RP-Accounting and Finance Department

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Loan Management Strategies and Asset Quality Performance in Deposit Taking Savings and Credit Co-Operative Societies in Murang’a County, Kenya
(Kenyatta University, 2025-04) Mwaura, Samuel Njoroge
The SACCO Supervision Report (2021) showed a positive growth in DT SACCOs’ total assets and loans. However, the rise in the NPLs to Gross Loans ratio from 2020 to 2024 raised concerns about declining asset quality. This study aimed to explore the effect of loan management strategies on asset quality within Deposit-Taking SACCOs (DT-SACCOs) in Murang’a County, an area that has not been extensively explored. The research sought to elucidate the ways in which loan management strategies affect asset quality, using the ratio of Non-Performing Loans (NPLs) as a key metric. It examined the effects of loan monitoring, credit risk management, loan rationing and loan refinancing on asset quality. An explanatory research design underpinned the study, which drew from Financial Intermediation, Loanable Funds, Information Asymmetry, and Agency theories. The study encompassed 56 branches of four DT-SACCOs in Murang’a County, gathering secondary data from financial reports provided by SASRA, alongside primary data collected from 48 branches through questionnaires distributed to randomly selected loan officers. For data analysis, a multiple regression model was employed. The findings reveal that credit risk management has a significant positive impact on the asset quality of DT-SACCOs, with a statistically significant p-value of 0.004 and a strong correlation (r = 0.642) with asset quality performance. Loan monitoring is also important, showing a regression coefficient of 0.296 and a p-value of 0.003, indicating a statistically significant relationship and a strong correlation (r = 0.635) with asset quality. The role of loan refinancing in asset quality is highlighted, with a coefficient of 0.284 and a p-value of 0.005; however, its correlation with asset quality (r = 0.546) suggests it is less effective compared to credit risk management and monitoring. Lastly, loan rationing is noted as a significant factor, with a regression coefficient of 0.272 and a p-value of 0.001, although its correlation (r = 0.518) is weaker than the other strategies. The research concluded that loan management strategies (credit risk management, loan monitoring, loan refinancing and loan rationing) affect the asset quality, highlighting that effective loan management practices positively influence the asset quality of DT-SACCOs. The research recommends that policymakers should mandate that DT-SACCOs adopt comprehensive risk assessment tools and regularly update them to reflect the latest market conditions and borrower behaviors. Regulatory bodies should also consider providing training programs and resources to help DT-SACCOs develop advanced risk management capabilities. The deposit taking SACCOs should invest in advanced loan monitoring systems that allow for real-time tracking of loan repayments and borrower behavior. These systems should flag potential issues early, enabling proactive interventions to prevent loan defaults. Policymakers should establish guidelines that require regular loan reviews and audits, ensuring transparency and accountability in loan management processes.
Impact of Infrastructure Bond Interest Rates on the Performance of Road Projects within the Nairobi Metropolitan Area
(The International Journal of Business & Management, 2025-05-19) Aoko, Roselyn Anyango; Ndede, Fredrick W.S.; Njaramba, Jennifer G.
Infrastructure projects in Kenya frequently encounter challenges related to timely completion and adherence to budgets. This research aims to determine the impact of infrastructure bond interest rates on the performance of road projects within the Nairobi Metropolitan Area. The research employed a longitudinal research design to effectively address its objectives. The study population encompassed all 61 road construction projects conducted between 2014 and 2022. A comprehensive survey of these road projects was carried out. Secondary data for the years 2014 to 2022 were gathered from a variety of sources, including the Central Bank of Kenya, National Treasury, Ministry of Transport, Infrastructure, Housing, Urban Development, and Public Works, as well as the Kenya Urban Roads Authority. Data was analyzed using descriptive statistics and inferential statistics aided by STATA ver.14.0. The hypothesized relationships were tested using panel regression. The findings revealed that increasing infrastructure bond interest rates negatively affect the completion of road infrastructure, with a statistically significant inverse relationship between bond interest rates and kilometers of roads completed. To improve road infrastructure completion, the government should consider stabilizing or reducing infrastructure bond interest rates through policies including subsidies, government-backed guarantees, or interest rate caps.
Internal Equity and Financial Performance of Kenya Tea Development Agency Processing Factories in Nyeri County, Kenya
(International Academic Journal of Economics and Finance, 2025-07) Gichuki, Shelmith Wanjira; Farida Abdul
The tea industry globally has faced a significant market decline, with the exception of China, where the sector showed resilience. The Kenyan tea industry, in particular, has experienced mixed financial results, often demonstrating a declining trend in performance. This decline is evident when examining the financial performance of tea factories in Kenya, as reflected in profitability metrics such as dividend payout ratios. For instance, the Kenya Tea Development Authority (KTDA)-managed tea factories posted declining dividend payout ratios: 14% in 2020, 12% in 2021, 10.5% in 2022, and 11% in 2023. These figures suggest challenges in maintaining profitability, which are compounded by factors such as fluctuating market prices, cost pressures, and financing choices made by the factories. Financing decisions are critical in determining the success of any business, particularly in capital-intensive industries like tea production. Prudent financing decisions have the potential to optimize the utilization of funds while minimizing associated risks, thereby contributing to improved financial performance. A key element of these financing decisions is the capital structure, which includes a combination of debt and equity financing. For tea factories, a wellbalanced capital structure could mean the difference between maintaining liquidity, achieving profitability, and sustaining growth. The specific objective of this study is to examine the effect of internal equity— primarily retained earnings—on the financial performance of KTDA-managed tea factories in Nyeri County, Kenya. Internal equity, as a financing source, allows firms to reinvest profits back into the business without increasing debt obligations, potentially offering greater financial stability. This study focuses on internal equity’s relationship with financial performance, measured through the dividend payout ratio, which serves as an important indicator of profitability. By analyzing the capital structure’s role, the research aims to offer insights into how the use of retained earnings can influence the financial health of tea factories, especially in an environment marked by economic challenges and market volatility. The findings from this study could help inform better financial strategies and decisions within the Kenyan tea industry.
Capital Structure and Financial Performance of Non-Financial Companies Listed at the Nairobi Securities Exchange, Kenya
(Kenyatta University, 2024-03) Kosgei, Mercy Chepleting
Most firms, face a major challenge on identifying the utmost and suitable capital structure which can optimally and directly propel financial performance, whether for firms domiciled in the emerging or developed economies. Past literature has not yet provided a universally agreed upon capital mix which straight away explains the variances in most firm profitability levels. The study aimed at investigating the influence of capital structure and non-financial companies’ financial performance which were listed at the Nairobi securities exchange. The specific objectives were namely; to establish the influence of debt on the financial performance of non-financial companies listed at the Nairobi securities exchange, Kenya; to evaluate the influence of retained earnings on the financial performance of non-financial companies listed at the Nairobi securities exchange and to establish the influence of paid-up share capital on the financial performance of non-financial companies listed at the Nairobi securities exchange. Modigliani and Miller theory, Agency Theory, Trade-off theory of capital mix and Pecking order theory are the supposition underpinning this inquiry. To establish the research problem, the study utilized causal research design. The study considered 41 non-financial companies which were members of Nairobi securities exchange, Kenya as sample size out of a population of 46 such firms. Balanced data was incorporated for analysis purposes. Audited end of year statements was utilized to access the data needed. The data covered the period between 2018 up to 2022. The study considered both descriptive and inferential data analysis methodology which entails correlation and multivariate models to establish the final results. The research outcome was outlined in form of tables, graphs as well as figures. The study incorporated ethical consideration by including both permission letter from Kenyatta, University graduate school and NACOSTI to ensure all parties rights were adhered to. Research findings portrayed that debt as a source of financing had a negative and statistically significant influence on earnings per share of non-financial companies listed at the Nairobi securities exchange, Kenya. Retained earnings portrayed direct and statistically significant influence on earnings per share of non-financial companies listed at the Nairobi securities exchange, Kenya and finally, paid up share capital demonstrated a positive and statistically significant influence on earnings per share of non-financial companies listed at the Nairobi securities exchange, Kenya. To the top management of non-financial companies, the theoretical viewpoint of debt, retained earnings and paid-up share capital on financial performance is a reliable base for the indirect connection of long-term debt will guide them to establish policies which will ensure that funding of firm projects should not exceed the optimal debt capital structure. CMA management will be in a position to develop policy guidelines to encourage the new and existing firms to fund project projects by focusing on the cheap sources which arise due to advantages such as benefits of tax deduction allowances The academicians are beneficiaries of the study outcome for the methodological gap on how to measure the debt, retained earnings, paid up share capital and earning per share using diluted EPS of non-financial organizations has been placed in a new debatable frontier.
Carbon Financing and Profitability of Renewable Energy Firms Registered Under the Energy and Petroleum Regulatory Authority, Kenya
(International Academic Journal of Economics and Finance, 2025-06) Wainaina, Kareithi Samuel; Aluoch, Moses Odhiambo; Kimutai, Caroline
Erratic profitability for renewable energy firms has pushed them to looking for additional sources of funding and carbon financing has emerged as a critical source which also contributes to achieving sustainable growth. By allowing businesses to generate revenue through the sale of carbon credits, carbon financing offers a powerful incentive for investing in cleaner technologies and processes. This financial mechanism not only supports companies in meeting regulatory climate commitments but also opens new revenue streams, increasing profitability and enhancing their financial resilience. Despite Kenya’s rich potential, high capital costs, inconsistent regulations, limited financing, and operational inefficiencies hinder firms’ financial sustainability. Additional issues like grid connectivity, market competition, and currency fluctuations further complicate their profitability. The study’s principal aim was to establish a link between carbon financing and profitability of renewable firms registered under Kenya’s Energy and Petroleum Regulatory Authority. More precisely, the study examined key carbon financing variables that include carbon credits, project initial cost, credit issuance and transactional costs, tax incentives and their effect on profitability. The study was based on and supported by the resource-based view theory, market-based theory and agency theory. The study employed a descriptive survey design and adopted a positivist research philosophy. The research design relied on primary data collected using a structured questionnaire that relates to carbon financing. The target population was fifty (50) renewable energy companies registered under Energy and Petroleum Regulatory Authority, and a population approach was used. Both descriptive and inferential statistics was used for data analysis with the help of Scientific Package Social Sciences (SPSS). Descriptive statistics including mean and standard deviation. A multiple regression model was performed to estimate the relationship between carbon financing and profitability. The results were presented on frequency tables, charts, and graphs. The results revealed that carbon credit, tax incentives, credit issuance and transactional costs and projects costs have significant effect on the profitability of renewable energy firms registered under the Energy and Petroleum Regulatory Authority. Further, firm size does have a significant moderating effect on the relationship between carbon financing and profitability of renewable energy firms registered under the Energy and Petroleum Regulatory Authority. Therefore, all the five hypotheses were not supported and the study concluded that carbon financing has significant effect on profitability of renewable energy firms registered under the Energy and Petroleum Regulatory Authority and this effect is strengthened by firm size. The study recommended that management should consider diversifying the types of carbon credit projects in which the firm engages. Expanding into various carbon credit initiatives, such as forest preservation and renewable energy projects, can help mitigate risks associated with fluctuations in carbon credit prices and market demand. The government should continue to support the development and growth of carbon credit markets, both locally and internationally. Policies should focus on creating a stable and transparent regulatory framework that encourages both local and foreign investments in carbon credit projects.
Anti-Money Laundering Training and Profitability of Commercial Banks in Kenya
(Journal of Finance and Accounting, 2025-06) Terer, Obed Kipkirui; Mwangi, Lucy Wamugo
The commercial banks'profitability has experienced fluctuations over the past decade. The study sought to determine the effect of anti-money laundering training on the profitability of commercial banks in Kenya.The research employed an explanatory research design.The targeted population comprised 35regulated commercial banks as at December 31, 2021. The study period was eight (8) years (2014 to 2021). Respondents were chosen through purposive sampling. Primary data was gathered using structured questionnaires, while secondary data was derived from the annual banking supervision report from the Central Bank of Kenya. Data was analyzed using descriptive statistics and regression analysis.The findings revealed that anti-money laundering (AML) training had a positive and significant effect on the profitability of commercial banks (β = 0.222, p-value = 0.005 < 0.05). The study concludes that employing and retaining employees with adequate anti-money laundering skills improves the proactiveness of banks in identifying and preventing potential money laundering activities. Commercial banks should institutionalize structured AML training programs by implementing both on-the-job and off-the-job together with assessments to validate employee understanding and competency
Internal Control Constraints and Performance of Revenue Collection in Marsabit County
(Global Press Hub, 2025-06-11) Molu, Saadia Wario; Jagongo, Ambrose
Marsabit County from 2018 to 2023, experienced a consistent decline in tax revenue, despite having a legislative and institutional framework for revenue management. This trend raised concerns about the county government's ability to meet its goals. The study aimed to assess how weaknesses in internal oversight influenced tax revenue generation, focusing on the impact of internal control automation, risk assessment, communication, knowledge, and monitoring technologies. The research was grounded in agency theory, stakeholder theory, resource-based view (RBV) theory, and the technology acceptance model. A descriptive research design was adopted, targeting 80 employees from the Finance, Health, Tourism & Trade, and Lands departments of Marsabit County Government. Using a stratified sampling method, 67 individuals were selected as the study sample. The study collected data from both primary and secondary sources. Semi-structured questionnaires were used to gather primary data, while a secondary data collection template was used for secondary information. Quantitative data was analyzed using SPSS version 20. This investigation sought to provide insights into how internal control limitations affected revenue collection efficiency, ultimately offering recommendations for improved fiscal performance in the county.
Effect of Cash Reconciliations on Financial Performance of Kenya Power, Central Rift Region, Kenya
(The International Journal of Business Management and Technology, 2025-05) Njihia, Jeffrey Njoroge; Makori, Daniel
This study examined the effect of cash reconciliations, as a critical component of internal control systems, on the financial performance of Kenya Power in the Central Rift Region, Kenya. A quantitative research design was employed, targeting 155 finance division staff across eight sub-regions, with a sample of 62 respondents selected using proportional stratified sampling. Data were collected through structured questionnaires, assessing cash reconciliation practices on a five-point Likert scale, and secondary data on financial performance (Return on Assets) from Kenya Power’s financial statements (2018–2022). Descriptive statistics revealed strong employee confidence in cash reconciliation practices, including regular petty cash reconciliations, frequent surprise checks, bank reconciliations, independent verification, and high-quality record-keeping. Inferential statistics, including Pearson correlation and regression analyses, confirmed a significant positive relationship between cash reconciliations and financial performance. However, financial performance exhibited volatility over the study period, suggesting that while cash reconciliations are impactful, other factors also influence outcomes. The study concludes that effective cash reconciliations enhance financial accountability and transparency, though broader strategies are needed for sustained stability. Recommendations include adopting automated reconciliation systems, enhancing staff training, increasing bank reconciliation frequency, implementing robust monitoring, and integrating digital payment systems to strengthen financial controls and support long-term performance. These findings provide actionable insights for Kenya Power to optimize its internal control systems and financial outcomes in the Central Rift Region.
Internal Control Systems and Financial Performance of Private Security Firms in Nairobi City County, Kenya
(International Academic Journal of Economics and Finance (IAJEF), 2025-05) Kisaingu, Francis Munyao; Njoka, Charity
Effective internal control systems are vital for protecting organizational assets, ensuring adherence to regulations, and enhancing overall operational performance, all of which contribute to strong financial outcomes. Huge cash losses have been recorded throughout the years, putting private security companies involved in cash transportation in the headlines. Theft of cash in transportation occurs not just by the G4S security business, but also by other security agencies engaged to carry it. In one recent occurrence, KK security agents stole a total of Sh82 million while carrying it from Westlands to the Central Bank of Kenya. The Wells Fargo security failed to prevent the theft of 94.9 million belonging to one of the Supermarket in Kenya during money transit. It is evident that the existing private security measures were insufficient to safeguard the business's assets. Private security firms are essential for ensuring safety and security across various sectors, including business environments, residential areas, and public events. This research aimed to investigate the effect of internal control systems on the financial performance of private security firms in Nairobi City County, Kenya. The objectives of the research were: to evaluate the effect of access control on financial performance of private security firms and to analyze the effect of risk assessment on financial performance of private security firms. The research was anchored on Agency Theory and Stakeholder Theory. The linkage between the variables were investigated using a causal study approach. The research focused on a population of 81 officially registered private security companies, from which a sample of 25 firms were chosen utilizing stratified sampling techniques. Data was primarily collected through structured, closed-ended questionnaires. The collected responses were analyzed utilizing both descriptive and inferential statistical methods. Descriptive statistics involved measures like means, standard deviations, and while inferential statistics comprised regression analysis to determine relationships and significance. The analyzed data was presented through frequency and percentage tables, and charts. The findings revealed that access control shows a positive performance as indicated by significance value of .001. Risk assessment have a significance level of .004, further solidifies the importance of this variable. The research concluded that effective internal controls particularly in the areas of access control and risk assessment play a critical role in enhancing the financial performance of private security firms. The research recommended that firm managers prioritize the continuous improvement of internal control frameworks. Specifically, it advocated for regular staff training to upgrade professional skills, as well as collaborative efforts among stakeholders and policymakers to foster an environment that supports best practices in internal control throughout the private security sector.
Forensic Auditing and Financial Performance of Kenyan Counties
(Journal of Finance and Accounting, 2025-01) Omucheyi, Rispah Khamonyi; Abdul, Farida; Kosgei, Margaret
County governments collect a small percentage of their own source revenue potential and the absorption rate of their budgets are low, this has slowed performance and service delivery. The study sought to find the effect of forensic auditing on the financial performance of the counties in Kenya. Data was collected from financial statements of 45 counties in Kenya in the custody of the controller of budgets for nine years from financial year 2014/2015 to 2022/2023 except Meru and Homabay because financial statements were not found. The study used a dynamic panel model to examine the relationship between forensic auditing and financial performance of all counties in Kenya and analyzed using R statistical tool. The findings showed that forensic auditing has a significant effect on financial performance of counties at first lag. The study concluded that forensic auditing is important and that each county should ensure that they invest in the forensic auditing function. The study recommends that county leadership, including governors, senators, members of the county assembly, and employees, should invest in forensic auditing. The leadership should ensure that accountants are well-trained in forensic auditing processes and consistently apply these skills. All accounting personnel should possess and practice forensic auditing skills. Additionally, county officials should provide supporting evidence for all activities conducted within or outside their counties to facilitate the forensic auditing process. County leadership should focus on spending strictly on budgeted projects, avoiding both overspending and underspending by monitoring ongoing and upcoming projects. Counties should also exhaust all revenue collection avenues and ensure that collected revenue is utilized for its intended purposes to meet collection targets. The study also recommends that the Institute of Certified Public Accountants of Kenya (ICPAK) should ensure its members are equipped with knowledge of forensic auditing by organizing regular training sessions and seminars to support the function. ICPAK should provide recommendations on accounting policies in counties to enhance the quality of financial statements. Furthermore, through ICPAK’s guidance, counties should establish fully functional audit departments and ensure the independence of audit committee members.
Organisational Performance as Outcome of Strategic Partnerships in the Context of selected Quickmart Supermarkets in Nairobi City County, Kenya
(International Academic Journal of Human Resource and Business Administration, 2025-04) Wanyama, Ecla Nekesa; Aluoch, Moses Odhiambo
Small and medium-sized enterprises are major drives of economies worldwide constituting more than ninety percent of the industries in both developed and developing economies. However the financial performance for most small and medium-sized enterprises is declining in most economies including Kenya due various factors including shift from being product-drive to market-driven to meet their complex financial needs. Globalization, technological advancements, competition, capital adequacy and lack of financial inclusion pose significant challenges to financial viability and growth of the enterprises. Despite several challenges small and medium-sized enterprises continue to play major roles to economies. This study investigated mobile microfinance services and financial performance of small and medium-sized enterprises in Trans-nzoia County in Kenya. The specific objectives included mobile credit facilities, mobile savings services and mobile money transfer or payments on financial performance of small and medium-sized enterprises. The study further explored how entrepreneurial training moderated the relationship between mobile microfinance services and financial performance of the small and medium-sized enterprises. The study was anchored on the resource-based view theory, modern portfolio theory, Modigliani and Miller’s capital structure theory, and the financial growth nexus theory from 2018 to 2023. The study employed descriptive research design, targeting 197 small and medium-sized enterprises in Trans-nzoia County. Small and medium-sized enterprises owners served as the unit of analysis, and respondents were selected through simple random sampling methods. Primary data was collected using a closed-ended, semistructured questionnaire utilizing a fivepoint Likert scale. The study ensured validity by achieving a satisfactory construct score of 0.7 or higher. Quantitative data was analyzed through descriptive, correlation and multiple linear regressions, and all ethical considerations were adhered to. The study revealed significant relationships between mobile microfinance services and small and medium-sized enterprises financial performance. The moderating effect of entrepreneur training was also tested and confirmed to influence this relationship. The recommendations highlighted the need for further studies to explore additional factors influencing small and medium-sized enterprises performance, as well as the importance of enhancing financial literacy and entrepreneurial training to maximize the benefits of mobile financial services for small and medium-sized enterprises.
Foreign Exchange Volatility and Financial Performance of Bond Market in Kenya
(International Academic Journal of Economics and Finance, 2025-05) Maratani, Padwick B.; Vincent, Shiundu
Foreign exchange rate volatility has characterized the Kenyan market environment leading to effects on the financial markets. The bond markets in Kenya have also been witnessing a fluctuating trend from 2010 to 2023; the same period where the foreign exchange rate fluctuation has been at the highest. This study explored the interrelation between financial performance and foreign exchange volatility of bond markets in Kenya. The precise goal was to investigate the impact of inflation, money supply and interest rate on bond markets performance from a financial perspective. The period of study was from 2010 to 2023. The research was underpinned on the interest rate parity theory, quantity theory of money, monetary theory of inflation, and modern portfolio theory. The research utilized a causal research design and targeted 26 institutions from various sectors including banks, investment Firms, pension funds and insurance. A census was employed in analyzing these institutions. Data collection was done using a secondary data collection tool and the analysis was done using a panel regression model with the aid of Stata version 14. Descriptive statistics, correlation analysis and inferential statistics were conducted. The diagnostic tests which include normality test, heteroscedasticity test and multicollinearity tests were equally carried out. A Hausman test was done to determine whether a fixed effect or a random effect model will be applied in the study. Finally, the study adhered to the ethical considerations throughout the period of study. The findings also indicate that the R2 (coefficient of determination) is 0.694 implying that 69.4 percent of the changes in bond market turnover is explained by inflationary changes, interest rates and money supply. The findings from panel regression analysis indicate an inverse and significant relationship between inflation and bond market turnover holding other variables constant (r=−.768, p.05). The study further recommends that investors should use financial instruments like forward contracts, options, or futures, to guard against unfavorable movements. This strategy helps ensure that inflationary effects do not erode the returns from the bond investment. Regarding the significance of interest rates in bond markets, the study recommends that in volatile markets, focusing on short-term bonds may be advantageous as they typically have less sensitivity to interest rate changes compared to long-term bonds.
Financial Risk Hedging and Financial Performance of Commercial Banks Listed in Nairobi Securities Exchange, Kenya
(Journal of Finance and Accounting, 2025-01) Mohamud, Ahmed Mohamed; Kimutai, Carolyne; Kariuki, Grace
In Kenya, financial institutions play a vital role in economic development by facilitating investments through receiving and lending funds, but they face market-driven financial risks that impact their performance, including a decline in Return on Assets over the past decade. This study aimed to determine the relationship between financial risk hedging techniques and the financial performance of Kenyan commercial banks listed on the Nairobi Securities Exchange (NSE). The study's specific objectives included forward contract, future contract, currency diversification of currencies, and swaps hence bank size is used as moderating variables. The agency theory, profit maximization theory, and enterprise risk management theory supported the study, providing a theoretical foundation for exploring the relationship between financial risk hedging and the financial performance of publicly traded commercial banks in Kenya. A descriptive correlational approach was adopted to target all publicly traded commercial banks in Kenya, with a census conducted to ensure comprehensive coverage. Secondary data was collected annually over a five-year period (2017–2021) from publications by the Nairobi Securities Exchange and the respective commercial banks, utilizing a structured data collection form. Diagnostic tests, including normality, multicollinearity, heteroscedasticity, and stationarity, were performed, confirming that the data met the required assumptions for analysis. The data was subsequently transformed to ensure that regression analysis could be conducted without producing spurious results. Descriptive statistics were summarized using means and standard deviations, while correlation and regression analyses were employed to test the hypotheses and draw meaningful conclusions. The correlation analysis revealed that using forward contracts as a hedging strategy has a strong positive and significant impact on financial performance. The futures, swaps, and currency diversifications also they had positive correlation against financial performance, and they had significant relationship. The regression study revealed a strong positive link between risk hedging and financial success, indicating a noteworthy correlation. Forward and future contracts were revealed to be risk-hedging approaches with significant effects on commercial bank financial performance, implying that currency diversification and swaps had a positive and significant effect on financial performance. Size had a strong favorable impact on the link between risk hedging and financial performance. The study recommends that bank executives and stakeholders should adopt robust risk management approaches and diversification strategies to enhance financial performance and stability in the banking sector. The Central Bank of Kenya (CBK) should regulate high-risk financial hedging products and require banks to disclose their use of financial derivatives, while the government should create supportive policies to promote these tools, ultimately strengthening financial institutions and fostering economic growth.
Financial Risk Hedging and Financial Performance of Commercial Banks Listed in Nairobi Securities Exchange, Kenya
(Journal of Finance and Accounting, 2025-01) Mohamud, Ahmed Mohamed; Kimutai, Carolyne; Kariuki, Grace
In Kenya, financial institutions play a vital role in economic development by facilitating investments through receiving and lending funds, but they face market-driven financial risks that impact their performance, including a decline in Return on Assets over the past decade. This study aimed to determine the relationship between financial risk hedging techniques and the financial performance of Kenyan commercial banks listed on the Nairobi Securities Exchange (NSE). The study's specific objectives included forward contract, future contract, currency diversification of currencies, and swaps hence bank size is used as moderating variables. The agency theory, profit maximization theory, and enterprise risk management theory supported the study, providing a theoretical foundation for exploring the relationship between financial risk hedging and the financial performance of publicly traded commercial banks in Kenya. A descriptive correlational approach was adopted to target all publicly traded commercial banks in Kenya, with a census conducted to ensure comprehensive coverage. Secondary data was collected annually over a five-year period (2017–2021) from publications by the Nairobi Securities Exchange and the respective commercial banks, utilizing a structured data collection form. Diagnostic tests, including normality, multicollinearity, heteroscedasticity, and stationarity, were performed, confirming that the data met the required assumptions for analysis. The data was subsequently transformed to ensure that regression analysis could be conducted without producing spurious results. Descriptive statistics were summarized using means and standard deviations, while correlation and regression analyses were employed to test the hypotheses and draw meaningful conclusions. The correlation analysis revealed that using forward contracts as a hedging strategy has a strong positive and significant impact on financial performance. The futures, swaps, and currency diversifications also they had positive correlation against financial performance, and they had significant relationship. The regression study revealed a strong positive link between risk hedging and financial success, indicating a noteworthy correlation. Forward and future contracts were revealed to be risk-hedging approaches with significant effects on commercial bank financial performance, implying that currency diversification and swaps had a positive and significant effect on financial performance. Size had a strong favorable impact on the link between risk hedging and financial performance. The study recommends that bank executives and stakeholders should adopt robust risk management approaches and diversification strategies to enhance financial performance and stability in the banking sector. The Central Bank of Kenya (CBK) should regulate high-risk financial hedging products and require banks to disclose their use of financial derivatives, while the government should create supportive policies to promote these tools, ultimately strengthening financial institutions and fostering economic growth.
Credit Risk Management and Profitability of Commercial Banks in Nairobi City County, Kenya
(International Academic Journal of Economics and Finance, 2025-03)
The connection between credit risk management and profitability in Kenyan commercial banks is a significant issue, as the financial health and profitability of these institutions have been adversely affected by elevated non-performing loans. Thorough credit assessments and strong risk mitigation strategies are necessary for preventing defaults and maintaining stability; however, they can also result in decreased lending and lower revenue from interest income. The Kenyan banking sector faces a delicate balance between managing credit risk and maintaining profitability, which is further complicated by the country's fluctuating economic growth rates and political uncertainties that can exacerbate credit risk, leading to higher provisions for loan losses and reduced profitability. Lending remains the main purpose of commercial banks, making it the main cause of credit risk. Therefore, it is crucial for banks to reduce their exposure to credit risk in order to ensure their continued operation. The aim of this research was to analyse how credit risk management impacts the profitability of commercial banks in Nairobi City County, Kenya. Its main goal is to determine how credit approval, collateral policies, credit limitations, and solvency impact the profitability of commercial banks in Nairobi City County, Kenya. It was based on four theories: adverse selection theory, asymmetric information theory, credit risk theory, and lending credibility theory. Descriptive research design was utilized. The target group consisted of the 38 commercial banks located in Nairobi City County of Kenya according to the Central Bank of Kenya Report (2023). A census was conducted due to the population being fewer than 100 individuals. A questionnaire was used to collect primary data, while a data collection sheet was used for secondary data. The analysis was assisted by a multiple regression model. Various assessments were conducted, such as autocorrelation, heteroskedasticity, multicollinearity, normality, and stationarity tests. Data analysis involved the use of descriptive statistics as well as multiple regression analysis. The findings revealed significant insights into the components of credit approval, with borrower character and collateral being crucial factors. Regarding collateral policies, a strong belief in the link between asset quality and profitability emerged; highlighting that high-quality collateral enhances bank profitability. In terms of credit restrictions, there was a strong consensus on the importance of borrower payment history in determining credit eligibility, with stringent restrictions seen as a means to improve profitability by reducing default risks. The study concluded that that effective credit approval processes significantly enhance the profitability of these banks. Given the positive effect of credit approval on profitability, it is recommended that the management of commercial banks implement comprehensive credit approval processes that rigorously assess borrower character and financial history. While this study examined the impacts of credit approval, collateral policies, credit restrictions, and solvency on profitability, future research could investigate the interaction effects of these factors in greater detail.
Electronic Banking Channels and Financial Inclusion among Small and Medium-Sized Enterprises in Mogadishu, Somalia
(journaleconomics, 2025-05) Warsame, Abdiaziz Omar; Wamugo, Lucy; Musau, Salome
This study evaluated electronic banking channels effect on financial inclusion among Mogadishu’s small and medium enterprises. It assessed how mobile, Internet banking, Automated Teller Machine banking, and agency banking affect these enterprises financial inclusion, while allowing for financial literacy role. The following theoretical frameworks; technology acceptance model, financial intermediation theory, and financial repression theory were utilized. An explanatory approach was employed and primary data was used. According to Mogadishu Municipal Authority, there are 5,431 Small and Medium-sized Enterprises from various sectors, including retail, services, and manufacturing which served as the target population of this investigation. 461 respondnets were chosen through sampling of random stratification. Data was gathered using a semi-structured questionnaire. Employing descriptive statistics, correlation, and multiple regression analysis were utilize to interpret the quantitative data. The analysis findings were illustrated on tables and figures. Findings revealed that mobile banking significantly and positively (β=0.2452; ρ=0.000) affect financial inclusion; internet banks also noted a significant positive (β=0.3633; ρ=0.000) effect on financial inclusion; automated teller machine unveiled also significant positive effect (β=0.2167; ρ=0.000) on financial inclusion while agency banking uncovered inverse (β= -0.0997) and insignificant (ρ=0.082) effect on financial inclusion. The survey advocates that the government and financial institutions should collaborate to develop and promote tailored mobile banking solutions specifically designed for SMEs. By addressing the unique needs and difficulties confronted by these enterprises, such as limited access to credit and financial literacy, such initiatives can empower business owners to leverage digital financial services effectively.
Business Risk, Profitability, Asset Structure and Firm Value of Non-Financial Firms Listed in the Nairobi Securities Exchange, Kenya
(International Academic Journal of Economics and Finance, 2025-04) Musyimi, Anthony M.; Gatauwa, James M.; Kimutai, Carolyne J.
Financial Technology and Profitability of Small and Medium Enterprises in Trans Nzoia County, Kenya
(International Journal of Innovative Research and Advanced Studies, 2025) Mutai, Mirriam Chepchirchir; Mutwiri, Nathan Mwenda
SMEs have continued to face various challenges despite its vital role in the economy. Most African countries depends heavily on SMEs for economic development and industrialization. The government of Kenya has identified the creation of SMEs as a strategy of achieving vision 2030. However, Republic of Kenya Baseline Survey (2019) found out that 65% of SMEs’ fail within the first three years of their operations despite the provision of interventions. The thriving economy of Trans Nzoia County is comprised largely of SMEs which are the main income earners in the region. However, the income generation of these SMEs has been dwindling and consequently, their ability to spur economic growth in the growing metropolis may be affected. The recent report from the county government of Trans Nzoia indicates that net profit margin of SMEs in the county declined from 11.3% in 2018 to 4.4% in 2022. This trend resulted directly in unemployment which then heightens social inequities and rate of crime. As such, this study sought to explore the influence online banking services on financial performance of SMEs in Trans Nzoia, County, Kenya. This study adopted and based its findings on a descriptive research design whose target population constituted of 3610 SMEs registered by ministry of trade, commerce and industry of Trans Nzoia County, Kenya. By using the Cochran, (1977) criterion, the researcher selected a sample frame of 347 SME. Stratified sampling technique was applied to group SMEs while purposive sampling technique was adopted to select respondents. The main research instrument used was the semi-structured questionnaire and included information for both dependent and independent variables .The study was anchored on Technology Acceptance Model. The researcher utilized Likert scale to gather information from questionnaires. Data collected for the research was edited, evaluated and analysed using descriptive statistics and inferential statistics with the help of statistical package for social sciences (SPSS) 24. The results indicated that online banking services significantly affects profitability of SMEs in Trans Nzoia County, Kenya. According to the study's findings, financial institutions should develop more banking agents in rural areas, because they are the most favored and used by SMEs.
Vendor Managed Inventory on Financial Performance of Flour Processing SMEs in Nairobi City County, Kenya
(International Academic Journal of Economics and Finance, 2025-04) Ng’ang’a, Charles Njoroge; Mbuva, Geoffrey
Small and Medium Sized manufacturing firms involved in processing flour play a key role in mitigating food insecurity issues in most of the economies. Be it developed or emerging ones. However, the Nairobi City County based flour processing Small Medium Enterprises (SME) has not been exempted from declining financial performance in addition to other small firms over the years. Therefore, this inquiry aimed at determining the influence of vendor managed inventory on financial performance of flour processing SMEs in Nairobi County, Kenya; To underpin this investigation, the researcher considered twofold theoretical viewpoints, namely; lean inventory theory and economic order quantity theory. This inquiry incorporated descriptive survey research design to develop the research problem. The 18- Nairobi City County based flour processing Small Medium Enterprises (SME) is the size of the populace selected for the purposes of achieving the study’s main objective with the corresponding 18 top officials of the aforementioned SMEs being used as the unit of observation. Further, it should be noted that since the populace was dismal, the researcher planned to rely on survey methodology for data collect purposes. The whole process of collection of the data aforementioned was based on a drop and pick approach whereby structured questionnaires were used as the tool for that purpose. The research findings portrayed that vendor managed inventory had statistically significant influence on the financial performance of flour processing SMEs in Nairobi City County, Kenya. Majority of the respondents were of the opinion that firms should direct their efforts toward adopting advanced forecasting tools and data analytics, leveraging these technologies to gain better insights into customer demand patterns, ultimately reducing the risks associated with shortages or excessive inventory. The study recommendations were as follows; comprehensive inventory management studies that explore the combined impact of various strategies, including JIT, EOQ, and lean inventory, on financial performance should be conducted. The studies would provide insights into the synergies and trade-offs between these practices. Comparative studies would assess the effectiveness of different inventory management strategies, taking into account their combined application. These studies can help businesses identify the most effective combinations of strategies for their specific contexts.
Financial Management Practices and Financial Performance of Insurance Companies Listed at Nairobi Securities Exchangein Kenya
(Journal of Finance and Accounting, 2025-03) Kihara, Christine; Macharia, James
The financial performance of Listed Insurance Companies in Kenya's insurance industry has fluctuated significantly. This study looked into the relationship between Kenyan insurance businesses that are listed on public markets' financial performance and their financial management practices. The specific objectives included examining the impact of working capital management, capital budgeting, and capital structure on the financial performance of listed insurance companies as well as the extent to which inflation affected the relationship between financial management practices and listed insurance companies' financial performance. An explanatory research design was used. Six listed insurance companies made up the target population. In this analysis, all six listed insurance firms were considered. Because there were so few companies, a census was undertaken. Panel secondary data for the years 2015–2022 was used. Both descriptive and inferential statistics were used to analyze the data. Results indicated that high and positive association was shown between successful financial management and working capital management. High and negative correlation between capital structure and financial performance is revealed by random effects regression analysis. Capital budgeting and financial success had a positive and significant correlation. The study also discovered that the association between financial performance and financial management techniques is negatively moderated by inflation. According to the study's findings, capital structure has a detrimental effect on financial performance whereas working capital management and capital budgeting have a positive one. This study suggested that insurance companies listed at NSE should seek to maintain adequate current assets that would be enough to cater to all short-term liabilities that may arise in the course of the business operations. Insurance firms should also seek to balance the use of debt financing and equity financing to ensure the negative effect of high debts is neutralized. This study hence recommended that insurance firms should seek to adopt practices that will reduce the cost of investment but also increase the return on the investment. This study also made suggestions that insurance firms listed at NSE should be able to understand the economic situations in terms of inflation and make the right financial decisions that would not negatively impact their performance. The study also recommends that the IAA should provide regulations that will protect insurance firms against the effect of inflation.

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