The Impact Of Interest Rate Liberalization On Commercial Banks' Profitability In Congo

The financial liberalization intellectual platform in developing countries was employed for the first time in 1973 by the studies of Ronald McKinnon and Edwards Shaw.Their seminar indicated that the view of interest rate liberalization raised the interest rate,thereby increasing banks' profitability and investment.Nowadays,the banking profitability is measured by two main indicators,the returns on assets(ROA)and the net interest margins(NIM).The Congolese empirical evidence offers support of the beneficial effects of interest rate liberalization.However,the turbulence economic and macroeconomic uncertainties of the 1980s have greater impacts on financial deepening,savings,investment,banks' profitability and growth in Congo during the period of interest rate liberalization.This study is focused on the impact of interest rate liberalization on commercial banks' profitability in Congo.It covers the period from 2007 to 2014 and a Simple linear regression technique was adopted using statistical software 'SPSS and Eviews 7.2'.The empirical finding of our study reveals that deposit to asset,loan to deposit,spread,assets size and equity to asset are those variables that had impacted the profitability of commercial banks operating in Congo.Other variables like assets growth,credit risk,and total debt to equity did not show any impact on profitability of Congolese banking industry.We found out that interest rate liberalization had significant impact on the profitability of commercial banks in Congo.The variable spread which is the control variable for interest rate has shown a strong and positive impact on banks' profitability.