Empirical Analysis of Foreign Direct Investment Inflows on Financial Development of Commercial Banks in Rwanda

Foreign direct investment (FDI) inflows into the country can help to boost economic growth by supplementing domestic savings for investment. The study examined the influence of foreign direct investment and financial development on commercial banks in Rwanda. The study was anchored on Institutional FDI Fitness theory and secondary data was collected from the annual financial reports of eleven commercial banks between 2010 and 2019. The results revealed that foreign capital equity positively and significantly affects financial development (β = 0.3233, p<0.05). Also, reinvested foreign earnings findings exhibits negative and significant association on financial development (β = -0.0564, p<0.05). The study recommends that Rwanda, as it aspires to be a financial hub, would continue to encourage companies to increase foreign equity capital and reinvested income so as to increase the access, depth, efficiency and stability of commercial banks in Rwanda.