The Role of Investment Policies in Resource Allocation and fund Utilization in Commercial Banks

Abstract

This study aimed to analyze the role of investment policy, specifically the lending rate, in resource allocation and utilization through its two indicators: the deposit lending rate and the resource utilization rate, in Yemeni commercial banks during the period 2011-2021. Data were obtained from the Central Bank's annual reports and the financial reports of Yemeni commercial banks. The researcher employed a descriptive-analytical approach for the theoretical framework and to describe the indicators, alongside a quantitative econometric approach to apply statistical tests and construct economic models to estimate the relationship between the study variables. Simple linear regression was used, utilizing the EViews 13 statistical analysis software. The study concluded that the time series were not stationary and stabilized at the first difference. A strong positive correlation was found between the lending rate and the deposit lending rate, and a significant positive effect of the lending rate on the deposit lending rate was also found. Furthermore, a moderate positive correlation was found between the lending rate and the resource utilization rate, and a significant positive effect of the lending rate on the resource utilization rate was also observed. The estimated models were found to be free of measurement problems. The economic aspect is represented by self-correlation and the instability of the variance to the point of error. The study recommended that Yemeni commercial banks adopt flexible and balanced lending policies that ensure the continuity of the flow of credit facilities towards productive economic sectors, which contributes to raising the efficiency of employing their financial resources and maximizing the returns on uses.