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Browsing by Author "Gachanja, Paul Mwangi"

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Credit risk, efficiency and performance of commercial banks in Kenya
(Kenyatta University, 2014-10-10) Lakasia, Japheth Manguya; Muniu, Joseph Muchai; Gachanja, Paul Mwangi
Banking in Kenya is very dynamic and robust. Performance of this sector measured by profitability is very important and should be monitored closely because it contributes immensely to economic growth in Kenya. Vision 2030 of Kenya envisages an increase of savings to 10% of GDP. The government of Kenya is relying on commercial banks to mobilize the savings that will . lead to extension of loans to the public to fuel development. Credit creation is the main income generating activity of banks; however banking comes with a couple of risks including credit risk captured by the level of nonperformingloans among other factors. Recently the level of nonperforming loans in the Kenyan banking industry has been on the upward trend. There is a felt . need to ad~ress this trend because an increase in nonperformingloans (indicator of credit risk)• may hamper commercial banks from achieving their objectives. Therefore this study seeks to . establish the effects of efficiency and credit risk on performance of commercial banks. This ..researchis significant in the sense that it will help banks to place themselves strategically towards achievement of their goals. The study will employ Data Envelopment Analysis to determine•• .. techriical efficiency of commercial banks while panel data regression model will used to establish credit risk on performance of commercial banks.
Determinants of gender earnings differntials in the informal set up
(2003-09) Gachanja, Paul Mwangi
The rapid and comprehensive economic reforms that Kenya has undertaken have led to changes in the employment situation, with respect to increased participation of women in the labour force and the rise of unemployment, especially among the youth. The increased participation of women in the labour force is mainly due to the opening up of opportunities occasioned by the improved access of women to education. This has seen participation rates rise for urban women from 30 percent in the early eighties to over 56percent currently. However, women S employment is still characterised by low productivity, low pay and long hours of work. This situation is even worse in the rural set up where the rural women still spend a disproportionate amount of their time on unpaid work, limiting their access to income earning opportunities. They also have a limited role in formal employment, while off-farm work oftencompromises their traditional roles. In addition, women are disproportionately represented in the informal sector. The major factors fronted for this situation include imbalances in training and access; retrogressive cultural practices which bar women from taking uppositions in certain spheres of employment and lack of a supportive legal framework. Attempts to raise the level of quality participation of women in the labour force have been unsuccessful due to inadequate skills and other social cultural factors (Republic of Kenya, 2002). The upshot is that average earnings for women are less than half those of men. (Republic of Kenya, 1997). This suggests that men arefavoured by all these factors above, guaranteeing them higher earnings than women. This paper will therefore seek to identify the major hindrances to women s participation in labour force in the informal rural set up and more so, the extent to which training, culture and the current legal framework have contributed to dismal participation of women in the gainfulemployment thereby dismal earnings. This will be achieved through collection of the available secondary data to be supplemented with information primarily obtained from the relevant sources. Simple descriptive statistics will be used to analyze the data. The paper proposes remedies that will enhance women participation so as to step up their earnings.
Effects of Monetary Policy Changes on Credit and Economic Growth in Kenya
(2014-03-06) Chebet, Elijah Ruttoh; Gachanja, Paul Mwangi
Several empirical studies have confirmed that there is a positive relationship between credit growth and economic growth. The Central Bank of Kenya (CBK) has in the past attempted to use monetary policy to influence the direction of credit growth with the aim of improving economic growth in Kenya. The objective of this study therefore is to determine whether there is a relationship between credit growth and economic growth, whether an increase in credit does in fact improve economic growth in Kenya and whether a reduction in the CBR reduces the commercial bank lending rates and thereby increasing the amount of credit available in Kenya. Using data between 1971 and 2008 and Vector Autoregression (VAR) model, it is found that even though credit growth deviates so much from the long run trend, it still traces economic growth and therefore using monetary policy to target credit growth with the aim of irifluencing the direction of economic growth is still beneficial in the long run. The results also show that lending rates reduces following an expansionary monetary policy. This is consistent with expectations but the lending rates seem to respond a bit sluggishly. The findings further show that loans and advances will increase if there is a positive shock in the lending rates. This finding is contrary to expectations. This positive impact could imply that loan demand in Kenya is inelastic. The findings further show that, other than own shocks, the variations in credit growth mainly come from the changes in lending rates and GDP. More emphasis therefore need to be put in these two variables to avoid too violent volatility of credit growth.
Effects of Public Pension Schemes on National Savings in Kenya, 1971-2011
(2014-03-07) Thinguri, Salome Wambui; Muchai, Dianah; Gachanja, Paul Mwangi
This study seeks to investigate the effect of pensions on national savings in Kenya. The study covers the Kenya Government's public pension schemes for its employees. The Granger causality test was employed to investigate the relationship between these two variables and it was found that there was no causal relationship between the two variables. The long run relationship between the two variables was derived using the Vector Error Correction Model. Analyzing the effect of pensions on savings requires the control of other variables which impact on savings. As a byproduct of this paper I investigated the determinants of savings. The specific variables that were of focus in this paper were inflation rate, real interest rate, GDP, dependency ratio (young and old), life expectancy, and labor force participation rate. The methodology adopted involves the lifecycle model. Annual secondary data of the relevant variables for the period 1971-2011 was used in the analysis. Some variables were not stationary and were made stationary after first differencing. Information was sourced from World Bank publications and the Kenya Government's Consolidated Fund Services. The Vector Error Correction Model was employed to investigate these relationships. The results indicated that pensions expenditure had a negative impact on savings. It was also found that Gross Domestic Product has a positive impact on Gross Domestic Savings. The results also show a negative influence of inflation on Gross Domestic Savings in Kenya. The real interest rate and life expectancy have negative and statistically significant impact on Gross Domestic Savings, suggesting that income effects outweigh the sum of its substitution and human wealth effects. The old age dependency ratio has a negative but statistically insignificant impact on saving while the young age dependency ratio has a positive but statistically significant impact on savings.
An efficiency analysis of hospitals owned by faith based organisations in Kenya
(2014-08-01) Kinyanjui, George Kariuki; Gachanja, Paul Mwangi; Muniu, J. M.
The desired goal for Kenya's Vision 2030 and the millennium development goals is to provide efficient and reliable healthcare that will reduce child mortality rates, improve maternal health and ~ombat HIV/AIDS, Malaria and other diseases by the year 2015. Kenya's health care sector has been among the most inefficient in the world characterized by high disease prevalence, high mortality rates, low life expectancy, and poor access to healthcare services and corruption. Addressing the above challenges and attaining the millennium development goals on reduction of child mortality rates, improvement of maternal health and combating of HIV/AIDS makes efficiency in health care services delivery a requisite obligation in addition to sound government policies and stakeholder goodwill. Hospitals owned by the faith based organizations are a vital component of health care institutions in Kenya. They form a key component of the private sector healthcare provision with about 40 percent dominance. The operations of these hospitals depend on donor funding, user fees and government subsidies. Dwindling donor assistance, falling government subsidy, poor human resource for health employment and distribution coupled with financially poor citizenry that seek the services of hospitals owned by faith based organization has been a compelling datum to pursue efficient ways of providing healthcare. Therefore, the question on how the scarce resources allocated to the hospitals owned by faith based organizations are been utilized, has been of urgent need for address. This study sought to unravel the technical and scale efficiency of hospitals owned by faith based organizations in Kenya. The study employed the Data Envelopment Analysis which is either input oriented or output oriented. Input orientation was adopted for this study. The input variables included medical officers, nurses, beds and cots and an aggregate of other hospital workers; while the number of inpatients and outpatients were the output variables for the analysis. The sample size included 30 FBO hospitals drawn from the Kenya Conference of Catholic Bishops (KCCB), the Christian Health Association of Kenya, (CHAK) and the Supreme Council of Kenya Muslims (SUPKEM) as the major FBO blocks in the country. The results were that only 36.67 percent of FBO hospitals were operating efficiently under the Variable Returns to scale technical efficiency. Scale efficiency revealed that approximately 20 percent of the FBO hospitals were scale efficient. Tn general the study concluded that if FBO hospitals operated as a group, the technical efficiency would be 79% while scale efficiency would be 59 percent. The key recommendation of this study is that FBO hospitals and the other health facilities need to have a yearly efficiency analysis to ascertain proper resource allocation. The desired goal for Kenya's Vision 2030 and the millennium development goals is to provide efficient and reliable healthcare that will reduce child mortality rates, improve maternal health and ~ombat HIV/AIDS, Malaria and other diseases by the year 2015. Kenya's health care sector has been among the most inefficient in the world characterized by high disease prevalence, high mortality rates, low life expectancy, and poor access to healthcare services and corruption. Addressing the above challenges and attaining the millennium development goals on reduction of child mortality rates, improvement of maternal health and combating of HIV/AIDS makes efficiency in health care services delivery a requisite obligation in addition to sound government policies and stakeholder goodwill. Hospitals owned by the faith based organizations are a vital component of health care institutions in Kenya. They form a key component of the private sector healthcare provision with about 40 percent dominance. The operations of these hospitals depend on donor funding, user fees and government subsidies. Dwindling donor assistance, falling government subsidy, poor human resource for health employment and distribution coupled with financially poor citizenry that seek the services of hospitals owned by faith based organization has been a compelling datum to pursue efficient ways of providing healthcare. Therefore, the question on how the scarce resources allocated to the hospitals owned by faith based organizations are been utilized, has been of urgent need for address. This study sought to unravel the technical and scale efficiency of hospitals owned by faith based organizations in Kenya. The study employed the Data Envelopment Analysis which is either input oriented or output oriented. Input orientation was adopted for this study. The input variables included medical officers, nurses, beds and cots and an aggregate of other hospital workers; while the number of inpatients and outpatients were the output variables for the analysis. The sample size included 30 FBO hospitals drawn from the Kenya Conference of Catholic Bishops (KCCB), the Christian Health Association of Kenya, (CHAK) and the Supreme Council of Kenya Muslims (SUPKEM) as the major FBO blocks in the country. The results were that only 36.67 percent of FBO hospitals were operating efficiently under the Variable Returns to scale technical efficiency. Scale efficiency revealed that approximately 20 percent of the FBO hospitals were scale efficient. Tn general the study concluded that if FBO hospitals operated as a group, the technical efficiency would be 79% while scale efficiency would be 59 percent. The key recommendation of this study is that FBO hospitals and the other health facilities need to have a yearly efficiency analysis to ascertain proper resource allocation.
Efficiency analysis of the agro-processing industry in Kenya
(2015) Ndicu, Simon; Muchai, Diana N.; Gachanja, Paul Mwangi
This study will seek to provide empirical evidence on technical efficiency of the Kenya Agro-processing industry. Agro processing is the process or action taken by manufacturers of converting primary (raw) agricultural products into consumable commodities suitable for consumption. This subsector is involved in processing, packaging and value addition of the fresh agricultural produce produced through activities of farming , livestock keeping and forestry by the Kenya Agricultural sector of tea, coffee, sugar cane, fruits, vegetables, milk, Honey, meat, grains and barley .The major problem of the Agro-processing industry is that it has been inefficient in terms of value addition to these agricultural produce and Kenya is known to be a net exporter of raw agricultural produce instead of high quality value added products .This study will seek to determine the efficiency estimates of the agro-processing industry and analyze the trend in efficiency changes under the period under consideration .There after policy recommendation for the agro-processing industry will be provided. Panel data covering three year (2011, 2012, and 2013) for 30 firms in the Agro-processing industry will be collected from the ministry of industrialization, Kenya daily board, Kenya sugar board, KTDA, KNBS and EPZ departments for the said periods. This study will treat salary and wages, plant equipment and machinery and raw materials as the input variables while the net sales of the firms will be the output variable .Econometric production frontiers will be estimated for the Agro-processing industry in each period and the analysis will be done based on results of the stochastic frontier analysis. Technical efficiency of the Agro-processing industry will be computed from the results of the estimated stochastic frontier model and changes in technical level will be observed over time and between the beverage subsector, food subsector and the non-food sub sector .The findings of this study will be used to draw sound conclusions and recommendations that will be very useful to enable efficient resource allocation and cost of production minimization to the firms and to the policy makers of the Kenya ministry of industrialization and enterprise development
The impact of population change on economic growth in Kenya
(World Academy of Science, Engineering and Technology (WASET), 2013) Thuku, Gideon Kiguru; Gachanja, Paul Mwangi; Obere, Almadi
The debate on the relationship between population growth and economic growth has been undergoing and varies across countries. The first theory states that population growth stimulates economic growth. The second theory view population growth as a factor that adversely affects economic growth while a third school is that population growth is a neutral factor in economic growth and is determined outside standard growth models. Given this scenario there was a need to establish the relationship between economic growth and population growth in Kenya. The study employed Vector Auto Regression estimation technique and used annual time series data for the period 1963 to 2009. The results indicated population growth and economic growths are both positively correlated and that an increase in population will impact positively to the economic growth in the country. The study concludes that in Kenya population growth promotes economic growth and subsequently economic development.
Performance of micro and small enterprises supported by women enterprise and development fund in Eldoret town, Kenya
(2011-08-12) Rono, Gladys J; Wawire, N. H. W.; Gachanja, Paul Mwangi
Women are the individuals who suffer more in the society although they perform multiple responsibilities in the home, workplace and in the community. Organizations have come up with ways seeking to uplift and empower women economically. But still little has been achieved. The government of Kenya, in realizing the women potential, established Women Enterprise and Development Fund so as to empower women both socially and economically. This study, examined performance of enterprises supported by Women Enterprise and Development Fund in Eldoret town. This study had four objectives: first, was to find out the types of activities carried out by women entrepreneurs. Secondly, was to determine the factors that influence the performance of MSEs. Thirdly, was to establish the relative importance of these factors. And lastly, to recommend possible actions that can be taken to improve the performance of MSEs. Stratified sampling technique was used to identify the sample, a sample of 60 enterprises was used, and interview schedule was used to collect the data. Descriptive statistics was applied to compute relevant statistics regarding performance of MSEs. The estimated log-linear model revealed that market size was the most significant determinant of MSEs performance. Other variables that determined MSEs profits were loan volume and business management skills. The rest of the remaining variables in estimated model were statistically insignificant. These include: technical training; size of the business; input price; level of education; age of the entrepreneur; marital status and the level of competition. Based on the findings of the study, it is recommended that the women enterpreneurs should undertake courses that will improve their business management skills. It is also important to formulate programmes to enhance marketing products of MSEs. Finally, the government should increase the loan volume and encourage women to borrow.
Technical Efficiency among Smallholder Dairy Cattle Farmers in Nyandarua County, Kenya
(GLOBEEDU Group, 2025-03) Mwaura, Eric Kimani; Gachanja, Paul Mwangi
Dairy farming is important due to its role in Kenya’s economy. It increases the nation’s food security, gives farmers a source of revenue, and creates jobs. The majority of milk drank worldwide comes from dairy cattle. Dairy cattle rearing has supplanted tea and coffee plantations as the primary source of livelihood across the Rift Valley and central Kenyan regions. The sector remains an integral part of Kenya’s economy; overall dairy production has gone down over the past 20 years despite an increase in cattle herds. In addition to the likelihood of an increment in the demand for dairy products and milk due to the growth of urban dwellers, Kenya’s dairy farming industry has not yet reached its full potential. Dairy production has been rising in Nyandarua, yet studies demonstrate that there has not been an analogous increase in productivity per cow when compared to the counties next door. The attainment of maximal technological efficiency at the farm level would be essential due to the shortage of production resources (particularly land) for dairy farming and boosting the availability of food, which is amid the Kenyan government’s targets. The assessment’s two goals are to estimate the technical efficiency of smallholder dairy cattle farmers in the Kinangop sub-county of Nyandarua County, Kenya, and to identify the factors that influence their technical efficiency. A non-experimental research approach was adopted, and cross-sectional data was gathered using questionnaires completed by a sample of farmers. Participants were chosen conveniently due to the lack of a population list to form a sampling frame to take part in the study based on a stratified sample from the ward. Each sampled farmer’s quantitative input and output data were gathered. Multiple regression analysis was used in the study in order to identify elements that alter technical efficiency, and a maximum-likelihood estimation approach was employed to establish the stochastic frontier production function. From the results, it was concluded that farmers were 71.1% technically efficient, 95% of the dairy farmers were above average, and only 5% of the farmers were below average. The maximum estimates likelihood coefficients indicated that labour, acres allocated to fodder production, concentrate, and fodder fed to animals per day were positive, although statistically insignificant. However, expenditure on animal health had a negative impact on technical efficiency but was statistically insignificant. The study also establishes that the level of education is a key determinant of efficiency in Kinangop. This study recommends that the smallholder dairy farmers in Kinangop sub-county ought to strive to be technically efficient including hiring labour that can aid in providing labour, joining the various societies that may be critical in providing credit among other services, using concentrates and fodder in dairy farming as well as practicing hay and silage preservation. The study further recommends that the county government of Nyandarua come up with policies that aid citizens in accessing higher education and extension services.
Technical efficiency of hospitals owned by Faith Based Organisations in Kenya
(2015) Kinyanjui, George Kariuki; Gachanja, Paul Mwangi; Muchai, Joseph Muniu
The desired goal for Kenya’s Vision 2030 and the millennium development goals are to provide efficient and reliable healthcare that will reduce child mortality, improve maternal health and combat HIV/AIDS, Malaria and other diseases. Kenya’s health care sector is among the most inefficient globally with high disease prevalence, high mortality rates, poor access to healthcare services and corruption. Hospitals owned by faith based organisations in Kenya play a key role in healthcare provision and contribute to about 40% of all private healthcare needs. This paper employs the Data Envelopment Analysis to unravel the technical efficiency of hospitals owned by faith based organisations in Kenya. Input orientation is adopted where the input variables are: medical officers, nurses, beds and cots and an aggregate of other hospital workers. The number of inpatients and outpatients recorded annually are considered as the output variables. Data obtained from the Kenya Conference of Catholic Bishops, the Christian Health Association of Kenya, the Supreme Council of Kenya Muslims and the Ministry of Health Master Facility List is used. Results indicate that 36.67 percent of faith based organized hospitals are inefficient. This paper concludes that if they would operate as a group, their technical efficiency would be 79 percent
Total factor productivity change in the Kenyan manufacturing sector: A malmquist index analysis
(2011-08-15) Gachanja, Paul Mwangi
Industrialization has been embraced by many developing countries as a means of achieving structural transformation of the economies. In Kenya, the goal to industrialize has long been held as a strategy for economic development. It has received emphasis as the main strategy for addressing the principal challenges of development in Kenya; employment creation and poverty eradication. While Kenya inherited a relatively well established manufacturing sector at independence in 1963, the sector's overall performance has been rather dismal. The share of the manufacturing sector in GND, which accounts for over 70 percent of the industry, has changed little over the last three decades. At the same time, the sector which was expected to play a leading role in the country's development and growth process has not been dynamic enough to effectively play this role. The study examined Kenya's manufacturing sector to empirically analyze the total factor productivity change. The study used the latest World Bank's Regional Programme on Enterprise Development firm level data for the period 2000-2003 to form a panel over the three year period 2000, 2001 and 2002. The total factor productivity change over the period was measured and decomposed into efficiency change and technical change. The study used data envelopment analysis (DEA) to derive Malmquist productivity indices. The study revealed an overall decline in Total Factor Productivity (TFP) of about 8.3 percent. The decline resulted mainly from declining which dropped by about 17.8 percent over the period despite an overall technical progress of about 11.5 percent. In as far as the sub-sectors were concerned, the study revealed that only the chemicals and pharmaceuticals sub-sectors recorded a TFP growth of about 7.9 percent. The textile and wood and furniture sub-sectors recorded an efficiency improvement of about 11.8 and 6 percent, respectively. Efficiency change was revealed to be the major source of TFP changes. The vision 2030 envisages the development of a robust, diversified and competitive manufacturing sector. The overall goal for the sector for the next five years is to increase its contributions to GDP by at least 10 percent per annum and moving Kenya to a middle income country by year 2030. The study concluded that, for the manufacturing sector to play the crucial role in employment creation and poverty eradication, the infrastructural and institutional bottlenecks bedeviling the sector must be addressed. These includes; low capacity utilization, poor infrastructure, lack of innovation, licensing and security.
Total Factor Productivity Change in the Non-life Insurance Sector, Kenya: 2005-2009.
(2014-03-10) Mdoe, Jackson Idi; Muchai, Dianah; Gachanja, Paul Mwangi
The Kenya Vision 2030 acknowledges that financial services will play a critical role by providing better intermediation between savings and investments. Among the financial service providers are non-life insurers. Non-life insurers contribute to economic growth through channelling resources from savers to investment projects, inducing consumption in risk averse individuals, reducing uncertainty and volatility of events as well as diversifying risk. To develop the insurance industry the government has intervened by creating IRA. To consolidate non-life insurers the government raised the paid up capital from Kshs. 150 million to Kshs 300 million and restricted individual ownership of an insurance company to less than 25 percent. The extent to which total factor productivity (TFP) for non-life insurers has changed with these reforms is yet to be determined. This notwithstanding, the actual levels ofTFP change in the Kenyan non-life insurance sector is not known. The study sought to fill this gap by estimating and decomposing total factor productivity change for non- life insurance sector. The study used an output oriented Data Envelopment Analysis (DEA) to derive Malmquist total factor productivity change indices. The indices were then decomposed to identify the sources of productivity change. To achieve these objectives the study used data from 32 non-life insurance firms that existed during the study period (2005 to 2009).The results revealed that, there was 2.7 percent progress in TFP for the sector. This progress in TFP was sourced from innovations. The decomposition of efficiency change into scale efficiency change and pure efficiency change revealed that the 7.8 percent decline in efficiency for the entire sector was occasioned by 2.7 percent decline in scale efficiency and 5.3 percent decline in pure efficiency. The study concluded that for non-life insurers to continue improving their TFP they need to sustain the high innovations and improve efficiency by improving their level of resource utilization and product survival.

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