RP-Accounting and Finance Department

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Access of Credit and Financial Performance in Small and Micro Enterprises: Evidence of Enterprise Development Funds Strategies Used in Kenya
(IJLRHSS, 2021) Kemei, Joseph Kipngeno; Warui, Fredrick
Small and Micro Enterprises (SMEs) has encountered myriads of challenges especially at early establishments. This has affected the financial performance of youth SMEs and some leading to closure. Despite the effort by government in Kenya for youth enterprise development funds their success rate is still very low. To address this issues the main objective of the paper is to establish the effect of access to credit strategy on financial performance of SMEs in Kericho County. Financial intermediation theory was utilized in the study. The study utilized a descriptive survey design where information was retrieved from SMEs in Kericho County who had access to YEDF and Uwezo funds. It targeted a population of 236 comprising of 144 employees in YEDF and 92 employees in Uwezo funded SMEs where a sample of 148 respondents were selected using stratified sampling method. Questionnaires were used in as data collection tools. The study conducted descriptive statistics where mean and standard deviation were adopted. ANOVA analysis was used to examine the relationship between the variables. The finding revealed access of credit had significant influence on financial performance. Where there was flexibility in access to loans as well as low requirement in accessing finance. It also showed that group loans strategy assisted significantly the growth of SMEs. The study recommended training and exhibition of SME products to create knowledge and market respectively for proper utilization of loan accessed.
Accounting Disclosures and Firm Value of Commercial Banks Listed on the Nairobi Security Exchange, Kenya
(International Journal Corner, 2019) Chebon, Nicolas Kipsang; Warui, Fredrick
The financial health, sustainability and soundness of banks is a basic requirement for the depositors and equally important for the shareholders, employees, and the entire economy. Thus, regulators across the globe have made an effort to measure the financial wellbeing of banks by requiring them to disclose information about their operations. External factors including being stripped of licenses, deregulation, lack of information amongst the customers, homogeneity of the business, connectivity amongst the banking sector affect the performance of the bank which is reflected in their value. The collapse of three commercial banks over a short period of time focused the attention of regulator and policymakers on the disclosures by commercial banks in Kenya. Investors have also demanded greater transparency particularly for firms listed at the Nairobi Securities Exchange. Further, a review of the trends in the share prices of listed commercial banks and the information released indicates contradictions. An analysis shows that in some instances the share prices recorded show increases despite the company releasing negative information and/or vice-versa. This leads to the question of what is the relationship between disclosures on the firm value. The aim of the study was to determine the effect of accounting disclosure on the firm value of listed commercial banks in Kenya. The study was guided by four research objectives namely: to determine the effect of accounting practices disclosures, risk information disclosures, hedging strategies disclosures, and reserves disclosures on the firm value of listed commercial banks in Kenya. The value of the firm was measured using the market based measurement Tobin’s Q. The study was anchored on the Decision Usefulness Theory, Signalling Theory, and Positive Accounting Theory. The disclosure items were measured using an accounting disclosure index, which is a checklist of different disclosure indicators included in the annual reports of the listed commercial banks. The accounting disclosure consisted of 25 items. The study adopted a causal research design. The study sampled all the listed commercial banks. The study established that accounting policies, risks, hedging strategies, and reserves had a positive and statically significant effect on firm value of commercial banks listed on the Nairobi Securities Exchange.
Accounting Practices and Financial Performance of Public Secondary Schools in Makueni County, Kenya
(International Organization Of Scientific Research (IOSR), 2019-06) Manei, Benson Orikae; Omagwa, Job
In Kenya, most public secondary schools fund management systems have been coupled by a lot of challenges among them corruption, mismanagement, problems of denied secondary certificates due to arrears that are non-existent, and some parents accusing the schools of making fictitious fees balance claims. Therefore, this brings out the case of serious financial performance challenges in Kenyan public schools. As a result, the study sought to determine the effect of accounting practices on the financial performance of public high schools in Makueni County. The accounting practices investigated were: record keeping, internal control and budgeting. The study was guided by three theories: Residue Equity theory, Institutional theory and Contingency theory. The study adopted a census design and the target population was 44 public secondary schools in Makueni County. The study used purposive sampling in picking respondents. Both primary and secondary data was used and the analysis procedure entailed the use of descriptive analysis (means and standard deviation) and Multiple Regression Analysis with the aid of SPSS Software (Version 21). The study found that record keeping had a positive and significant effect on financial performance of public secondary schools in Makueni (Beta = 0.819; P Value =0.000,< 0.05). The study further found that internal control had a positive and significant effect on financial performance of public secondary schools in Makueni (Beta = 0.853; P Value = 0.000,<.0.05). It was also established that budgeting had a positive and significant effect on financial performance of public secondary schools in Makueni (Beta = 0.811; P Value = 0.000, <0.05). Based on the findings, the study concludes that the relationship between record keeping, internal control as well as budgeting and financial performance of public secondary schools in Makueni County was positive and significant. The study recommendations the management and administration of the public secondary schools to involve all stakeholders in managing and accounting for the school finances and resources; empower, build capacity and remunerate bursars accordingly to enable them diligently deliver on their mandate as well as sensitize the school principals on basic accounting, bookkeeping and financial management to enable them oversee, supervisor and guide financial management among their institutions.
Accounts Receivable Management and Financial Performance of Kericho Water and Sanitation Company Limited, Kericho, Kenya.
(International Academic Journals, 2019) Siele, Kipkirui Charles; Tibbs, Charles Yugi
Account receivables have been a major problem for most utility service providers especially those still dealing with the post payment method where services are rendered before payment is made. This study sought to find out if financial performance of Kericho Water & Sanitation Company (KEWASCO) was attributed to management of accounts receivable. The study collected secondary data spanning from 2010 to 2014 from Kenya national audit office and KEWASCO published financial statements to find out average collection period and accounts receivable turnover. The target population included employees of KEWASCO in two regions, Kericho and Bureti working in finance. Data was collected using questionnaires where a census was employed and data analyzed using regression and correlation analysis to find if there is any relationship between financial performance and accounts receivable at 5% significance level. From the findings inventory turnover period and average payment period is averagely 30.14 days and 105.45 days respectively, accounts receivable turnover had a mean of 24.54, average collection period (29.8) size of the region (1.547). The results showed that KEWASCO, financial performance variable Return on Equity (ROE) was significantly affected on Size of the region with positive correlation of 0.688 and Inventory Turnover with negative correlation of 0.245. According to the regression equation established, taking all factors into account; size of the region, Average Payment Period (in Days), Accounts receivable turnover, and Average collection period) financial performance of KEWASCO, measured by ROE was 0.752 (75.2%).This study recommended that the organization should increase average collection period, inventory period, accounts receivable turnover and debt levels in order to improve their financial performance.
Adoption of E-Procurement and Financial Performance of Ministry of Education, Science and Technology, Kenya
(International Academic Journals, 2018) Samoei, Abraham Kiprop; Ndede, Fredrick
The core and critical challenge mostly experienced by MOEST include application of effective supply chain management procedures and practices as well as poor information and communication technology integration among others. MOEST is operating in emerging markets that have multibusinesses linked through supply chain management practices cross-subsidization and are therefore generally viewed as having a complex supply chain management system. The concept of finance considerably contributes to the performance of public institutions. In the current dynamic business environment, organizations require reliable and fast information so as to improve their decision making regarding adapting in an effort to improve organizational performance. The general objective of this study was to determine how e-procurement adoption affects the financial performance of Ministry of Education, Science and Technology, Kenya. The specific objectives were to find out the effect of etendering, e-sourcing, e-ordering and einforming on financial performance of Ministry of Education, Science and Technology, Kenya. Descriptive research design was used. The population of the study was employees in the Ministry of Education, Science and Technology. The study used census method, implying that all the individuals in the target population were used. The study’s sample size was 40 staff working in information technology, accounts, procurement and finance departments. Primary data was collected from respondents via questionnaires. Descriptive statistics included percentages, frequencies, mean and standard deviation. Inferential statistics made use of multiple regression analysis. Statistical analysis of the data gathered revealed that e-tendering, e-sourcing, e-ordering and e-informing have a statistically significant effect on financial performance. The study found that e-tendering has a significant effect on the financial performance in the Ministry of Education, Science and Technology (r=0.788, p-value=0.006). In addition, Esourcing had a significant effect on the financial performance in the Ministry of Education, Science and Technology (r=0.611, p-value=0.016). Further, eordering had a significant effect on financial performance in the Ministry of Education, Science and Technology (r=0.578, p-value-0.021). Also, einforming had a significant effect with financial performance in the Ministry of Education, Science and Technology (r=0.852, p-value=0.000). The study recommends that MOEST should ensure that procurement policies and regulations are adhered to so as to be ethical in the tendering process. MOEST should enhance their e-sourcing activities so as to gain control over their tender processes and an audit path for compliance purpose and to support collaboration and allow various stakeholders to easily work together. MOEST should practice eordering in order to improve employee productivity, receive accurate orders, create a better experience for customers. Since e-informing has a positive influence on financial performance, the study recommends that it is important for MOEST to obtain the information of the suppliers on their previous clients as well as their experiences. It is also important to consult references for product/service quality, electronically, so as to improve the financial performance of MOEST
Adoption of Financial Innovations by Tier One Commercial Banks and Financial Deepening in Kenya
(Strategic Journals, 2021-06-19) Winga, E.; Ndede, F.
It is envisaged that by 2030 Kenya will realize the three pillars of success that is social, economic and political development. These pillars are not likely to be achieved if the country adopts same way of doing things, thus innovations in all sector is vital. Innovation accelerates growth in all the three pillars and more so economy. Although bank innovations are of convincing importance when checked in terms of financial performance, the effect created by the innovation on financial deepening is still not clear. The general objective of the study was to establish the effect of the adoption of financial innovations by tier one commercial banks and financial deepening in Kenya. Specifically, the study sought to establish mobile, agency, automated teller machine and internet banking on financial deepening in Kenya. The study was based on diffusion theory of innovation and theory of financial deepening. The study adopted correlation research design. In the current study the target population composed of 6 banks in tier one. Census approach was used to select 6 tier one commercial banks from 2010 to 2018. Data was analysed using descriptive statistics, correlation analysis and multiple regression analysis with the aid of STATA 12. The regression coefficients were tested for significance using tstatistics at 5% confidence level. Diagnostic tests that conducted include auto correlation, multicollinearity, heteroscedasticity, fixed and random effects and normality. The study findings found that commercial banks in tier one had an average financial deepening of 16.61. Regression analysis revealed that mobile banking, agency banking, automatic teller banking and internet banking have positive and significant effect on financial deepening of tier one commercial banks in Kenya. There is need to take advantage of agency banking services especially in regions which have low mobile phone penetration and adopt agency banking services owing to proximity to banking agents. Data security should be provided to enhance authorization procedure when using automatic teller machines banking services.
Adoption of International Public Sector Accounting Standards and Quality of Financial Reporting in National Government Agricultural Sector Entities, Kenya
(International journal of Innovative Science and Research Technology, 2024) Kabachia, Wanyoike Samuel; Warui, W. Fredrick
The general objective of this study was to determine the effect of the adoption of International Public Sector Accounting Standards on the quality of financial reporting in national government agricultural sector entities in Kenya. The study was guided by the following specific objectives: to assess the effect of adopting a standardized chart of accounts on the quality of financial reporting in national government agricultural sector entities in Kenya; to assess the effect of disclosure and valuation of assets and liabilities on the quality of financial reporting in national government agricultural sector entities in Kenya; to evaluate the effect of accounting policies, estimates, and errors on the quality of financial reporting in national government agricultural sector entities in Kenya; and to determine the effect of corporate governance reporting on the quality of financial reporting in national government agricultural sector entities in Kenya. The study adopted a cross-sectional survey research design. The target population consisted of 11 national government agricultural sector entities, which served as the unit of analysis. Within these entities, the unit of observation included finance managers, accountants, financial analysts, and internal auditors. Purposive sampling was employed to deliberately select 44 respondents. Four, representing 10% of the study sample, participated in a pilot test. Primary data was obtained utilizing a semi structured questionnaire. The Statistical Package for Social Sciences (SPSS) version 25 software was used to analyze the data. Qualitative data was analyzed using content analysis and presented in prose form. Descriptive and inferential analysis techniques were employed for qualitative data analysis. Descriptive statistics such as frequency, percentages, and means were used. Pearson correlation coefficient was used for testing the strength and direction between the independent and the dependent variables. A multiple regression model was used to test the significance of the influence of the independent variables on the dependent variable. The findings were presented in Tables and figures. The regression analysis revealed significant positive relationships between adopting a standardized chart of accounts, disclosure and valuation of assets and liabilities, accounting policies, estimates, and errors, as well as corporate governance reporting, and the quality of financial reporting, with beta coefficients of 0.324, 0.235, 0.347, and 0.481, respectively. To enhance financial reporting quality in national government agricultural sector entities, recommendations entail implementing robust standardized chart of accounts, improving transparency in disclosing asset and liability information, establishing clear accounting policies and error management practices, and strengthening corporate governance reporting mechanisms.
Adoption of turnover tax in Kenya: a snapshot of small and medium enterprises in Gikomba market, Nairobi Kenya
(IJSSE - International Journal of Social Sciences and Entrepreneurship, 2014) Kimaru, Thairu; Jagongo, A. O.
Turnover tax was introduced in Kenya in 2007 to enhance revenue collection, improve tax administration and reduce compliance and collection costs. On turnover tax recruitment, the performance has on average been below 50% with 2,890 SMEs registering for turnover tax against a target of 6,928 between 2009 and 2010. Despite the benefits accrued from the use of turnover tax and the low adoption, very few studies have been done on the same. This leaves a wide knowledge gap which this study seeks to fill-in. This study sought to establish the factors affecting the adoption of turnover tax in Kenya. Specific objectives were to establish whether tax administration practices, turnover tax training and tax environment policy influence the adoption of turnover tax by SMEs in Gikomba Market in Nairobi, Kenya. The target population of the study was 1405 SMEs at Gikomba market. Stratified random sampling technique was used to identify the respondents. Results revealed that most Gikomba traders did not understand the administration and actually saw the tax computation as very tedious and complicated. Tax amount were not collected in a timely manner and that enforcement powers of the staff was applied injudiciously. The study concluded that Kenya .Revenue .Authority need to fully utilize the established channels to educate the traders on importance of proper accounting systems and tax compliance. Simplifying registration of businesses would enable majority of the small enterprise operators to comply with tax payment making it easy for adoption of turnover tax.
Affordable Housing Programme in Kenya: Policy Guidelines and Milestones
(IISTE, 2021-03-31) Omagwa, Job
The paper presents an overview of policy interventions and milestones by the Government of Kenya with regards to the Affordable Housing programme targeting civil servants, members of the Kenya Police Service and Kenyan Citizens. The programme was initiated by the Government to supply 500,000 homes over a period of 5 years in line with the Government’s Big Four Agenda, Kenya Vision 2030 and Kenya Constitution 2010. The paper presents a Financing Framework through which Citizens could eventually buy or rent a home cheaply. A highlight of the housing gap in Kenya is presented as well as the residential housing affordability challenges faced by most Kenyan Citizens. The paper highlights the eligibility criteria for affordable housing (through the Bomayangu online platform), the financing framework (for raising capital to buy a home) as well as partnerships between the Government of Kenya and other external stakeholders such as governments and private companies. Through the State Department of Housing and Urban Development, the Kenya Government has initiated several affordable housing projects in Nairobi and Kisumu Cities as well as Embu and Machakos Towns. In addition, slum upgrading programmes are on course in Kibera slums, Nairobi as well as other parts of Kenya. Lastly, the paper highlights the contribution to various stakeholders as well as housing finance theory where limited literature exists on such government initiated programmes.
Alternative Banking Channels and Performance of Commercial Banks in Nairobi City County, Kenya.
(International Academic Journals, 2020) Motondi, Felix Omweri; Bula, Hannah
Commercial banks have employed alternative banking channels to reach out to more clients and lower operational costs. However, these channels have encountered a variety of challenges raising questions on the influence they have on performance. Persistent system downtimes, network failures, transaction errors, security concerns and lack of customer confidence have driven customers into seeking services in bank branches resulting to congested banking halls. The objective of this study therefore was to assess the influence of alternative banking channels on the performance of commercial banks in Nairobi City County, Kenya. The specific objectives of the study were to examine the influence of agency, mobile, internet and ATM banking on performance of commercial banks in Nairobi City County, Kenya. The theories that guided the study were; Bank Led Theory, Innovation diffusion theory, Agency theory, financial intermediation theory and the Resource based theory on performance. This study used descriptive survey research design. 188 respondents from all commercial banks operating in Nairobi City County was the target population of this study out of which a sample size of 94 respondents was selected through simple random sampling. Primary data was collected using a questionnaire. The supervisor helped ascertain validity of the instruments, whereas piloting was conducted to improve on instruments reliability. Quantitative data collected was classified, analyzed and coded. The expected parameters were calculated using the SPSS program as the main statistical tool. Descriptive statistics presented using charts, graphs and frequency percentages were used in measuring the central tendencies such as mean and standard deviation and reporting the data collected from the findings. Qualitative primary data was analyzed via thematic analysis. Apart from the inferential statistics like regression analysis, other forms of analysis such as ANOVA and correlation were used to determine the relationship between the study variables. The study found out that agency, mobile, internet and ATM banking have a positive influence on performance of commercial banks in Nairobi City county, Kenya. The study concluded that; agency banking investments and incomes favorably effect overall performance of banks. Mobile banking alerts assist customers to make informed choices benefitting banks on decreased cost of service delivery and enhanced consumer convenience. The payback duration of internet bank investments is lower than ten years and incomes gained favorably affect bank’s performance. The use of ATMs has replaced labor intensive and paper-based banking methods leading to quicker access to services, convenience. This study recommended that Commercial banks continue offering alternative banking channels for improved efficiency and increased accessibility. The commercial banks need to review and have a variety of products and services available across the alternative banking channels to mirror those offered at branches. The study recommended that Commercial Banks should review the pricing models adopted to enable customers’ access products and service on alternative banking channels affordably. In addition, more security features be adopted to ensure that the system is up to date with most current technology to avoid loss of funds for clients through illegal system accesses.
Analysis of Credit Terms and Loans Performance among Deposit-Taking SACCOS in Nairobi City County, Kenya
(EdinBurg, 2024-02) Nyabwari, Jared Okumu; Kimutai, Caroline
Deposit-taking SACCOs in Kenya have consistently recorded an increasing rate of loans that are not honored as and when they become payable throughout the years. According to SASRA 2021 Sacco supervision report, the NPL in the DT-SACCOs was 5.23% in 2016, 6.14% in 2017, 6.30% in 2018, 6.15% in 2019, 8.39% in 2020, and 8.86% in the years 2021. This persistent increase in NPL among the DT-SACCOs is worrying, and the cause has not been established conclusively. This study sought to analyze how credit terms aspect of CMP affects loan performance in DT-SACCOs within the City County of Nairobi. A descriptive research approach was adopted in this research and the target population included 47 DT-SACCOS. A census approach was used and the 47 credit managers were the targeted responders. Descriptive and inferential statistics were employed to analyze the data collected. The findings revealed that credit terms had a negative and significant effect on loan performance. The study concluded that credit terms reduce loan performance among deposit-taking SACCOs. The research recommends that SACCO’s management should have well-stipulated credit terms that are understandable to the borrowers. The management should have flexible loan repayment periods to help them reduce the NPLs.
Analysis of the effect of Financial Leverage on Loan Repayment among Small and Medium Sized Enterprises in Kenya
(International Journal of Science and Research, 2020-06) Ouma, Oketch Samson Oduor; Musau, Salome
This study sought to analyze the effect of financial leverage on loan repayment among Small and Medium Sized enterprises in Kenya. The study was guided by the following specific objectives; to determine the effect of SMEs debt to equity ratio, interest coverage, capital allocation and debt ratio on loan repayment among small and medium sized enterprises Kakamega County, Kenya. The study was anchored on the pecking order theory. The study used a census survey. The study collected primary data using structured questionnaires. The collected data was analyzed using both descriptive and inferential statistics. The study concluded that financial leverage significantly and positively influenced loan repayment among the medium sized enterprises. The study further concluded that to a significant extent the firms had optimum loan compared to total equity to enable loan repayment, are able to repay their loans with the current total debt and total equity ratio and manage their ratio. The study concluded that to a significant extent interest coverage influenced loan repayment among the enterprises since it was affordable allowing them to improve their earnings, borrow more and promptly repay the loans. It was concluded that the firms to a significant extent embrace diligent capital allocation to profitable assets, long-term debts and having an investment policy which increased their returns, net profit margin and ability to service debts. Further it was concluded that the firms have maintained a positive ratio between current assets and current liabilities which has improved their debt repayment and reduced the liabilities. It was recommended that the firms need to maintain a positive debt to equity ratio which will enhance their solvency and there is need to allocate more of their capital in acquisition of assets and also reduce their current liabilities all aimed at improve their liquidity and ability to repay debts
Analysis of the Influence of Firm’s Growth on the Financing Structure among Youth-owned Small and Medium Size Enterprises in Kiambu County, Kenya
(International Journal of Economics, Business and Management Research, 2023) Otieno, Vincent Ochieng; Njoka, Charity
Small and Medium Enterprises (SMEs) play a vital role in the economic landscape, with their financial stability being crucial for their survival and growth. The availability of capital, especially during phases of product and process innovation, is a pivotal factor that determines the trajectory of SMEs. Kiambu County in Kenya has emerged as a region witnessing notable growth in SMEs, particularly among young entrepreneurs who own a substantial number of these enterprises. This study aims to investigate the impact of firm growth on the financing structure of youth-owned SMEs in Kiambu County, Kenya, drawing upon the trade-off theory as its theoretical framework. Employing both explanatory and cross-sectional research designs, this study adopted linear regression analysis to explore the relationships between key variables. The findings reveal that most SMEs in the region exhibit high levels of product and service development, indicating growth in their ability to provide unique offerings. However, when it comes to ICT and financial innovation, the majority of these SMEs lag behind. Moreover, the study indicates a significant increase in the overall employee count, suggesting overall growth within these enterprises.
Analysis of the Utilization of Agency Banking on the Performance of Kenyan Banks
(Scientific & Academic Publishing, 2015) Musau, S. M.; Jagongo, A. O.
The objective of the study was to assess the utilization of agency banking on the performance of Kenyan banks. Descriptive research design was used in this study. The target population from which the sample was drawn is commercial banks within Nairobi region. A census was done to include all the banks which have successfully rolled out agency banking. Both primary and secondary data was used in the study. Data collected was validated, edited and coded then analysed using descriptive statistics with the aid of statistical package for social sciences (spss). Data presentation methods used were tables, charts and diagrams. The study established that liquidity availability, agency regulation, agency infrastructure cost and security was a major influence to banks performance. Some of the recommendations that the study made were that banks should give more attention to security and find better ways of vetting their agents. The agents should be more financially included to handle many transactions.
Analyzing the Effect of Liquidity on Financial Stability: Evidence from Kenyan Deposit-Taking Savings and Credit Cooperative Societies
(Stratford Peer Reviewed Journals and Book Publishing, 2024-05-15) Birisi, Hesborn Birisi; Omagwa, Job; Musau, Salome
Non-performing loans have been on the rise among DT SACCOs in Kenya over the past five years as evidenced by the increase in percentage of NPLs to gross loans in SACCO regulatory authority report of 2020. Consequently, if this trend is allowed to continue then this sector’s contribution to financial intermediation through provision of financial services will be negatively affected. In view of the above this study sought to investigate the effect of firm characteristics and financial stability of deposit taking savings and credit cooperative societies in Kenya. In view of the above this study sought to assess the effect of liquidity on financial stability of deposit taking savings and credit and cooperative societies in Kenya. The study was anchored on agency theory. Positivist research philosophy was adopted in this study. The study adopted explanatory research design. The target population for the study comprised 160 DT SACCOs which were fully operational in the period. A census approach was used for the study. This study utilized quantitative secondary data which was obtained from the society’s financial statements and supervision reports from the savings and credit cooperatives regulatory authority. The study utilized annual panel data for the period of 2017 to 2021. Multicollinearity test, normality tests, autocorrelation test, homoscedasticity, stationarity test and model specification test were carried out prior to panel data analysis. Data was analyzed using descriptive statistics, Pearson’s correlation analysis and panel regression analysis. STATA software was used for the analysis. The findings showed that liquidity had a strong, positive effect on NPLs ratio (β = 0.410056, p=0.003 <0.05). In view of the findings, the study recommends that DT SACCOs with high liquidity levels should consider implementing rigorous lending practices to ensure that loans are extended to creditworthy borrowers. Additionally, effective credit risk assessment and continuous monitoring of borrower repayment behavior are essential to minimize NPLs. DT SACCOs should focus on improving management efficiency by implementing cost-effective operational processes.
Analyzing the Relationship between Interest Rate and External Reserves in Nigeria: a Cointegration Approach
(The USA Journals, 2023) Njoroge, Machupa
Nigeria's economy is heavily reliant on the oil industry, making external reserves and interest rates crucial indicators of economic stability and development. This paper examines the long-term relationship between interest rates and external reserves in Nigeria using cointegration analysis. The study finds a significant long-term relationship between the two variables and suggests that external reserves have a causal relationship with interest rates, indicating that external reserves are a crucial determinant of interest rates in Nigeria. The findings have important implications for policymakers in Nigeria, highlighting the importance of maintaining a stable external reserve to ensure economic stability and growth.
The Announcement Effect of Capital Gains Tax on Foreign Portfolio Investment for Firms Listed at the Nairobi Securities Exchange, Kenya
(Open Access Publishing Group, 2018) Mathyela, Antony Munanda; Karimi, Thuo Anthony; Kinyua, Wachira Alexander
Foreign investment is important for growth of any country since it enables flow of capital, resources and skills from one country to another. Foreign portfolio investment enables investors to invest in securities in a foreign country and this has various benefits to the host country. The government of Kenya re-introduced capital gains taxes in 2015 after a 30 year suspension in a bid to increase tax revenue to finance various projects. This tax was to be charged at a rate of 5 percent of the net capital gain. The reintroduction of the capital gains tax (CGT) had an effect on the foreign portfolio investment as some of the foreigners opted for other markets and form of investments. Eight months prior to reintroduction of CGT the average foreign portfolio investment was 53.08% of the overall Equity Market at the Nairobi Securities Exchange market. One month to the effective date of the CGT, the level of foreign portfolio investment dropped to 32.37% giving a percentage drop of 20.71% from the average participation. The changes in the percentage of foreign investors may or may not have been significant, based on the abnormality of the changes. The study used a longitudinal descriptive research design which looked at the percentage changes in foreign portfolio investment at the NSE as a result of the announcement of the capital gains tax reintroduction. The study used secondary data from the Nairobi Securities Exchange to answer the research question. The foreign shareholding was collected as at the end of each 6 months, before and after the announcement month. Another set of data was collected for 6 months before announcement of the tax suspension and 6 months after the suspension. This data was analysed using events study, where abnormal foreign shareholding changes were calculated and assessed to determine whether it was significant. This was done using SPSS v.21 software. From the analysis, the study findings indicated that capital gains tax had a significant effect on foreign portfolio investment with decrease in foreign participation in the announcement month. With the findings, the study recommended that the government should come up with favourable tax policies to attract foreign investors and also to involve all stakeholders.
Assessment of Financial Stability among Commercial Banks in Kenya: An Evidence of Fragility Index Measure
(Global Press Hub., 2022-03) Wafula, Nathan Wamalwa; Mungai, John; Makori, Daniel
Fluctuations rate of the fragility index were characterized by the increasing rates of non-performing loans in commercial banks, bank runs among the commercial banks and increase in foreign liabilities from commercial banks in Kenya. The study was carried out between years 2011 to 2018. Evidently, there was a sharp increase and fluctuation in the fragility index from the end of 2014 and the beginning of 2015 to 2018; it was within this period that Dubai Bank, Chase Bank and Imperial Bank were put under receivership. Fragility index in this study has emerged to be a robust measure of early warning signal to financial stability of commercial banks in Kenya. The study recommends that going forward, fragile commercial banks should divest a way towards merging to ensure they are financially stable.
Asset Quality and Efficiency of Deposit Taking Savings and Credit Cooperative Societies in Kenya
(2019-11) Kimutai, Carolyne Jebiwott; Jagongo, Ambrose; Omagwa, Job
The deposits taking Savings and Credit Cooperative Societies have continued to play a critical role in Kenya’s financial sector in terms of access, savings mobilization and wealth creation. Given the importance of the sector in economic growth, there has been considerable interest in their efficiency. In Kenya, DTS have been reported to have low efficiency, with the average efficiency being less than one. There is limited empirical literature to explain the inefficiency of DTS. In view of this, the study sought to establish the effect of asset quality on efficiency. The study was anchored on Asymmetric Information Theory. The study adopted positivist philosophy and explanatory research design. The target population comprised 110 DTS as at 2017.The study used secondary data that was collected from the audited financial statements for the period 2012-2016.Data was collected using a document review guide. Data Envelopment Analysis methodology was used to generate efficiency scores. Both descriptive analysis and inferential statistics which included panel Tobit regression was done and was aided by stata version 11. Descriptive analysis indicates that the mean of asset quality is above the required maximum by the regulator. In addition, asset quality had a statistically significant effect on efficiency. The study concluded that: increase in non-performing loans reduces efficiency. The study recommends that DTS Societies should develop credit administration strategies that reduce the amount of non-performing loans; a policy for credit information sharing to make it compulsory for Deposit Taking Savings and credit Cooperative Societies to share credit information.
Asset Quality and Financial Performance of Commercial Banks in Kenya
(International Journal Corner, 2019) Wambugu, James Wairegi; Mungai, John Njangiru
There has been a tremendous increase in non-performing loan in the recent past as a result of poor loan quality and poor management of demand deposits in the recent past resulting to closure of various banks in Kenya. These has resulted to the decline in banks overall decline in return on equity. The study’s aim was to determine effects of asset quality on financial performance of the commercial banks. The study target population was 43 commercial banks. The study adopted a census sampling design where causal research design was used. The study made use of secondary data and regression model was utilized. Statistical package SPSS was used for data analysis. Complete secondary data for the period 2013 to 2017 from 34 commercial banks was analyzed and presented in tables. This represented 79 per cent of the target population. The findings presented that there was a low variation in asset quality ratio amongst the commercial banks. The results showed that the average ROE for period 2013 to 2017 had huge significant dispersion amongst the selected commercial banks in Kenya. The study found that the average performance of the commercial banks for the year 2013 to 2017 as indicated by ROE was on the decline. The study concluded asset quality significantly explains the changes in the financial performance of commercial banks in Kenya.

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