Contribution of Working Capital Management on the Performance of Commercial Banks in Rwanda: A Case Study of Equity Bank Rwanda Limited

The research purpose was to assess working capital management and performance of commercial banks. Because many financial institutions face challenges like insolvency, disappointments to clients who come to the bank and fail to get their savings and lack of loanable funds due to poor working capital management. The study was achieved by use of three specific objectives, namely; To analyse the effect of cash budgeting on the performance of Equity Bank, Rwanda Ltd; To determine the contribution of capital planning on the Performance of Equity Bank, Rwanda Ltd and to examine the effect of capital control on the performance of Equity Bank, Rwanda Ltd. The research design used was descriptive and analytical based on quantitative and qualitative data. The population of the study was 120 and sample size was 92 respondents. The researcher use questionnaires as a tool for data collection and Banks reports for secondary data. In the findings it was established that working capital management contributes to financial performance of financial Institution in Rwanda, simply because working capital components like cash budgeting, capital planning and capital control has significant contribution to profitability of Equity bank. The respondents N is 92 and the significant level is 0.01, the results indicate that independent variable has positive moderate correlation to dependent variable equal to.673** and the p-value is.000 which is less than 0.01. When p-value is less than significant level, therefore researchers conclude that variables are correlated and null hypothesis is rejected and remains with alternative hypothesis. This means that there is a moderate relationship between working capital management and financial performance. Researcher can therefore conclude working capital management contribute positive to financial Performance of Equity bank.