The Impact of Cost Control on the Performance of Commercial Banks in Rwanda; A Case Study Bank of Kigali

It is believed that cost control techniques and tools aim at improving business cost efficiency by reducing costs or at least restricting their rate of growth, to monitor, evaluate and ultimately enhance the efficiency of specific areas such as departments, divisions or product lines within their operations, preserve and boost corporate profits and maintain or gain a competitive advantage. However, it is a difficult task for managers to make sure that business operations are running in a well and organized manner due to inadequate measures to contain costs which will cause over budget which is a risk to the business. Cost control practice is considered to be a very important element to analyse the organizations performance while conducting day to day operations in order to improve its financial performance (Hansen). Cost control is of great value and importance on organizational performance in various ways and some of them are; it helps the organization to improve its profitability and competitiveness through reduced costs and expenses. It is indispensable for achieving greater productivity through investment of the acquired profits. Cost control helps to control all controllable labor costs that is for example hiring enough employees for specific tasks. As an organization strives to reduce its costs, it helps it to reduce its prices. If the price of the product is stable and reasonable, it can maintain higher sales volume and thus employment of work force and as well more profits realized. The control of costs again leads to the control of risks, of which risks may include losses to the business and lastly, controlling costs stabilizes business life. The general objective of this study was to determine the impact of cost control on the performance of commercial banks in Rwanda. The research design used is descriptive. The target population of this study was all employees of Bank of Kigali at the headquarters. In carrying out this study, census technique was used to access the entire population, then data for this study were collected by use of questionnaires and the outcomes from this study are going to provide other commercial banks with the ideas on the factors that are needed to be focused on in order to improve their ways of controlling costs for better performance. Based on the information drawn from findings, the researcher concluded a significant positive correlation between operational cost control and performance of bank of Kigali and finally; the researcher concluded a significant positive relationship between administrative costs and performance of bank of Kigali. The management of Bank of Kigali should strengthen the production cost control measures since poor control of production and operation costs may negatively affect the financial performance of performance of Bank of Kigali by declining or reducing the profits of the bank of Kigali. The bank of Kigali should also strengthen the measure for effective administrative cost control since their poor control may affect the performance of bank of Kigali because if not well controlled they may increase the administrative expenses the bank incurs on daily, monthly and annual basis. Lastly but not the least, the bank of Kigali should remove the challenges encountered during cost control process like the way it takes too much time to get cost control measures to be established in the bank and finally, the bank of Kigali should adopt mixed methods for its costs control.