Mergers and Acquisitions on Financial Performance of Commercial Banks In Rwanda: Case of I&M Bank Ecobank And BPR Atlas Mara

Abstract

Most of the banks in Rwanda have undergone through the process of Merger and/or Acquisition in the recent past. The general objective of this study was to assess the effects of business merger and acquisition on bank financial performance in Rwanda. This study aimed to assess the factors that lead the merger and acquisitions in commercial banks in Rwanda, to assess the factors that determine the performance of commercial banks in Rwanda, to determine the relationship between merger and acquisition and the financial performance of banks in Rwanda. This study is significant to bankers, business developers and academic researchers. The study targeted three banks in Rwanda namely the BPR Atlas Mara, I&M Bank and Ecobank. These banks had 1724 employees countrywide composed the target population. Due to the large number of employee’s target, the researcher targeted a number of 750 employees from three selected banks. The study used Slovin’s formula to get a sample size of 88 respondents on which 96% have responded. As findings, the study indicates five main factors that lead the M&A in financial institutions include; providing variety of products and services to clients, cost efficiency, fulfilling capital requirement, asset acquisition and economies of scale. The merger and acquisitions can increase the performance of commercial banks in terms of CAR, ROA, ROE and ROI. The regression showed that the factors that led to merger and acquisitions contribute of 42% to the improvement of CAR, 48% to the improvement of ROA, 47% to the ROE and 53% to the ROI. It was recommended that commercial banks should continue to embrace M&A in order to improve the financial performance. This should be recommended to be undertaken by small banks in order to increase their competitiveness in the market. Banks should increase on their capital structure in order to operate effectively and efficiently, and strive to efficiently management of assets at their disposal at a minimum cost. This will increase bank’s profitability and encourage the shareholder to invest more in the bank. For further researchers, they should focus on Investigation on effect of Intellectual Capital on financial performance selected Commercial banks. The researchers should also conduct a new research on effect of technology innovation on financial performance of selected commercial banks.