Effects of Increasing Interest Rates in Africa

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Table of Contents

Literature review
Significance of the study
Limitations
Methodology
Data collection
Data analysis
References

The world has been experiencing economic hardships over the last decades, among them the widely infiltrated economic recession. As a result, many companies and businesses were affected. Corporate profits went on a reducing pattern throughout the period. Many companies embarked on strategy formulation in their recovery plans.

Some of the organizations were financial institutions such as banks and other lending bodies. These institutions thought of interest increment as part of their recovery effort. The action has brought with it a lot of effects among the affected institutions, borrowers and related bodies as well. This paper focuses on the effects of increasing interest rates in Africa.

Literature review

Available indicative evidence suggests that increasing interest rates do have significant effects on the diverse parties involved in the process. When monetary demand goes up, there is a likelihood of increment of interest rates. One of the principles of economics states that demand and supply are inversely proportional to each other such that when one is high, the other is down and vice versa.

In the same scenario, monetary demand or other factors such as economic hardships and corporate revenue declines trigger banks in enforcing higher interest rates in economic recovery attempts. These increments diversely affect borrowers, lenders and other industries such as those dealing with mortgages (Hereford, 2011).

Research conducted in 2006 indicated that there was a decline in borrowing by around 46%. Further evidence of the scenario showed less interest in individuals taking mortgage loans. A consequence linked to borrowing also led to decreased confidence in banks and thus consumer withdrawal. Additionally, increased firm borrowing was witnessed in private and expanding firms (Hereford, 2011).

Significance of the study

The significance of this study is to bring out the effects of increasing interest rates in Africa. Although interest rates may be uniform in application from region to region, its effects might show variances from one region to another. Specific effects felts in regions such as Africa inform banking institutions on the effects of rate increment and consequently trigger reduction actions by the same institutions bringing in relief to affected parties in Africa.

Limitations

This study will cover the major banks in Africa such as Barclays, Ecobank, Standard Chattered Bank, and Bank of Africa. However, this may not fully reflect the situation on the ground since most Africans may have preferred transacting with small banks that do not have international record access. The drawn conclusions might thus not mirror the exact situation on the ground in regards tothe effects of interest increment.

Methodology

Conceptualization of a research design for this study may be inclusive of complexities. Carrying out research which involves participants in distant locations creates intricacies in attaining accurate data. Thus, design for methodology for this research is equally difficult. In light of consideration of available expenditure to be involved, the process of physical research and time consumption, case study method has been chosen as the most appropriate due to a variety of reasons.

To begin with, Peter (2008) argues that the case study methodological approach is relatively cheap given that much of the data required can be found in libraries and online resources. Secondly, in the case study scenario, it is very easy to address data sourcing and thus reduces biases of collecting data that may lead to drawing of wrong conclusions. In integration to this type of research, surveys sent directly to involved bank managers shall accompany case study and thus provide real results of lending rates before and after increment actions.

Data collection

Data collection from the study will involve survey forms sent directly to involved bank managers’ email addresses, which shall be filled and then emailed back. This method of data collection is very efficient in collecting precise data for accurate conclusion drawings.

In addition to surveys, secondary data shall be drawn from credible sources such as journals and past newspapers which have been reporting on the effects of interest increment on borrowing parties. The combined methods of data collection form perfect tools for acquisition of accurate data for precise analysis and thus correct conclusion drawing (Smith, 2006).

Data analysis

Data analysis is one of the critical steps in materializing a research study. In order to achieve this, statistical approach is helpful in this situation when making comparisons of values obtained during inquiries. Comparative statistics will be greatly influential in making correlation studies of the data obtained. Collected data is essentially put in tables and further analysis will employ the use of charts such as pie charts and graphs in showing comparative, linear and graphical evidences of increasing interest rates on different parties such as borrowers, lenders immediate institutions such as mortgage companies (Beckley, 2008).

Time Schedule

Time schedule is imperative in segmenting a research study which is also important in completing research task. Comprehensive literature review will be done in the first five days. Secondly, formulation of research questions and survey-form design will follow for a consecutive period of seven days. Data collection will follow and take duration of one and a half months. Data analysis will then be undertaken with discussion and conclusion taking the following seven days.

References

Beckley, S. (2008). How to implement economics research. New York, NY: Cengage Learning.

Hereford, J.A. (2011). Effects of increasing interest rates. Harvard, USA: Harvard University.

Peter, S.M. (2008). How to prepare for final research. New York, NY: Cengage Learning.

Smith, A. (2006). Research Methodology. Houston, Texas: Wiley & Sons.

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