study and also to establish therelationship between the variables. The results of this study shows that foreign banks perform better on capital adequacy,asset quality, and management efficiency. The local banks on the other hand performed better than their foreign counterparts on the earnings ability and are also more liquid than their foreign counterparts. A model developed for this study revealed that not all the CAMEL variables impacted significantly on the performance of commercial banks in Ghana. The results from the study show that there is a positive relationship between ROA, OPTR, and NIM. Also a similar relationship exist between OPTR, NPLTAM and ROE of commercial banks in Ghana, however CAR and ROE are negatively correlated.

Journal of finance and accounting, 2023

The study sought to examine the effect of capital adequacy, asset quality, management efficiency, earnings ability, liquidity and financial performance of Deposit Taking Savings and Credit Cooperative Societies in Kenya. The study originates from the Doctoral dissertation of the first author in which the co-authors served as supervisors. Descriptive and panel regression analysis were applied based on secondary data obtained for the period 2013 to 2022. The study established that capital adequacy has insignificant effect on financial performance of deposit taking SACCOs in Kenya. It was established that asset quality has significant effect on financial performance of deposit taking SACCOs in Kenya. It was established that management efficiency has insignificant effect on financial performance of deposit taking SACCOs in Kenya. It was established that earnings ability has significant effect on financial performance of deposit taking SACCOs in Kenya. The study established that liquidity has insignificant effect on financial performance of deposit taking SACCOs in Kenya. Effective credit risk system should be put in place to ensure proper identification, assessment, monitoring as well as control of credit risks. The study recommends that the managers of SACCOs should strive towards increasing the business net worth while ensuring competitiveness in the business environment. This can be achieved through continuous product innovation alongside having leverage on emerging technology. Additional studies can be done specifically on the effect of capital adequacy, management efficiency and liquidity on financial performance of deposit taking SACCOs in Kenya. This is in view of their insignificant predictive effect on financial performance. As such, additional researches on these variables can be based on different methodological approaches.

International Journal of Current Aspects in Finance (IJCAF), 2018

Meagre earnings by SACCO’S operating in Kenya has been attributed to challenges of embracing appropriate loan repayment strategies. Though limited studies have been conducted in Kenya to establish the link between loan repayment and financial performance, it is observed that there is no clear understanding on the link between loan repayment and financial performance of SACCO’S operating in Embu County, Kenya thus formed the basis of the study. The study sought to investigate loan repayment and financial performance of SACCO’S in Embu County, Kenya. The specific objectives included; loan appraisal, loan interest rates, loan follow-up procedures and customer characteristics on performance of SACCO’S in Embu County, Kenya. The study employed descriptive research design and targeted a total population of 250 respondents selected from of 10 SACCO’S operating in Embu County, Kenya. Out of the 250 respondents, Slovin’s formula was adopted to select 158 respondents to be the sample size of the study. The study used primary and secondary data. Primary data was collected using questionnaires through drop and pick later method. Secondary data was gathered by a review of existing materials that included financial statements and related empirical studies. The content validity was determined by lecturers that were drawn from department of Accounting and Finance of Kenyatta University and industry experts who were draws from SACCO’s. Reliability of the study was tested using Cronbach Alpha method and values of all the four variables of the study were more than the cut-off point of 0.7 thus were reliable for the study. Statistical Packages for Social Sciences (SPSS) version 24 was applied to analyse quantitative data using descriptive statistics such as mean scores, percentages and standard deviation. Multiple regression was conducted at 95% confidence level and 5% significance level to establish the statistical significance between variables of the study. The findings of the study were presented using tables and graphs. Data analysed revealed that there exist a statistical significant relationship between independent variables (loan appraisal, loan interest rates, loan follow-up procedures and customer characteristics) and dependent variable (financial performance of deposit-taking Savings and Credit Co-operative Societies in Embu County, Kenya). The study concludes that unless SACCO’s embrace models of minimizing financial risks such as loan appraisal, loan interest rates, loan follow-up procedures and customer characteristics models, achieving financial performance will be an uphill task. The study recommends that SACCO’s not only need to focus on non-performing loans but also seek to understand and review loan policies to encourage repayment within the stipulated timeframe.

Sound financial environment of the banking industry is the guarantee not only to her depositors but equally significant to the shareholders, employees and the whole economy as well. In line to this, efforts have been made from time to time to measure the performance of banks in the country. A number of factors are used in the measurement of banks performance in a typical developing economy and among these is profitability. This study was based on the determinants of banks profitability in Nigeria: using CAMEL model. The objective of the study was to determine the impact of CAMEL on the profitability of Nigerian banks. The data of the commercial banks in Nigeria were obtained for the period of 2001 to 2010. The model was estimated using ordinary least square method and the Statistical Package for Social Sciences (SPSS) 19. The findings based on the analysis elucidate that liquidity has a significant impact on banks profitability while capital adequacy, assets quality, management efficiency, earning did not. It was then recommended that banks should make sure that they maintain a reasonable liquidity position at all times to meet up regular financial obligations thereby maintaining depositors' confidence in the industry and increase profitability.