CAPITAL STRUCTURE AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN RWANDA CASE STUDY: BANK OF KIGALI PLC PERIOD: 2021-2023

Abstract

The purpose of the study was to assess capital structure on financial performance of commercial bank in Rwanda. The specific objectives of the study were to analyze the effectiveness of capital structure in Bank of Kigali Plc. The second objective was to determine the contribution of capital structure and financial performance of commercial bank in Rwanda. The fourth chapter is concentrates on analysis, interpretation and presentation of findings. Finally, this study is ended with the general conclusion and suggestions Results presented in the table13 demonstrate that Bank of Kigali Plc recognized a continuous increase in return on equity where it increased by 18.16%in 2021; by 18.72% in 2022 and by 20.42% in 2023. And as we all know shift of capital in banking sector are stimulated by different factors but equity is the most important because this trend may be caused by how well banks treat it shareholder‟s. But capital structure is there to ensure the performance of financial. Therefore, this allow researcher to confirm that capital structure contribute to the table 12 shows the Return on Assets ratio during the covered period. From 2021 up to 2023.The ratio of Return on Assets are 3.26%; 3.22% and 3.52% respectively. The table 13 shows that from 2021 up to 2023, the ratios of Return on Equity are as follow: 18.16%,18.72% and 20.42% respectively. This means that, in 2021 for the 100Rwf investors have invested in bank, they generated in 18.16Rwfof benefit, and in 2022 for the 100Rwf investors have invested in bank, they generated 18.72Rwf of benefit and in 2023 for100Rwf investors have invested in bank, they generated 20.42Rwf of benefit. Therefore, it is observed that equity management pray a very considerable role on this result because the return on equity on this sector mainly depends on how well shareholder‟s investments as well as members‟ term deposit were managed. Based on the above findings, the second hypothesis of the “capital structure contributes to the performance of Bank of Kigali Plc” was verified and confirmed.