Abstract

The study evaluates the impact of inflation on the profitability of commercial banks in Rwanda with specific focus on the Bank of Kigali. In Rwanda, the effect of inflation on the financial performance of commercial banks has not been adequately researched in relation to types of inflation. It is against this issue that the researcher wanted to carry out this research to find the relationship between inflation and profitability of commercial bank in Rwanda. The specific objectives of study were: to examine the trend of inflation in Rwanda; to examine the profitability of Bank of Kigali between 2011 and 2015; and to establish the relationship between inflation and profitability. To achieve objectives study used descriptive research design with population and sample size of 26 respondents. Correlation analysis is used to examine relationship between study variables. The study findings revealed that cost push inflation has positive high correlation to the Profitability of BK. Findings indicated that demand pull inflation and Monetary inflation has also positive high correlation profitability of Bank of Kigali. Finally it is concluded that the types of inflation affect commercial banks are cost push inflation, demand pull inflation and monetary inflation. Inflation has a significant role in enhancing commercial bank’s profitability.

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