Effect of Interest Rates on Business Investment Performance of Selected Commercial Banks in Kisii Town, Kisii County, Kenya

Abstract

Investors borrow money from banks and other financial institutions. The response of investment expenses changes keenly with interest rate which is at the mind of money-making analysis. Interest rates is the other strong factors that affect financial policies as well as weaker financial payments in guiding principles of investors, it facilitate investment if the high interest rate is applicable on savings. Interest rate influences savings practically all commercial banks commencing macroeconomic theories. The negative influence of higher investment rate inhibits the macroeconomic effect of interest rate policy. Interest rate is the money charged on loan of money. Investors borrow money from banks for investment. As a result of this encouragement, the bank lenders are competent to attain repayment of each and every loan by means of high prospect. As soon as it comes in the direction of mortgage contracts (if a borrower discards mortgage repayment), the loan official once more plays the central role by means of warning as well as if necessary authorize non-payment clients. Apart from the danger of advertising the security within a small number of days, they can slash off borrowers commencing extra way in to loans. The response of investment expenses changes with interest rates of having a loan from banks. The main objective of the study was to investigate the effect of interest rates on business investment performance. The specific objectives of the study was to find out the effects of cash lending on business investment, to evaluate the effects of loan repayment of on business investment performance and to examine the outcome of domestic savings on business investment performance. The literature review was viewed from other related studies. The conceptual framework had two variables according to the topic under study. The independent variable was interest rate and dependent variables were business investment. The study area was in Kisii town. The target population was all employees of 18 commercial banks more so branch managers, head of units and credit managers. The researcher was select 6 commercial banks to represent 30% of the target population 18 commercial banks. The systematic stratified sampling was used to get the sample size which was arrived at through census and it comprised of 482 respondents of commercial banks. The data were collected by questionnaires as the research instruments. Data were analyzed by the use of descriptive statistics and it was presented the analyzed in figures and frequency tables. The study wanted to investigate whether loan repayment affect investment performance the determinant of credit analysis used before granting cash services to the clients. The findings showed that there was influence of loan repayment on financial performance in banks. The study wanted to indicate techniques of credit analysis used before granting credit services to the investment and found out that Firm undertakes legal action for clients who fails to repay with the least mean of the evaluation is done on credit worthiness of clients and determinants of loan repayment in microcredit are still debatable among different researchers that might be due to situational factors like country level factors, bank level factors and the condition of legal and regulatory framework of the country. Thus, these debates can only be resolved through quantitative analysis on the determinants of loan repayments. The study suggested for further studies.