Determinants of Commercial Banks Liquidity in Botswana

Author(s)

Mufaro Andrew Matandare , Boniswa Maleke ,

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Volume 8 - September 2019 (09)

Abstract

The paper empirically analyzes the determinants of the liquidity of commercial banks in Botswana using a multiple linear regression model between 2009 and 2016 .On the basis of two indicators of liquidity risk, the research paper estimates the same group of determinants that co-create microeconomic factors (capital adequacy, size of the bank, spread, and non-performing loans) and macroeconomic factors (Gross Domestic Product and inflation). Findings indicated that significant factors that determine the liquidity of the commercial banks in Botswana are the size of the bank, non-performing loans and spread (the difference between interest rate loans and interest rates on deposits). Size of the bank and spread have a negative impact on bank liquidity whereas non-performing loans have a positive impact. The implication of these findings is that Bank of Botswana should devise legal requirements that give benchmarks of the above ratios to ensure sustainable liquidity of the commercial banks. This will help create a stable banking and financial sector and provides a conducive environment for sustainable economic growth and development

Keywords

Liquidity risk, Bank size, Spread, Non-performing loans, MLRM, Botswana

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Mufaro Andrew Matandare, Determinants of Commercial Banks Liquidity in Botswana, International Journal of Management Sciences and Business Research 09(2019):55-62 DOI: 10.5281/zenodo.3510083