MST-Department of Applied Economics

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Informal Financial Sector in Kenya: The Case of Siaya District
(Kenyatta University, 1991) Ouma, A. P. S.
This paper studies factors that affect an individual's probabilities of choosing amongst different financial institutions to save with and/or borrow from. A structured questionnaire was used to collect data on attributes of financial institutions (formal and informal) and on characteristics of individuals who had used these institutions over a period of one month prior to the interview. The data were analyzed using log it techniques. The empirical findings of the study reveal coexistence of informal and formal financial institutions in the study site. However, the informal institutions are more popular, having been used by 73 per cent of total respondents. The findings also show that distance, level of education, level of monthly income and collateral are significant determinants of selection probabilities for formal and informal financial institutions. On the basis of the empirical results, the study recommends that: (i) More formal financial insitutions be built in rural areas. (ii) Education programmes on finance and banking be intensified in the rural areas. (iii) Local .moneylenders should be recruited asI extension agents of formal financial institutions in rural areas. (iv) State loans, like those provided by the ICDC loan Agency in Siaya District, be channelled via informal financial institutions, especially Mutual Assistance Groups, under an overseer body.
Determining the economic viability of small-Holder caebon sequestration in Kakamega
(2011-08-12) Ouma, Levi; Martin N. Etyang; Okeri, S. O. M.
Climate change refers to the variation in the earth's global climate or in regional climates over time scales ranging from decades to millions of years. Climate change is caused in a large measure by human activity. It has many serious and damaging effects. Global warming is harmful for agricultural productivity. The working group on climate change reports that the maximum temperature in Kericho, a highland area in the Rift Valley province where most of Kenya's tea exports originate, has increased by 3.5°C during the past 20 years. In Lamu, on Kenya's north east coast near Somalia, the maximum temperature has increased by more than 3°C since the 1940s. This is potentially dangerous for two of Kenya's most important revenue earners, tourism and tea. Droughts are becoming more intense and more frequent in Kenya due to climate change. An international agreement to combat climate change is the Clean Development Mechanism under the Kyoto Protocol. This is an institutional framework for direct foreign investments in GHG mitigation projects in developing countries. It is an arrangement allowing industrialised countries with a greenhouse gas reduction commitment to invest in projects that reduce emissions in developing countries. Carbon sequestration is the process by which atmospheric carbon dioxide is absorbed by trees through photosynthesis and stored as carbon in biomass, which are biological material derived from living, or recently living organisms such as tree trunks, branches, foliage and roots, and soils. Carbon sinks where forests and vegetation are used to absorb carbon dioxide from the atmosphere and store it as carbon offer one potential route to link poverty reduction and climate change mitigation. Increased forest and tree cover can bring major social, economic and environmental benefits to rural areas as well as reducing net emissions of carbon dioxide. This study sought to explore the benefits and costs that are likely to be faced by a private firm acting as an aggregator by engaging small hold farmers in a carbon sequestration project. This was achieved by calculating the NPV. The data used for the research was secondary data collected from the Green Belt Movement. The costs and benefits were measured in current market rates. The project lifetime is 12 years and the chosen rate of discount is 12%. The NPV was calculated to be US $ -333.68 an indication that at the current conditions the project is not viable. It is necessary therefore to set a price that is high enough to yield significant economic benefits to the project implementers but low enough to encourage participation in the carbon market by the developed countries. A price that is slightly higher than US $ 10.10 ensures that the project is viable. Other alternative methods of carbon sequestration including agro-forestry, conservation tillage, cover crops and recycled waste should also be explored.
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.
Pension fund management strategies in Kenya and their impact on the average return of the fund
(2011-10-25) Yano, Renee Peninah; Khakame, Elijah W.; Wesonga, Wekesa M. J.
The pension industry in Kenya has been characterized by rampant mismanagement and misappropriation of funds that led to underperformance. The management strategies employed by the Kenyan fund managers have been questioned and therefore been a major issue of concern. In an effort to establish the best management strategy that maximized returns of the fund, the study sought to establish the management strategies employed by the Kenyan fund managers, the predominant strategy, its effectiveness and challenges. The target population was all pension fund managers, registered with the Retirement Benefit Authority (RBA). The data collected through questionnaire was analyzed using descriptive statistics with the aid of Statistical Package of Social Sciences (SPSS) and results presented by use of frequency tables and pie charts. Microsoft Excel was also used in the determination of averages and weighted averages. The study found out that the performance of hybrid managers was superior. Hence, its recommendation for adoption in the management of pension funds in Kenya. The study makes recommendations to investors, fund managers, RBA, and the security markets officials. The study contributes to the existing literature on pension fund industry in Kenya while suggesting on further researchable areas, to form basis for further scholarly work.
The relationship between inflation and economic growth in Kenya, 1963-2003
(2011-12-27) Kigume, R. W.; Wawire, N. H. W.; Obere, Almadi
Low economic growth and fluctuating inflation rates have been experienced over the years in Kenya. The relationship between inflation and economic growth has brought a lot of controversy both in theory and empirical literature. This study sought to establish if there is significant causality between inflation and economic growth, the specific nature of this relationship and to determine whether there is a short run or long run relationship between these two variables. The study examined the relationship between these two variables using annual data covering the period 1963 to 2003. The Phillips curve approach was used in this study. To undertake this study, published data was used. The data were tested for the presence of unit roots, which revealed that inflation was an 1 (1) and real GDP growth rate was an 1 (0). Granger causality tests revealed that there was no causality between inflation and economic growth rate. Estimations were done using OLS estimation technique. Various diagnostic tests were also carried out to confirm the statistical soundness of the models. The study found that there was a negative short run relationship between inflation and economic growth. Further, this relationship was positive in the long run. These results showed that inflation was affected by its own first and second lags, economic growth, climatic shocks (for example drought), monetary policy interventions and external shocks like the oil price. On the other hand, economic growth was affected by its first and second lags only. In this case, the Phillips curve approach was not applicable since it presents a short run positive relationship between inflation and economic growth while the results presented an inverse short run relationship and a direct long run relationship between inflation and economic growth in Kenya.
The relationship between budget deficit financing and private investment in Kenya
(2011-12-27) Kimani, R. N.; Wambugu, A.
The large budget deficit and its financing from the sale of government securities in the open market has rekindled debate on the possibility of crowding out of private investment in Kenya. The debate is especially relevant given that the Economic Recovery Strategy Paper (2004) has put emphasis on the private sector and private investment as sources of growth. This study examines the relationship between budget deficit financing through selling of treasury bills and bonds in the open market and private investment to establish the possibility of crowding out. Two schools of thought exist on the crowding out phenomenon. One school of thought believes that excessive domestic borrowing from the open market to finance the budget deficit reduces private investment through making interest rates to increase and thus making borrowing expensive. The Ricardian equivalence on the other hand, through its assumptions disputes the existence of a relationship between private investment and budget deficit financing. To carry out the study, data from IFS, February 2005 CDROM and various Statistical Abstracts were collected and used. Data were tested for stationarity and cointegration after which a cointegrated VAR model was estimated. The results of the VAR estimation show that private investment is significantly affected by its first lag and the first lag of domestic debt to GDP ratio. From the impulse response analysis, private investment responds to innovations of domestic debt, public investment, and growth in GDP and interest rates within the first 10 to 15 years. In light of the findings, it can be noted that government domestic borrowing from the open markets crowds out private investment.
Characteristics and the impact of rotating savings and credit associations on the growth of micro and small enterprises in Nairobi-Kenya
(2011-12-29) Mbwiria, Esther Kathure
Micro and Small Enterprises (MSEs) promotion in Kenya is a viable and dynamic strategy for achieving National goals such as poverty alleviation. In recent years the sector has gained widespread recognition. However, the sector has continually faced several constraints to growth and development. One of them being financial due to limited access to credit facilities. A number of informal micro-finance institutions have come to the rescue of MSEs in access to credit. One such institution is Rotating Savings and Credit Associations (ROSCAs). ROSCA is an indigenous organization of a group of people who make regular contributions to a fund, which in turn is given in whole or in part to each contributor in rotation. The purpose of this study was to examine the impact of ROSCAs on the growth of Micro and Small Enterprise in Nairobi. Though the number of ROSCAs is generally on the increase among citizens, little research has been done on their impact on the growth of MSEs. The study is important because the findings will provoke interest and encourage the various stakeholders to provide an enabling environment for the growth of the sector. The study is descriptive survey that sought to evaluate the impact of this type of credit to growth of MSEs. It was conducted in Nairobi and selection of the sample, involved a combination of techniques, viz. cluster, stratified random sampling, simple random, and snowballing. A sample size of 130 MSEs and seven, ROSCA groups were selected. Data was collected through personal interviews incase of individual enterprise owner-manager, and direct administration in case of ROSCA groups leaders. In addition to ROSCA - member enterprises interviewed, 49 nonmember enterprises were also interviewed to establish reasons why they have not joined or formed ROSCAs. Both qualitative and quantitative data were collected. Descriptive statistics, with in-depth content analysis, were summarized under common themes and presented in form of tables, frequencies and percentages. The findings indicated that ROSCA credit was mainly used in the following areas: buying stock (82% of the respondents), buying assets (62%) and domestic activities (58%). As a result of credit intervention, respondents reported improvement in income, with a positive change ranging from 8% to 500% increase with an average of 115.3% Other changes included savings (82.3%), sales (57.7%), assets/stock vi (54.6%), market skills (52.3%) and employing more workers (46.2%).Management practices and working capital also improved. The enterprises registered a minimal horizontal expansion through opening of new enterprises and business diversification. Only 11.5% of the respondents reported opening new branches on acquiring loans from ROSCA groups. However, no enterprise reported vertical growth, i.e, none changed from micro to small, or small to medium. Other changes reported included improvements in entrepreneurial skills, networking, and family welfare, among others. Nevertheless the enterprises reported a number of constraints, which may have contributed to minimal growth in the enterprises. These included limited amount of working capital, lack of suitable premises, economic uncertainties, lack of adequate equipments for manufacturing enterprises, and socio- political factors, among others. The main reasons given as to why some enterprise owners did not join or form ROSCAs include conflicts, gossips, small loans and negative attitudes. Some respondents, especially men, said that ROSCA micro-finance is highly for women. In conclusion, the ROSCA micro-finance system / network were found to be effective in assisting the Micro and Small Enterprise to progress and reach some measure of growth. It is therefore recommended that ROSCA groups should be supported and strategically used to promote self-reliance and to help the economic viability among the individuals who source this type of credit. Aggressive dissemination of information regarding ROSCAs as a source of credit should be done in order to promote this type of microfinance.
The determinants of supply of Kenya's major agricultural crop exports , 1963-2003
(2011-12-29) Maugu, K. Lenity
Kenya has been experiencing low export growth rate in general, and agricultural exports in particular and yet an increase in agricultural crop exports can contribute significantly to economic growth and improve the citizen's welfare. This study investigated the determinants of agricultural crop exports supply for Kenya over the period 1963-2003. Annual time series data were collected from Kenya's Statistical Abstracts and the IMF's International Financial Statistics (IFS). A disequilibrium model of agricultural crop export was utilized. The data for all variables were tested for the presence of unit roots. The tests revealed that all variables, apart from productive capacity proxied by GDP, were integrated of order zero. Consequently, the Ordinary Least Square (OLS) estimation technique was used. The regression results showed that the real exchange rate was a significant determinant of tea, pyrethrum and horticulture exports but not coffee exports. The pyrethrum export was more elastic with respect to real exchange rate. Productive capacity as proxied by GDP was found to be a significant factor in determining coffee, tea and aggregate exports. El-Nino rainfall, as captured by a dummy, was significant for coffee exports, while trade liberalization, also captured by a dummy was only significant in determining pyrethrum exports.
Macroeconomic factors affecting stock prices on the Nairobi stock exchange, 1990-2002
(2012-01-03) Mutai, K. Nahashon
This study empirically tested the relationship between the stock prices on Nairobi stock exchange and Kenya's macroeconomic variables that included; inflation, exchange rates. current account balance, money supply, budget deficit and treasury bill rates. This was in recognition of the fact that the market efficiency tests done by other researchers examined whether markets incorporate available information, but did not determine what information the market responds to and to how important this was. The objectives of this study were therefore to identify the macroeconomic variables that influence the stock prices and to estimate a long-run relationship between them, utilizing the VAR technique. Monthly data for the period 1990 to 2002 were used. The model was specified based on the Arbitrage Pricing Theory. Before any analysis of the data was done, stationarity tests for time series data were conducted. By applying the Augmented Dickey Fuller test, it was found that alt the variable were I (1) except GDP and current account balance, which were I (2) and 1(0) respectively. Johansen's procedures for cointegration were used and it was found that cointegrating vectors existed. The findings of the study suggest that the stock prices and inflation, exchange rates, current account balance, money supply, budget deficit, treasury bill rates tend to evolve together over time. The relatively small coefficient of the error term in the Vector Error Correction Model (VECM) indicated a slow rate of adjustment to restore equilibrium in the dynamic model. In order to get a deeper insight of the interrelationships among the variables identified, Granger-Causality analysis was performed. The empirical results show that bi-directional relationship existed between stock prices and inflation, exchange rates, money supply, budget deficit, treasury bill rates and Gross Domestic Product. Unidirectional relationship was found to exist between stock prices and current account balance. Thus, stock prices are caused by inflation, exchange rates, money supply, budget deficit, treasury bill rates and GDP.
Determinants of aggregate domestic private savings in Kenya, 1980-2003
(2012-01-12) Tiriongo, Samuel Kiplang'at
This paper studied the determinants of aggregate domestic private savings in Kenya capturing the reform period 1980 to 2003.It was motivated by the existence of substantial fluctuations in the ratio of aggregate domestic private savings to GDP and the interest to test the impact of demographics and financial sector development on private savings. The study included demographic variables like young and old age dependency ratios, and the different measures or indicators of financial sector development: the ratio of M2 money to GDP, the ratio of liquid liabilities to GDP and the ratio of the assets of commercial banks to the assets of' central bank as new variables previously not used in any study on Kenya. Among the other variables were income tax, deposit rate used at central bank, current account deficit. The interest rate spread, terms of trade, inflation rate and real gross disposable per capita income. A hybrid model was specified consisting of all the variables identified from the Life Cycle hypothesis on savings and consumption, the permanent income hypothesis and the simple Kevnesian hypothesis was used in the estimations. The results of the estimations showed that aggregate private savings in Kenya is significantly determined by the current account deficit, the ratio of M2 money to GDP, real gross per capita income growth, deposit rate and the old age dependency ratio.
The relationship between fiscal deficits and the current account balance in Kenya (1964-2000)
(2012-01-24) Kosimbei, G. K.
Fiscal and current account deficits have been a common phenomenon on the Kenyan macroeconomic scene from the 1960s. This study examines the relationship between these two deficits using annual data covering the period 1965 to 2000. The relationship between fiscal and current account deficit "twin deficit hypothesis" was presented. These are the Ricardian, neoclassical and Keynesian schools of thought. The Ricardian equivalence argues the absence of any relationship between the deficits, while the Keynesian proposition affirms that fiscal deficits lead to a current account deficit. To enable to undertake this study, data from International Financial Statistics is used. Granger causality tests are performed on the fiscal and current account balances series. The tests revealed that there was no causality between fiscal and current account deficits. Estimations are done using OLS estimation technique. Wald tests are performed to ascertain the overall significance of the coefficients. The estimations are repeated using growth values of fiscal and current account balances, to ascertain if short-run dynamics are the same as long run equilibrium relationships. The study confirmed that there is no relationship between the two deficits. In this study, the Ricardian equivalence is valid in the Kenyan case. The study also found out that the short-run dynamics are the same as long run equilibrium relationships. Since, the results in the study show independence, one important implication for policy is that if the government would wish to reduce both deficits, it should deal with them separately.
The demand for prenatal health care services in Nyando district, Kenya: a case study of lower Nyakach division
(2012-04-05) Oremo, Hellen; Oloo, K. O.; Kuuya, P.M.
Women play an important role in the production of goods and services in any economy. For maximum production, they need to be healthy. Maternal and child health is an essential and integral element of health care programme aimed at improving general health status of women since better maternal health helps to reduce the risk of death and disability in pregnancy and child birth. On the other hand, prenatal health care is an essential component of maternal and child heath care. Good prenatal heath care helps to reduce morbidity and mortality on women and children. However, there is low attendance of prenatal health care especially in the rural areas. However, there is low attendance of prenatal heath care especially in the rural areas. It is therefore necessary to understand factors that determine demand for prenatal health care in the rural areas. This study has investigated the determinants of prenatal health care services in Lower Nyakach Divisions of Nyando District. To meet the objectives of the study, primary data was collected and analysed using both econometric and descriptive methods. Econometric analysis involved estimation of a log linear model using Ordinary Least Squares (OLS) estimation technique. The empirical results showed that price of prenatal health care, waiting time, perceived quality, distance traveled and the duration of the pregnancy at which the first prenatal health care visit was made are significant determinants of demand for prenatal health care. Descriptive results showed that contrary to the beliefs that people are moving away from the traditional health care, women in the rural areas are still visiting both modern and traditional health care facilities. The results also showed that demand for prenatal visits late (between five and six months of pregnancy). Based on the empirical findings, the study recommends that health care planners should design and modify the hours of operation of certain facilities to reduce waiting time, since waiting was found to be a significant determinant of demand for prenatal health care; that prenatal health care services should be further subsidized. On the other hand, mobile clinics should be provided to reduce distance travelled to the health care facilities. Distance was found to negatively influence demand for prenatal health care and was also a significant determinant. The study also recommends that awareness campaigns for prenatal health care be intensified and also included in public education programmes and that when planning for health care services, the feelings and opinions of potential users should be taken into consideration. For example, health care providers can adapt some aspects of their services to satisfy the patients’ expectations.
Determinants of investment demand in the informal sector: A case study of shoe making in Kibera, Nairobi
(2012-04-05) Oketch, T. C.; Etyang, Martin N.; Oloo, K. O.
The informal sector has an important role to play towards the industrialization process and generation of employment opportunities. The sector provides to potential employees for both the informal and formal sectors, thereby helping to improve the quality of life to those who would otherwise be without any source of livelihood. Also, the informal sector has a capacity to mobilize investments and produce affordable goods and services to the ever-increasing population. For these reasons, various stakeholders are targeting the sector so as to enhance the potential benefits. Despite these efforts, the sector has not become the expected solutions to Kenya's developmental problems. The concern of this study was to investigate the determinants of investment in the informal shoe-making sub-sector in Kibera area of Nairobi Province. Data was collected from a sample of 40 shoemakers in the area. Both linear and log-linear multiple regression models were specified and estimated and the results interpreted based on the log-linear model, which was adopted as the suitable one for analysis because it had more significant variables, and higher R2 and F-statistics. The results suggest that output of the firm; price of investment goods, entrepreneurs' dependants and of investment in the sub-sector. Contrary to a prior expectations, the coefficients of transfer payments, training, accessibility of the enterprise was negative. Further, the study found that none of the respondents had benefited from the assistance package provided by the government, donors, and other stakeholders. Thus, these shows that the promotion services aimed at the sector do not reach the entrepreneurs in the sub-sector. This paves way for various policy recommendations.
Profits and linkages in the urban informal sector: a case study of the food sub-sector in Kamukunji division in Nairobi province
(2012-04-11) Mbuthia, Aflonia
The informal sector has been recognized for its role in contributing to national output and employment. In particular, the food sub-sector has continued to be a source of livelihood to a substantial size of the urban population. This research paper analysed the profitability and linkages of the food kiosks sub-sector in Kamukunji division of Nairobi. A total of 80 food kiosks were selected using cluster-sampling technique. Data was collected from entrepreneurs, and was regressed using both linear and log-linear estimations. Regression results revealed that there was no theoretical difference when either linear of log-linear profit functions were regressed. Working capital was the most statistically significant variable in profit determination in informal food kiosks. Other factors that significantly affect profits are output price, level of competition and gender differences. Study findings showed that there is a stronger backward linkage with the formal sector while the forward linkage was stronger with other informal sector activities. Based on the findings of this study, the government and other stakeholders of the informal sector should help in financing the operations of the entrepreneurs. In particular the government should give subsidies and reduce tax on inputs utilized more in the sector. The entrepreneurs should keep records of their activities so that proper accounting can be done for every expense or income. To reduce the level of competition, the city council should allocate plots to build food kiosks based on population density.
The characteristics of the poor people in rural Kenya. a case study of Kisii central district
(2012-04-17) Sevelius, Barongo Yophen
All countries worldwide view poverty as an enemy to development. This is why governments' efforts are directed towards the alleviation of poverty. In Kenya, poverty has been and still is one of the main problems facing the country and particularly in rural areas. To achieve any sustainable economic growth and development in Kenya, is important to alleviate poverty in rural areas , but first by understanding the major causes of poverty in rural areas even in areas with agricultural potential like Kisii Central District. The purpose of this study was to investigate the characteristics of the poor people in rural Kenya. The setting of the study was Kisii Central District. The respondents consisted of 64 rural households. Data were collected through the questionnaires and interviews. Out of the total 64 households, 37 were classified as poor and 27 were classified as rich by using food consumption expenditure to total income ration method. The study sought to find out the characteristics of the poor in rich agricultural Kisii Central District. Descriptive statistics were employed in the analysis of the collected data. The results revealed that large family sizes, lack of enough land, high illiteracy level, lack of access to rural credit facilities, theft of the farm produce, and diseases especially malaria were some of the characteristics of the poor in Kisii Central District. The policy recommendations suggested by the researcher included: the government and NGOs to promote literacy level in rural areas, provision of rural credit facilities to the farmers, reduction of large family sizes through the spread of education on the importance of having small family sizes, spread of education on how to control malaria and punishing heavily all those caught stealing farm produce.
The determinats of milk supply in Murang'a district: a case study of Kiharu division
(2012-04-23) Gachanja, Mwangi
To keep in pace with the rising demand for food by the fast growing population in Kenya, the Agricultural sector has an important roe to play. Dairy farming for milk production is a major component in the sector. This research was concerned with the study of the factors that determine milk supply patterns from farmers in Kiharu division of Murang'a district. Data were collected from a sample of 90 farmers in the division and linear and log-linear multiple regression models estimated. The results are interpreted based on the log-linear model, which was adopted as the suitable one for analysis. The results suggest that incomes from other agricultural activities are the most significant factor in explaining the pattern of milk supply in the district. Other factors that explain milk supply include the prices paid to the farmers, and the input costs. The main conclusion from the study is that, to step up milk production and supply, farmers must have access to the necessary services which were found to be provided by cooperatives. Farmers are therefore advised to form cooperatives. Educative programmes should be organized to enlighten the farmers on the formation, running and management of the co-operatives. This will not rule out private buyers who instead should be licensed to step up competition. However, farmers are advised to take caution, since such private buyers, survival in and out of season is not guaranteed.
Constraints to small holder credit farm investment: a case study of coffee farming in Majoge Chache location, Kisii district
(2012-05-07) Ombuki, C.
This study analyses the constraints to smallholder credit farm investment. The data for the study were collected in Majoge Chache Location, Kisii District. A total of 40 respondents were interviewed for a period extending from 17th of July to the 5th of August 1995. A list of farmers in Majoge Chache Location who had borrowed funds for investment in coffee farms was obtained from the Loans Officer based at Ogembo Divisional Headquarters. Following the list, systematic sampling procedure was then applied in which every sixth loan farmer was picked until a sample size of 40 was obtained. The estimated results of both semi-log and double log models indicate that initial household endowment of housing services and investment in non-farm activities have very significant effects on credit farm investment. Specifically, sample farmers with quality houses were observed to invest more of the credit they received on the farm. The main non-farm activity to which most of the sample farmers diverted farm credit was school fees. The results indicated that other variables studied do not have significant effects on the proportion of credit invested in coffee farms in the study area. These variables are: Family size, number of children in school, price of coffee per kg., and household income.
An empirical analysis of household expenditure patterns in rural Kenya: a case study of Gatundu division
(2012-05-15) Kaboro, Ruth Njeri
The objective of this study is to investigate the rural expenditure behaviour in Kenya so as to improve our understanding of these rural expenditure patterns. To achieve this objective, data on the relevant variables were collected from 98 rural households and Extended Linear Expenditure System (ELES) of equations was estimated. Specifically, expenditure, demand, and budget share functions were estimated. Estimation results shown that the household characteristics play a limited role in determining households' expenditure behaviour, the dominant variables in expenditure determination being price and income. Elasticies were also computed, from which we conclude that most commodities responses are inelastic to changes in various demographic and economic variables. The results further show that foods task the greatest proportion of the total household expenditure. From these results a number of policy recommendations are suggested.
Money supply determination in Kenya: a macroeconometric analysis
(2012-05-15) Korir, J.K.
Monetary policy plays an ever-increasing role as an economy develops. The understanding of money supply determination is important in formulating correct monetary policy measures. This study investigated the impact of high-powered money and the basic ratios of money multiplier on money supply. Time series data used for estimation were obtained from published documents from the central bank of Kenya. The only artificial variable constructed is quarterly data for income. The results show that high-powered money and the various deposit and reserve ratios are all significant in the determination of money supply in Kenya. On the basis of empirical results. It is recommended that: (a) Greater stability to sought on the balance of payments to increase predictability of the high-powered money as it was found to be the most important determinant of money supply. (b) The government budget gap is narrowed to reduce government domestic credit so as to enable the central bank to have some grip over high-powered money. Budget deficit in Kenya have been shown to exert a powerful impact on trends in domestic credit and money, and this applied to deficits financed externally. (c) Effective ways of controlling bank credit be designed and implemented in response to changes in their liquidity. This can involve use of banks reserve base which requires raising of liquidity ratios until they affect credit creation by the banks.
A case study of marketing systems for beans in Machakos district
(2012-05-18) Katheka, John
Agriculture remains the mainstay of the economy of Kenya. It not only tops the list of foreign exchange earnings for the country but is also the source of livelihood in terms of food production in the country. Beans are second only to maize as a source of food in Kenya. This study, which consists of six chapters, looks at the marketing systems for beans in Machakos district of the Eastern province of Kenya. Eastern province is the major bean producer in Kenya and Machakos is one of the leading districts in the production of beans in the Province (see Appendix III). Mostly small-scale farmers grow the crop by intercropping it with other crops, for example maize. The district lies between high and low potential zones. The high and medium potential areas are the surplus bean areas while the low potential areas are the deficit bean areas. The research problem addressed to by this study is mainly the lack of information on bean production and marketing in Machakos district in particular and Kenya in general. The specific objective of this study is to describe the marketing systems for beans in Machakos District and to identify the factors affecting the marketing efficiency. Both primary and secondary data are used. The primary data was collected through questionnaires and is used for empirical results in Chapter five. The secondary data is incorporated in chapter one. Descriptive and frequency tables and multiple regression results analyses are presented in Chapter five, which discusses the results. Chapter six gives the summary and conclusions of the study findings. The chapter also suggests some policy recommendations, which could be implemented to improve the production, consumption and marketing of beans in Machakos district in particular and Kenya in general.

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