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Analyzing The Effects of Interest Rate Adjustments As a Monetary Policy Tool on Financial Stability: Evidence from Absa Bank Customers in Zambia

Authors

  • Chilawo Hazemba School of Humanities and Business, Information and Communications University, Lusaka, Zambia
  • Peter Silwimba Risk Department, National Savings and Credit Bank and School of Humanities and Business, Information and Communications University, Lusaka, Zambia https://orcid.org/0000-0001-6663-1866

    silwimbap47@gmail.com

Abstract

This study took the end user customer assessment of the impact of changes in the monetary policy rate on Absa Bank’s financial performance. The study used a quantitative approach with a 100 sample size. The study aimed at establishing if strategic changes in the monetary policy rate indeed affect bank customers decisions on demand for loans, willingness to incur costs that would make banks profitable and deposit volume decisions. Findings were that demand for loans was highly inelastic to changes in interest rates where 80% of customers reported that they would still apply for loans even after interest hike and 46% admitted that they do not consider bank interest rates when applying for loans. For deposits, response to interest rates changes varied with different customer type with retail and individual type of customers being highly responsive to changes in deposits rates (45%) followed by corporate clients (25%). Government agencies and funded groups were found to be non-responsive to deposit interest rate changes. This made interest rate deposit elastic for retail and individual clientele (Pearson chi-square test result χ² = 40. p = 0.000). The bank’s profitability was dependent upon these adjustments (p = 0.001). The study concluded that changes in interest rates were highly inelastic on loans and fairly elastic on deposits, bank profit depends on the net effect of the two rates. The study recommends that to achieve financial stability both the bank and the regulator should set optimum interest rates clearly targeting the right side of the market. 

Keywords:

Bank Profitability Deposit Rates Financial Stability Interest Rate Policy Loan Rates Risk

Article information

Journal

Journal of Economics, Business, and Commerce

Volume (Issue)

2(2), (2025)

Pages

288-296

Published

29-11-2025

How to Cite

Hazemba, C., & Silwimba, P. (2025). Analyzing The Effects of Interest Rate Adjustments As a Monetary Policy Tool on Financial Stability: Evidence from Absa Bank Customers in Zambia. Journal of Economics, Business, and Commerce, 2(2), 288-296. https://doi.org/10.69739/jebc.v2i2.1146

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