Effects of Bank-Specific Factor on Financial Performance of Commercial Banks in Rwanda: A Case of Bank of Kigali

Joseline Nikuze & Richard Kabanda
University of Kigali
Email: nikujoseline2016@gmail.com

Abstract: This study examined the effect of Bank-Specific Factor on the financial performance of Bank of Kigali. A descriptive and explanatory research design was adopted using secondary data obtained from audited financial statements and quarterly reports covering the period from 2011 to 2025. A census approach was used, resulting in 60 quarterly observations. Capital adequacy was measured using the Capital Adequacy Ratio (CAR), while financial performance was assessed using Return on Assets (ROA), Return on Equity (ROE), and Net Interest Margin (NIM). Data were analyzed using descriptive statistics, Pearson correlation analysis, and regression analysis to determine the relationship between capital adequacy and financial performance. Pearson correlation analysis revealed a positive and moderately strong relationship between capital adequacy and financial performance (r = 0.621, p < 0.01). Regression analysis further showed that capital adequacy had a positive and statistically significant effect on financial performance (β = 0.621, p < 0.001), explaining 38.6% of the variation in financial performance (R² = 0.386). The ANOVA results confirmed that the regression model was statistically significant (F = 39.038, p < 0.001). The study concludes that adequate and efficiently utilized capital is important for improving the financial performance of Bank of Kigali. It recommends strengthening capital planning and monitoring, maintaining adequate capital levels, ensuring productive utilization of available capital, and aligning capital management with regulatory requirements.