RP-Accounting and Finance Department

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Capital Adequacy and the Performance of Micro Finance Institutions in Kenya
(International journal of Innovative Research and Advanced Studies, 2023) Gathigia, Beatrice Muchee; Aluoch, Moses Odhiambo
Microfinance institutions are created with the intention of enhancing and fostering direct participation of impecunious groups and people in well-established enterprises as well as improving their socioeconomic position by offering efficient monetary as well as social assistance. The microfinance industry has nonetheless been affected by poor performance. For instance, the data from Association of Microfinance institutions showed that the performance declined between 2017 and 2018. There was a surge in Kenya’s microfinance sector losses in 2017 which contributed to a dramatic drop in financial income. While the micro-lenders struggle to manage a shifting business environment, losses reported by the sector are eroding the main and total capital levels of MFIs. This paper investigated how the financial success of microfinance organizations in Kenya is impacted by capital sufficiency. It distinctively aimed to determine the effect of management effectiveness on the performance of the microfinance institutions in Kenya, to evaluate the impact of asset quality on that performance, to ascertain the impact of total capital on that performance, and to ascertain the contribution of liquidity on that performance. A descriptive research approach was applied. The paper utilized the fixed effects model in analyzing secondary data collected from 14 Kenyan MFIs from 2017 to 2021. The findings reveal that the performance of microfinance institutions has been declining over the years. Furthermore, capital sufficiency and liquidity improve financial results while asset quality and managerial efficiency have a negative effect. This paper proposes that these institutions should adopt debt collection policies and practices that minimize loanee default rate.
Corporate Board of Directors’ Activities and Profitability of Agricultural Firms Listed on the Nairobi Securities Exchange, Kenya
(International Academic Journal of Economics and Finance, 2024-05-21) Kieti, Winfred Mbinya; Aluoch, Moses Odhiambo
Growing concerns among different stakeholders about the need for increased value in companies that they own stakes in have affected not just a single company or region but also multinational corporations, giving them a worldwide reach. Most firms have been forced to liquidate in situations where there are prolonged periods of decreased profits and eventually the management loses control. The crucial socioeconomic significance played by agricultural firms is visible worldwide. However, their ability to survive is hindered by numerous barriers, which negatively impacts their profitability. The purpose of this study was to investigate how the corporate board of directors' activities affect the profitability of agricultural firms listed on the Nairobi Securities Exchange. The study's precise goals were to assess how corporate board meetings, committees, ownership, and tenure influence the profitability of agricultural firms listed on the Nairobi Securities Exchange. The study was based on four primary theories: agency theory, stewardship theory, stakeholder theory, and resource dependency theory. The study followed a causal research strategy. A data collection schedule was used to survey the six agricultural companies, to obtain information. This survey specifically targeted this small population. The acquired data underwent analysis utilizing both descriptive and inferential methodologies. The research findings were presented using tables and figures. To guarantee that ethical norms were followed, research permission from the National Commission for Science, Technology, and Innovation was required, as well as a letter of authorization from Kenyatta University. According to the study, both board meetings and board committees have a favorable and considerable impact on the profitability of agricultural firms listed on the Nairobi Securities Exchange. In addition, the study discovered that board tenure and share ownership have a positive and minimal impact on the profitability of agricultural firms listed on the Nairobi Securities Exchange. Recommendations of the study are, that the management should encourage the scheduling of regular and organized board meetings to ensure consistent oversight and strategic decision-making processes within the agricultural firms. These meetings should be properly planned to allow for thorough discussions and decision-making processes. Additionally, the study recommended that the firms should establish well-functioning board committees with members who are qualified and experienced in their respective fields of specialization. This is mostly applicable to those committees which are focused on strategic planning, finance, audit, and risk management. Further, while board share ownership and board tenure have a positive association with profitability, their insignificant effect suggests that governance efforts should not overly prioritize these factors. Instead, boards should diversify their focus to include other critical aspects such as strategic planning, risk management, and operational efficiency.
Financing Options and Growth of Real Estate in Savings and Credit Cooperative Societies in Nairobi City County, Kenya
(International Academic Journal of Economics and Finance, 2024-08-16) Sangori, Roselyne Auma; Aluoch, Moses Odhiambo
The challenges confronting real estate enterprises in Kenya, especially within Nairobi City County, are substantial, particularly regarding financing decisions given the capital-intensive nature of their projects. The evident gap between annual housing demand and actual supply underscores the critical need for effective financing mechanisms to bolster the expansion and development of the real estate industry. The research concentrated on investigating the impact of various financing options available through Savings and Credit Cooperative Societies in Nairobi City County is particularly relevant, given Savings and Credit Cooperativess' role in offering financial services to their members. Evaluating the effects of mortgage financing, lease financing, savings financing, and equity financing on real estate growth can offer valuable insights into the feasibility of different funding avenues for these enterprises. Considering the moderating influence of real estate firm size on the relationship between financing options and growth rates enriched the analysis, acknowledging that a firm's size and scale can significantly shape its financing strategies and growth trajectory. Drawing on theoretical frameworks such as the lien theory of mortgage financing, resource dependency theory, transaction costs theory, and housing cycle theory provided a robust foundation for understanding the dynamics of financing and growth in the real estate sector. Adopting a descriptive research design, along with panel data analysis spanning a five-year period, facilitated a comprehensive examination of trends and patterns among real estate firms operating within Savings and Credit Cooperative Societies in Nairobi City County. By employing a census approach to collect data from the entire population of 72 real estate companies, the study ensured a representative sample, enhancing the reliability and validity of the findings. The study found a significant and positive effect between mortgage financing, lease financing, savings financing, and equity financing and growth of real estate in SACCOs. The result indicated a moderating effect on the relationship between financing options and growth of real estate firms in SACCOs. The study concluded that the real estate sector in Nairobi City County requires effective financing and strategic decision-making, relying on mortgage, lease, savings, and equity financing to optimize resource allocation and drive growth, with SACCO size significantly moderating the impact of these financing options on firm performance. Based on the study findings, policy recommendations include reducing mortgage costs through subsidies and regulatory reforms, increasing lease financing options via innovative structures and Public-Private Partnerships, boosting savings financing through mobilization programs, facilitating equity financing with improved market mechanisms, and optimizing SACCO performance through targeted training. The study enriches understanding by demonstrating the significant impact of various financing options on real estate firm growth, advancing theoretical frameworks, addressing methodological gaps, and providing practical policy recommendations to support sector expansion.
Firm Characteristics and Financial Performance of Microfinance Banks in Kenya
(International Academic Journal of Economics and Finance, 2024-10-07) Ouma, Cavine Onyango; Makori, Daniel; Aluoch, Moses Odhiambo
Kenya has one of Sub-Saharan Africa's most active microfinance marketplaces. Microfinance gives the forte to improve the economic activity of low-income individuals and eliminate poverty, resulting in economic progress. However, microfinance's financial performance in the country has declined over time. With this view, this investigation aims to explore how firm characteristics (capital adequacy, assets quality, managerial efficiency, earning ability and liquidity) performance of microfinance banks in Kenya. The study was grounded on stakeholders, liquidity preference, financial intermediation, buffer capital, efficiency structure and interest rate parity theories. The study research methodology rested on positivism research philosophy. Research Design was explanatory non-experimental design. Secondary panel data was utilized. 13 microfinance banks in Kenya were target. Information was gathered using secondary data sources from microfinance banks accounting report from 2016 to 2022. Data was descriptively and inferentially analyzed. The investigation employed panel multiple regressions and Pearson’s Product Moment Correlation analysis. Diagnostics test such as multicollinearity, normality, autocorrelation, heteroscedasticity and stationary tests were carried out. All ethical considerations were appropriately observed. Findings uncovered that adequacy of capital exerts a notable and direct effect on financial performance, underscoring the importance for microfinance banks in Kenya to prioritize maintaining sufficient capital levels to support their overall stability and financial outcomes. Conversely, quality of asset demonstrates a significant and adverse influence on performance financially, highlighting the need for microfinance banks to enhance their credit assessment processes to ensure the quality of their loan portfolios. The research reveals that efficiency of management has an insignificant direct influence on performed banks financially. To address this, microfinance banks are advised to invest in comprehensive management training programs and capacity-building initiatives to improve operational effectiveness and decision-making processes. Earning ability, on the other hand, exhibits a considerable and direct influence on performance financially. Microfinance banks should thus focus on continuous innovation of their products and services to enhance their earning potential and overall financial outcomes. Liquidity levels exhibit an insignificant and inverse effect on the financial performance outcomes. To mitigate potential risks, microfinance banks should establish comprehensive policies and procedures to monitor and manage liquidity effectively. Interestingly, the study reveals that the connection concerning firm-level attributes. Therefore, the study recommends that microfinance banks concentrate on improving governance structures, operational efficiency, risk management practices, and asset quality. This can be achieved through capacity-building programs, training initiatives, and adopting best practices from successful microfinance institutions. Strengthening these firm characteristics will enable microfinance banks to enhance their financial performance, irrespective of interest rate fluctuations.
Firm Characteristics, Interest Rate and Financial Performance of Microfinance Banks in Kenya
(International Academic Journal of Economics and Finance, 2024-10) Ouma, Cavine Onyango; Makori, Daniel; Aluoch, Moses Odhiambo
Microfinance Banks gives the forte to improve the economic activity of low-income individuals and eliminate poverty, resulting in economic progress. However, microfinance's Banks financial performance in Kenya has declined over time. The objective of this study is to investigate firm characteristics, interest rate and financial performance of microfinance banks in Kenya. The study was grounded on buffer capital, efficiency structure and interest rate parity theories. The study research methodology rested on positivism research philosophy. Research design was explanatory non-experimental design. Secondary panel data was utilized. 13 microfinance banks in Kenya were target. Information was gathered using secondary data sources from microfinance banks accounting report from 2016 to 2022. Data was analysed using descriptive and inferential statistics. The study used multiple regressions and Pearson’s Product Moment Correlation analysis. All ethical considerations were appropriately observed. Findings indicated that adequacy of capital exerts a notable and direct effect on financial performance, underscoring the importance for microfinance banks in Kenya to prioritize maintaining sufficient capital levels to support their overall stability and financial outcomes. Conversely, quality of asset demonstrates a significant and adverse influence on performance financially, highlighting the need for microfinance banks to enhance their credit assessment processes to ensure the quality of their loan portfolios. The research revealed that efficiency of management has an insignificant direct influence on financial performance of Microfinance banks. To address this, microfinance banks are advised to invest in comprehensive management training programs and capacitybuilding initiatives to improve operational effectiveness and decision-making processes. Earning ability, on the other hand, exhibits a considerable and direct influence on financial performance. Microfinance banks should thus focus on continuous innovation of their products and services to enhance their earning potential and overall financial outcomes. Liquidity levels exhibit an insignificant and inverse effect on the financial performance outcomes. To mitigate potential risks, microfinance banks should establish comprehensive policies and procedures to monitor and manage liquidity effectively. Interestingly, the study reveals that the connection concerning firm-level attributes and financial outcomes for microfinance institutions in Kenya does not appear to be subject to a substantial moderating influence from interest rate movements. Therefore, the survey recommends that microfinance banks concentrate on improving governance structures, operational efficiency, risk management practices, and asset quality. This can be achieved through capacity-building programs, training initiatives, and adopting best practices from successful microfinance institutions. Strengthening these firm characteristics will enable microfinance banks to enhance their financial performance, irrespective of interest rate fluctuations
Microfinance Banks Characteristics and Credit Risk of Microfinance Banks in Kenya
(International Journal of Commerce and Innovation, 2023-10-31) Nyamai, Jonathan Sila; Aluoch, Moses Odhiambo
The study sought to determine the effect of bank characteristics on the credit risk of Kenyan microfinance banking institutions was done. The research was anchored by agency theory and adverse selection theory. The adoption of a causal research design was eminent to analyze thirteen banks for the period 2015 to 2021 based on the census approach. The study outcomes were arrived at using secondary data obtained under the guidance of the secondary data collection schedule. The output of the analyzed investigation demonstrated that capital levels had an inversely significant effect on credit risk; liquidity also significantly inversely affected credit risk with bank size positively affecting the credit risk of microfinance banks significantly. The recommendation amongst which included that the microfinance banks’ management in Kenya should strengthen banks’ liquidity measures to allow for loans that are non-performing hence, lowering the risk associated with such intermediation function of the Kenyan microfinance banks.

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