MST-Department of Econometrics and Statistics

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Effect of Infrastructure Development on Domestic Private Investment and Foreign Direct Investment in Kenya
(Kenyatta University, 2025-03) Wenje, Peter Okoth
Kenya has prioritized infrastructure development since independence. This is evidenced in the seasonal paper number 10 of 1965, various economic development policies of the 1970s, National development policies in the 1980s, Medium-term plans of 2008 to the present term, as well as the vision 2030. All these economic planning strategies aim to provide an excellent environment for infrastructure development in the country to facilitate industrialization and make Kenya an attractive market economy. Availability of quality infrastructure boosts economic productivity, the cost of production, improves the quality of life, boosts domestic private investment (DPI), attracts foreign direct investment (FDI), and helps modernize the country. There is an evident effect of infrastructure development on DPI and FDI, as seen by the empirical literature. However, no study has analyzed whether the growth in infrastructure development is the reason for the structural change in FDI inflow and DPI development in Kenya. FDI and DPI in Kenya had a more or less uniform in trend from 1970 to 2006, to a significantly steeper upward trend from 2007 to 2021. This means that there is an observed structural change in both FDI and DPI. Logistic regression was applied in the study to explain the shift in the mean values from the low mean observed in 1970-2006 to a higher mean observed in 2007-2021, making this study different from any other study carried out on the subject. The first objective of the study was to analyze the effect of infrastructure development on FDI while the second objective was to examine the effect of infrastructure development on DPI in Kenya. Flexible accelerator theory on investment was the central theory of the study. From the results of the study, Information and Communication Technologies (ICT) infrastructure had a positive and significant effect on both FDI and DPI at 5 per cent level of significance. Energy infrastructure had a positive and significant effect on FDI but for DPI, it had insignificant effect. Transport infrastructure had a positive and significant effect on DPI but it had insignificant effect on FDI inflow in Kenya. GDP growth rate, inflation rate and exchange rate were used as the control variables in the study and they were not statistically significant in increasing both FDI and DPI at 5 per cent level of significance. Based on these findings the government should prioritize ICT development since it has a ripple effect on the FDI inflow as well as DPI development. Investing in cyber security measures and cloud networking will give investors confidence in the security of their data hence the urge to invest. Foreign investors prioritize energy generation capacity in the host country. Therefore, the government should prioritize expanding greater and efficient energy supply to attract more investors. Domestic investors on the other hand relies on transport infrastructure. Therefore, the government should see on how to reduce road congestions, port clearance bureaucracies as well as freight charges to boost more investment. The study therefore conclude that greater and efficient ICT infrastructure, Transport Infrastructure and Energy infrastructure are prerequisites for higher investment in the country
Gender Inequality and Its Implications on Economic Growth in Kenya
(Kenyatta University, 2025-05) Kimaru, Winnie Wangui
Despite its extensive socioeconomic effects, gender inequality remains a significant worldwide concern. The study's objective was to determine the relationship between gender inequality and Kenya's economic growth. Time series data on all variables investigated, including the gender inequality index, fertility rate, female labour market participation, investment, population growth, literacy level, and female loan availability, were used in this non-experimental analysis. The data covered the years 1995–2023. The Autoregressive Distributed Lags (ARDL) method was used to analyse the data. Despite looking at various theories, the study was centred on the Solow growth model since it takes labour and human capital into account. The study incorporates gender-specific labor and education dimensions, feminist economics, and endogenous growth theories to understand the impact of gender inequality on Kenya's economic growth. The study reveals that gender inequality in Kenya is influenced by fertility rate, women's literacy, and political representation. Higher fertility rates increase inequality, while improved literacy and political representation reduce it. Economic growth is influenced by gender inequality, investment, labor force participation, and literacy. Addressing gender disparities is crucial for long-term economic development. The results demonstrated that political representation, women's literacy, and the pace of reproduction are all factors that have a major impact on gender disparity in Kenya. Fertility rate and gender inequality in Kenya are favourably connected. The study also discovered that Kenya's economic growth is strongly impacted by the gender inequality index, investment level, labour market activity, and literacy level. The study also showed that while the gender inequality index has a negative influence on economic growth, women's literacy and labour market involvement have a statistically significant positive impact.
Determinants of Technical Efficiency in Maize Farming in Trans-Nzoia County, Kenya
(Kenyatta University, 2025-04) Chepleting, Joan
This study examines the factors influencing the technical efficiency of maize farming in Trans-Nzoia County, Kenya, with a focus on farm size and seed quantity as significant determinants. The specific objective was to identify and evaluate the socio-economic and farm-level factors affecting technical efficiency and to quantify the levels of technical efficiency in maize farming in Trans-Nzoia County, Kenya. The socio-economic factors were Level of Education, age, gender and household size and access to credit while the farm-level factors were quantity of seeds and farm size. For this study secondary data from Kenya Integrated Household Budgetary Survey, 2015 – 16 was used and Seventy-Seven (77) maize farmers in Trans-Nzoia County were the response rate which was analyzed. The Data Envelopment Analysis (DEA) was employed to estimate the technical efficiency scores of maize farming, while Tobit regression model was used to identify the factors influencing technical efficiency. Using empirical analysis, the study finds that larger farm sizes contribute positively to efficiency by enabling economies of scale, while excessive seed use negatively affects productivity due to overcrowding and competition for resources. Specifically, for each additional unit increase in seed quantity, technical efficiency is expected to decrease by approximately 0.62% (-0.0062), whereas for each additional unit increase in farm size, technical efficiency is expected to increase by approximately 9.94% (0.0994), holding other variables constant. Based on these findings, the study concludes that optimizing farm size and improving seed management are critical to enhancing technical efficiency in maize farming. The positive impact of farm size suggests that policies should focus on land consolidation, cooperative farming, and improved land utilization strategies to maximize productivity. Conversely, the negative impact of excessive seed use highlights the need for proper seed spacing and planting techniques to prevent overcrowding and inefficiencies. To address these issues, the study recommends targeted interventions, including farmer education on optimal seed application rates, increased access to improved and certified seed varieties, and enhanced agricultural extension services to promote best planting practices. Additionally, policies that facilitate land expansion through leasing or cooperative farming models should be encouraged to enable smallholder farmers to achieve economies of scale. Implementing these recommendations can significantly improve maize productivity, enhance farmer incomes, and contribute to food security in the region.
The Economic Impact of the Public Bond Market in Kenya: A Macro-Economic Assessment.
(Kenyatta University, 2025-06) Mulyungi, Zillah Malia
Bond markets play a critical role in influencing key macroeconomic indicators such as interest rates, investment levels, and economic growth. To ease access and foster the development of Kenya’s capital markets—including bond markets—several initiatives have been implemented. These include government regulation and the passing of the Green Bond Act in October 2019, which provides incentives to the private sector to issue sustainable bonds. Despite these efforts, the Kenyan bond market remains relatively underdeveloped, even as the public bond market continues to grow. However, this growth has not been matched by a proportional improvement in core macroeconomic indicators. The objective of this study was to examine the impact of Kenya’s public bond market on selected macroeconomic variables, specifically economic growth and interest rates. In this study, a non-experimental research design was employed. To assess the relationship between bond market dynamics and macroeconomic outcomes, the Autoregressive Distributed Lag (ARDL) model and the Mankiw–Romer–Weil (MRW) model were used. The ARDL model helped to estimate both the short-run and long-run effects of bond market growth on interest rates, while the MRW model incorporated factors such as human capital, physical capital, and technological advancement to estimate long-term growth determinants. Secondary data from both national (KNBS, CBK) and international sources (World Bank, IMF) was used for the period 1990–2022. Analysis of the regression results revealed a negative relationship between public bond market growth and interest rates in both the short and long term, indicating that bond market deepening helps reduce borrowing costs and can potentially stimulate investment. Additionally, the study found a positive association between bond market development and economic growth, underscoring the market’s significance as a macroeconomic instrument for promoting economic development and stability in Kenya. Based on these findings, the study recommends policies that promote bond market deepening as a strategy to lower borrowing costs and enhance long-term economic growth.
The Dynamics of Stock Market Returns Volatility and Growth Rate of Listed Companies in Kenya
(Kenyatta University, 2025-06) Ndumbi, Daniel Ngigi
Stock returns behavior affects the growth of firms' assets and hence their growth rates. Over time, companies listed under the Nairobi Securities Exchange have experienced an inconsistent trend in growth rates. Some companies keep issuing profit warnings to investors, and others result in delisting. In addition, the market has had a low number of new listings over the past 25 years. This raises some concerns about whether the listed companies are more exposed to risks associated with the stock market in Kenya. Based on the stock market environment, volatility of stock returns is among the motivators for companies to get high or low returns, and to get listed or get delisted. This study sought to determine the relationship between the volatility of stock returns and the growth rate of companies in Kenya. It outlined two specific objectives; to analyze the stock returns volatility's long-term behavior and determine their effect on the overall growth rate of total assets of listed companies in Kenya. The study used the maximum likelihood estimation method to analyze stock returns behavior, with the volatility models of the exponential generalized autoregressive heteroskedasticity and the generalized autoregressive heteroskedasticity. It then used the generalized method of moments to determine how the volatility of stock returns affects the growth rate of total assets. The stock returns data comprised 2,999 observations of daily stock returns, and the panel data comprised 1368 observations, from 19 listed companies between 2010 and 2023. Stock data was collected from the Wall Street Journal, while panel data was collected from the Wall Street Journal, and Africa Financials from companies' statements of financial positions. For the models’ validity, the study did the normality and ARCH-LM test on stock returns series and pooled ordinary least squares, fixed effects, and generalized method of moment models for the panel data, which helped to validate the use of a two-step generalized method of moment. Diagnostic tests were also conducted to avoid reporting spurious results: the auto-correlation test, Hansen’s test, and the joint significant test. The study found that stock returns over the study period were characterized by volatility clustering, persistence, and mean reversion behaviors but were not asymmetric. It also found that the volatility of stock returns adversely affected the growth rate of listed companies. The study therefore recommended that the government and other policymakers intervene in the stock market, with measures to attain significant asymmetric behavior. This will encourage investors and hence stock liquidity payout. This would give the listed companies easier access to more finance, reducing their financial risks in their attempt to grow their asset base.
Relationship between Microcredit Usage and Household Incomes and Savings in Kenya
(Kenyatta University, 2025-04) Wainaina, Ben Kimani
Microfinance has been suggested to be the panacea through which poor people can get access to financial services and improve their livelihoods. However, this microfinance promise is yet to be realized. This study sought to analyze how household access to microfinance credit has contributed towards household incomes and savings in Kenya. Specifically, the study aimed to assess the effect of household access to microfinance credit on household incomes in Kenya, and identify the effect of household access to microfinance credit on household savings level in Kenya. The study employed the non-experimental research design, which helped in discovering, measuring and explaining how access to microfinance loans by households influenced incomes and savings in Kenya. To derive the empirical models, the researcher relied on the Household Utility Theory and the Two-Period Life Cycle Saving Model for the household income and savings respectively. The researcher utilized the dataset contained in the National FinAccess household survey that was conducted in 2021 by the Financial Sector Deepening, which was cross-sectional. The study evaluated a sample of 3,027 households out of the 22,024 households covered by the survey who had accessed micro finance services. To achieve the first objective, the study applied the Weighted Least Squares regression after conducting diagnostic and model specification tests. The findings indicated that access to microcredit has a positive and significant effect on the level of household income. The study also determined that the age and sex of the head of the household, size of household, location of a household, marital status of the head of the household, credit use, awareness of credit reference certification, household debt distress and microfinance category positively and significantly influenced households’ level of income. The lifecycle effect of age was accounted for, it negatively and significantly influenced households’ income levels as did knowledge of charges. These findings imply that microfinance can positively impact income, particularly when household demographics and financial literacy are considered in lending models. To achieve the second objective, the study also employed Weighted Least Squares regression. The findings indicated that access to microcredit has a positive and insignificant effect on household’s savings level. Furthermore, it was determined that household’s income, sex of head of household, and perception of interest rate positively and significantly influenced households’ savings level. The age of the head of household, the size of the household, location of a household and knowledge of charges were found to have a negative and significant influence on households’ savings level. These findings suggest that, while microcredit access may not directly raise savings, targeted savings interventions and financial education may improve household financial resilience. The study makes a contribution to the existing literature because it addresses the complex relationship between microfinance credit, household income, and savings in Kenya, challenging the assumption that increased credit automatically leads to increased savings. It highlights the importance of socio-demographic factors and credit-related factors in shaping financial outcomes. The study recommends that microfinance institutions support income generation initiatives for their clients and promote member savings through innovative strategies.
Technical and scale efficiency of public secondary schools in Kenya: a data envelopment analysis of counties
(Kenyatta University, 2024-06) Ongaya, Victor Elikana
Kenya is working towards achieving a rapidly growing upper-middle income economy status by 2030. Education and training have been identified as among the enablers of this vision and have subsequently seen their public spending sustained at above 4% of the GDP over the last decade. Although there have been deliberate efforts which have yielded tremendous progress towards improving access to public education in the country over the years, there still remain direct challenges facing public secondary education. Notable among them is the coexistence of overutilization and underutilization of educational resources, and significant disparities in academic achievements of students across the 47 counties. This points to inefficiency in public secondary education, whose determinants are unknown. This study therefore sought to fill this gap by making use of the data envelopment analysis model approach to assess the technical efficiency levels of public secondary schools in Kenya and their determinants. The model was estimated using secondary cross-sectional data on one output and three input variables for the 2019 academic year, collected from public secondary schools across the country and using the 47 counties as decision making units. The output variable used was the number of form four candidates who scored a mean grade C+ and above in the 2019 Kenya Certificate of Secondary Education examinations. The inputs used were the county student-teacher ratio, county textbook-student ratio and county average school size. Results revealed that public secondary schools were inefficient, and could improve their efficiency by 51% using the available resources; there was a huge variability in efficiency levels of public secondary schools across the counties; public secondary schools were operating sub-optimally, and could improve on their unutilized capacity by 11.1%; counties with more secondary schools were more efficient than those with fewer secondary schools, and also counties with higher literacy rates were more efficient that those with lower literacy rates. Gender parity index and county aridity level were not found to significantly affect inefficiency The study recommends that policies that will ensure effective management of public schools, for instance benchmarking, should be implemented by the Ministry of Education. It also recommends opening of more secondary schools by the Ministry of Education in counties with fewer schools to encourage competition. The study additionally recommends inclusion of literacy programs into other community focused programs being funded by both the government and nongovernmental partners, and application of technology to promote continuous learning among communities, especially those in the ASALs.
Technical and scale efficiency of public secondary schools in Kenya: a data envelopment analysis of counties
(Kenyatta University, 2024-06) Ongaya , Victor Elikana
Kenya is working towards achieving a rapidly growing upper-middle income economy status by 2030. Education and training have been identified as among the enablers of this vision and have subsequently seen their public spending sustained at above 4% of the GDP over the last decade. Although there have been deliberate efforts which have yielded tremendous progress towards improving access to public education in the country over the years, there still remain direct challenges facing public secondary education. Notable among them is the coexistence of overutilization and underutilization of educational resources, and significant disparities in academic achievements of students across the 47 counties. This points to inefficiency in public secondary education, whose determinants are unknown. This study therefore sought to fill this gap by making use of the data envelopment analysis model approach to assess the technical efficiency levels of public secondary schools in Kenya and their determinants. The model was estimated using secondary cross-sectional data on one output and three input variables for the 2019 academic year, collected from public secondary schools across the country and using the 47 counties as decision making units. The output variable used was the number of form four candidates who scored a mean grade C+ and above in the 2019 Kenya Certificate of Secondary Education examinations. The inputs used were the county student-teacher ratio, county textbook-student ratio and county average school size. Results revealed that public secondary schools were inefficient, and could improve their efficiency by 51% using the available resources; there was a huge variability in efficiency levels of public secondary schools across the counties; public secondary schools were operating sub-optimally, and could improve on their unutilized capacity by 11.1%; counties with more secondary schools were more efficient than those with fewer secondary schools, and also counties with higher literacy rates were more efficient that those with lower literacy rates. Gender parity index and county aridity level were not found to significantly affect inefficiency The study recommends that policies that will ensure effective management of public schools, for instance benchmarking, should be implemented by the Ministry of Education. It also recommends opening of more secondary schools by the Ministry of Education in counties with fewer schools to encourage competition. The study additionally recommends inclusion of literacy programs into other community focused programs being funded by both the government and nongovernmental partners, and application of technology to promote continuous learning among communities, especially those in the ASALs.
Credit Access and It’s Effect on Rice Production in Mwea Irrigation Scheme in Kirinyaga County, Kenya
(Kenyatta University, 2024-11) Muriithi, Naftaly Munene
Rice is Kenya’s third most important cereal crop after wheat and maize. It’s grown for commercial purpose and subsistence. Its production contributes to food security, improves the livelihoods of farmers through opportunities and employment for private investment. Rice consumption is higher than its production in Kenya where the gap has been increasing since the year 2000.The annual national consumption was estimated at 300,000 metric tonnes against an annual production of 80,000 metric tonnes in the between the year 2014 to 2020. The deficit has over time been met through imports leading to loss of foreign exchange. Literature reveals that low production of rice has been attributed to unfavorable land tenure system, labour scarcity due to urban migration, poor access to credit and liberalization of irrigation schemes resulting in poor rice management practices. Research findings indicate that credit in agriculture helps by facilitating purchase, uptake of modern technology and use intensity of fixed resources. To address the low production of rice in Kenya several policies have been put in place to specifically address credit access in order to improve production yet the production gap persists. In Kenya credit access still remains a challenge to most rice farmers with the number of farmers seeking credit increasing whereas the percentage of unsuccessful applicants has been increasing. The research focused on three main objectives. Firstly, it aimed to identify the factors influencing access to credit for rice farmers in Mwea, Kirinyaga County. Secondly, it sought to understand the factors that impact the choice of credit sources among rice farmers in the same region. Lastly, the study aimed to assess the effects of credit access on rice production within the Mwea Irrigation Scheme in Kirinyaga County, a region contributing over 60 percent of Kenya's total rice production. The primary data for the research, collected during the 2021/2022 cropping season, utilized a structured questionnaire distributed to a sample of 226 rice farmers, selected through the disproportional sampling method. The data was then analyzed using STATA. Quantitative data analysis employed descriptive and inferential statistics, with logistic regression used for credit access factors, multinomial logistic regression for credit sources, and ordinary least squares for credit's impact on rice production. The findings highlighted that access to credit significantly improves rice production by enabling the purchase of quality seeds, fertilizers, and machinery. They underscore the need for targeted interventions to reduce barriers to credit access and address systemic issues affecting rice farmers.
Disaggregated Government Expenditure and Manufacturing Sector Performance in Kenya
(Kenyatta University, 2024-03) Gitau, Alex Gicini
Manufacturing sector is a key sector that promote development through; contribution to Gross Domestic Product, employment generation, value addition, diversification, industrialization and technological innovations. The government has spent significant amount resources to boost the growth of the manufacturing sector. The need for growth in this sector picked momentum in the early 60s. Policies like: the Import substitution in 1963; National development plan in 1970; Structural Adjustment Programs in the 80s; the Vision 2030 in 2008 and the Big Four Agenda in 2017, as well as increased government expenditure in the sector have been implemented to spur performance in the sector. Despite the policy implications and increased disaggregated government expenditure, the conduct of the manufacturing sector as shown by its value added experienced significant growth in the initial three decades after independence, after which it plateaued to 9 percent. It is against this backdrop that the research aimed to uncover the effects of disaggregated government spending in manufacturing sector on manufacturing sector performance in Kenya. The specific objectives of the study were to: determine the effect of government’s recurrent expenditure in manufacturing sector on the sector’s performance in Kenya, determine the effects of government’s development expenditure in manufacturing sector on the sector’s performance in Kenya and to determine the impact of total government expenditure in manufacturing sector on the sector’s performance in Kenya. The study used time series data from 1984 to 2021 for selected variables namely government recurrent and development expenditures in manufacturing sector, interest rates, inflation, exchange rates, Gross Domestic Product and manufacturing value added. An Auto Regressive Distributed Lag Error Correction Model was used to determine short run and long run relationship between variables after appropriate time series test were conducted. The study found a positive relationship between disaggregated government expenditure and manufacturing sector performance. The study therefore recommended that, to achieve a rapid economic growth and sustainable development through the Kenya manufacturing sector, the government of Kenya should optimally allocate expenditure to the sector
Effect of Monetary Policy on Financial Performance of Domestic and Foreign Commercial Banks in Rwanda
(Kenyatta University, 2024-11) Ndungutse, Eugene
A nation's monetary policy helps it achieve its varied economic objectives. All monetary decisions in Rwanda are made by the National Bank of Rwanda (BNR), which is the country's monetary authority. The bank works to stabilize prices and reduce inflation in order to foster an effective economic environment. This contributes to the nation's economic expansion. The bank employs a variety of tools to achieve its financial goals. The financial industry is essential to the expansion of the economy. It is made up of microfinance organizations, development banks, and commercial banks in Rwanda. The Monetary Authority regulates commercial banks. For example, the BNR establishes the reserve requirement for commercial banks. This helps the economy manage the money supply, which will affect the commercial banks' financial performance. The monetary authority has implemented a number of measures, but some commercial banks have demonstrated uneven outcomes. For example, Commercial Bank of Africa (Rwanda) lost money in 2017 and 2018, but Ecobank Rwanda made money in 2018. The objective was to assess the profitability of Rwanda's domestic and foreign commercial banks and ascertain the impact of monetary policy on their financial performance. The specific objectives were to determine how the money supply and discount rate impacted the financial performance of Rwanda's commercial banks and to compare the profitability of domestic and foreign commercial banks operating in Rwanda in response to monetary policy. The market power theory was used to create the pertinent empirical model. A non-experimental panel research design was used in the study and panel secondary data from 2012 to 2018 was utilized. The necessary diagnostic procedures, including stationarity and cointegration tests, were carried out. Hausman test was run too test if random effect or fixed effect models should be estimated for the first and second objectives and random affects model was selected. For the third objective, the study estimated a binary logit model to estimate the profitability of foreign versus local commercial bank. The study findings showed that local banks were performing better than the foreign banks as revealed by a higher Return on Assets in local banks when compared to foreign banks. However, for money supply and discount rate both foreign and domestic banks performed the same. Market share, the liquid to deposit ratio, the liquidity ratio, the required reserve ratio, the money supply, GDP, and inflation were all found to be positively and significantly correlated with return on assets (ROA); in contrast, the discount rate and credit growth showed a negative correlation. Conversely, the cointegration test demonstrated the existence of cointegration and the existence of a long-term link between the variables. To ascertain the link between the independent and dependent variables, the Random Effects Regression was selected.. In the regression analysis, it was discovered that the money supply and discount rate coefficients were statistically significant but negative. In respect to monetary policy, the binary logistic regression revealed a decreased likelihood that the profitability of international banks would exceed that of domestic banks. The study recommended that monetary policy makers should create measures that will decrease the quantity of money in circulation. The study recommended that banks should exercise due diligence when estimating the future cash flows of the investments they make today for their investors. The findings also suggested that foreign bank management examine monetary policies, including those pertaining to the money supply and discount rate, and develop methods and policies that will improve their performance.
Firm Specific Factors and the Profitability of Listed Non-Life Insurance Firms in Kenya
(Kenyatta University, 2024-07) Kiplang’at, Dennis
Insurance as a subset of the financial industry plays a critical function in economic growth of countries across the globe inclusive of Kenya. The subsector drives economic sustainability by ensuring the indemnification of the stakeholders and clients covered in the various policies. This is achieved mainly through recompense of parties with insurable interest thus insulating them against economic losses. While the insurance sector’s contribution to gross domestic product (also referred to as insurance penetration) in Kenya is relatively low (2.24% in 2021) compared to other major sectors such as agriculture, the sector can be considered as one of the key economic performance enablers. Despite the roles played by the insurance sectors especially non-life insurance which accounted for 55.2 percent of the total Kenya underwritten insurance premium as of 2021, the sector has witnessed performance hurdles especially in the recent past with occurrence of a persistence underwriting loss. A similar trend is also witnessed among the listed non-life insurance firms who recorded mostly negative before profit tax albeit. This continued negative performance forms the crux of the problem as to the dire implication of a flailing insurance industry on economic growth. The cost of premiums rise, insufficient economic loss/financial protection is provided to industries, and destabilization of the financial sector are some of the aftereffects of a poorly performing insurance industry. Thus, the study aimed at estimating the effect of firm specific factors on profitability for listed non-life insurance firms in Kenya to inure the industry, stakeholders and policymakers with further knowledge to improve the sector. Against this backdrop, balanced panel data for the four listed non-life insurance firms in Kenya covering 2015- 2022 period obtained from annual financial statements of these firms was analyzed to achieve the objective of this study which was to estimate the effect of firm specific factors on profitability of listed non-life insurance firms in Kenya. The estimation of the econometric model used the endogenous variables, return on assets (ROA) and return on equity (ROE) as measures of profitability based on the profit maximization concept as envisaged by theory of the firm with a linearity assumption between inputs and profit. The rationale is through the consideration of the insurance firms as profit maximizing agents. Subsequently, the firm specific factors included in the model were firm size, leverage, firm growth, liquidity, underwriting risks, and age of the firm. There was also inclusion of macroeconomics factors such as gross domestic product growth rate, inflation rate, and interest rate as control variables. The study found leverage level, liquidity, firm size, premium growth rate and age of the firm significantly affect both ROA and ROE as measures of profitability. This leads to a recommendation on policy implications by firms and the insurance regulator on clear leverage management strategies, minimum liquidity requirements review and a robust policy to further improve insurance penetration to improve premium growth rate.
Effects of Value Added Tax Refunds on Volume of Exports by the Kenyan Firms
(Kenyatta University, 2024-06) Omwenga, Walter Mokaya
Value Added Tax (VAT) is a consumption-based tax that is levied at each stage of product’s production and distribution. The long process of VAT refund and delays in refund payments arguably deprive export firms their working capital, which affects their operations, output and business profits. This may force export firms to alter their blend of production and/or reduce their export production. This study sought to look at how VAT refund affects the export performance of Kenyan firms. Specifically, the study sought to: estimate the effects of the payment of VAT refunds on export volume of firms in Kenya and establish the effects of time taken to pay the VAT refunds on export volume of firms in Kenya. The study utilised a non-experimental research design. The study employed unbalanced panel data consisting of 43 export firms observed at three different periods (2017, 2018 and 2019). The study was faced by missing data challenges thus firms included in the analysis are those that had data on dates of VAT refunds lodgments, approval and payments, VAT refund amounts; and at least three years’ observations on exports performance. The study employed Pooled Ordinary Least Square (OLS) model in the analysis, with the second empirical model including the sector dummies to control for the sector specific characteristics to achieve the first objective. The descriptive analysis which was used to address the second objective shows that the average refunds paid by the Kenya Revenue Authority (KRA) to the firms during the three-year period was Kshs 33,542,610.80, with a minimum value of Kshs 1,000,221.77 and a maximum value of Kshs 423,899,228.03. Additionally, the descriptive statistics show that on average, it took five and a half months to verify the refund claims during the period. The shortest time taken to verify VAT refund claims was one month while the longest it took was 14 months. However, it took only one month to pay the VAT refund claims after they were verified. This means that the payment for VAT refunds is well provided for thus the challenge is with the time taken to verify the refund claims. The empirical models showed that payment of VAT refunds has a positive relationship with export performance, meaning that efficient payment of VAT refund is likely to lead to an increase in export performance in Kenya. Moreover, the results from both models also showed that delay in verification of the VAT refunds negatively affects export performance of the Kenyan firms. The study recommends a review of the 100% VAT refunds verification requirement to reduce the refunds claims verification period and VAT data cleaning to improve on the VAT refunds data quality for analyses to inform management decision making and also risk profiling of VAT taxpayers.
Youth Participation in Agriculture and Its Effect on Welfare: The Case of Youth in Bomet County, Kenya
(Kenyatta University, 2024-03) Kiprono, Kevin
Kenya’s youth unemployment rate stands at 39 percent, forming the largest group of the unemployed in the country. The cohort possesses innovative behavior, minimal risk aversion, less fear of failure, less conservativeness, greater physical strength and greater knowledge acquisition propensity. The agriculture sector offers a huge opportunity for the creation of employment for the youth in the country. Despite the vital role the agricultural sector plays in the economy of Kenya, youth are yet to fully exploit its potential. Like in other countries, literature posits that youth participation in agriculture is low and major determinants of participation in agriculture are; education level, access to land, access to finance, household size and access to market. Youth perceive agriculture as a career of last resort that has low monetary benefits. The study sought to establish the determinants of youth participation in agriculture and its effects on the welfare of the youth in Bomet County. The County of Bomet was specifically chosen because of its’ vast agricultural land as well as large number of youths who remain unemployed and not participating in agriculture. A sample of 399 youths were picked as a representative sample. The study employed frequencies and percentages in analyzing the descriptive statistics of the study. Logistic and multiple regression were adopted in estimating the study models. The study undertook various diagnostic tests before estimating the models to ensure that the model is fit in determining the relationship of study variables. From the descriptive statistics 61.3 percent of the youth participated in agriculture with majority being males. The results from the study also showed that participating in agriculture improved welfare majorly through increased income and food. Logistic regression model established that marital status, university education, land size, financial access, access to ICT infrastructure, market distance, household size and agricultural training are the determinants of agricultural participation. Model results also established that marital status, university education, land size, financial access, access to ICT infrastructure, market distance, household size and agricultural training significantly influenced welfare of youth practicing agriculture. The study recommends that the government creates financial credit specifically tailored for majority of the youth who do not have the required collateral. There is also a need for the government to build more agricultural training institutes so that youth can learn diverse agricultural productions.
Adoption of Green Energy and Testing the Presence of Environmental Kuznets Curve in Kenya
(Kenyatta University, 2024-05) Kibet,Geofrey Kiprono
Energy is a determinant of economic growth in any economy, but due to different sources of energy which are categorized into green and non-green energy, there is a need for the economy to reduce the use of fossil fuels and consider using more green energy resources. This is because the use of fossil fuels leads to environmental pollution due to Carbon dioxide emissions into the atmosphere. Reduction of fossil fuel consumption leads to reduction of Carbon dioxide emission into the atmosphere, hence leading to global warming mitigation. The use of Non-green energy sources causes environmental pollution which results in the reduction of social welfare. Since little is known about the relationship between economic growth and environmental pollution in Kenya, and also there was clear policy on rates of substitution between green energy and non-green energy in Kenya. This research project intended to estimate the Marginal rate of Technical Substitution between green energy and non-green energy in Kenya and to ascertain whether the Environmental Kuznets Curve on Carbon dioxide emission is present in Kenya. The study used the Instrumental Variable (IV) approach to estimate elasticities and finally determine the MRTS. The objectives of the study included; first, to test the presence of the EKC hypothesis in Kenya. Secondly, it was to determine the Marginal rate of technical substitution between green and non-green energy in Kenya. The study used secondary time-series data from the year 1964 to 2021 from various sources and adopted the VECM model for analysis. Empirical results revealed that the EKC hypothesis on Carbon dioxide emission exist in Kenya in the long-run and not in the short-run. In the long-run, as per capita GDP grows, the environmental degradation continues to decrease. The study also concluded that Kenya requires more investment in green energy infrastructure in order to replace non-green energy infrastructure without affecting GDP growth. Investing in green energy to promote the use of clean energy, in the long run, leads to sustainable economic development.
Effects of Foreign Remittances on Human Development in Kenya
(Kenyatta University, 2023-07) Musyimi, Daniel Mutuku; Peter Ng'ang’a
The sole purpose of every government is to improve the welfare of its citizens. That is; to have high standards of living, quality education, good health and a quality general wellbeing. When a country thrives in human richness, then the country can be predicted to be on the rig!l( trajectory of achieving sustainable development goals. The Kenya scenario is no exception because the government has been striving to improve the welfare of its people. Though there has been increase in human development progress in Kenya from 0.468 human development index in 1990 to 0.575 human development index in 2021, the increase is relatively low compared to countries with very high and high levels of human development. Kenya is still in medium level which is far from the standards stipulated by UNDP which recommends countries to have high and very high human development index. Many of studies in Kenya have focused on remittances and education expenditure or remittances and health outcomes hence giving little attention on remittances and human development. This study sought to fill the gap between foreign remittances and human development in Kenya which has not received adequate attention despite the fact that foreign remittance has been one of the leading financial foreign inflows in the country. It is with this regard where the specific objectives sought to establish the effects of foreign remittances on both health index and education index. The study adopted foreign remittance as independent variable while health and education index were treated as dependent variables. To achieve the results, the study adopted vector error correction model (VECM) which falls under ordinary least square (OLS) regression technique. The model helped in determining the long run and short run effects of foreign remittances on health index and education index respectively. The study used time series data from period 1990 to 2021 and was obtained from secondary sources. A non-experimental research design was used to determine the frequency of association between the variables. Statistical results were achieved with the aid of statistical package E-views. The study concludes that foreign remittances have negative and significant effects on both health and education index. The study recommends that relevant authorities should deep in to understand the cause of negative relationship between remittances on both health and education index.
Relationship between Macroeconomic Factors and Foreign Direct Investment in East African Community
(Kenyatta University, 2023-11) Wambua, Mwalya; Stephen Gitahi Njuru
Foreign direct investments (FDI) are key for the growth of a nation’s economy, since it transfers money, technology, and knowledge to the recciving nation. Governments of many countrics actively seek FDI to promote economic growth and development and may offer incentives. FDI has resulted from globalization through the integration of local or domestic markets with international markets across the globe. However, the inflows of FDI into the East African Community (EAC) remain low compared to other regions. Therefore, the goal of this research was to examine how macrocconomic factors (exchange rate and GDP) affect FDI in EAC countries, through infrastructural development, trade openness, inflation, resource endowment, case of doing business as control factors. The study sought to address two specific objectives; to examine the effect of exchange rate on FDI in the East African Community; and to establish if there is an endogeneity of exchange rate and GDP with respect to foreign direct investment in the East African Community. The target population included Burundi, Kenya, Rwanda, Tanzania, Uganda, and DRC. However, South Sudan, one of the EAC countries, was excluded from the study because it had not been reporting its data to the World Development Index. The study used non-cxperimental research design, and theories such as eclectic paradigm, Keynesian, and Classical to support study variables. The study used published annual data from 2000 to 2021 to estimate Pooled Panel Ordinary Least Square (OLS) to answer the first objective and estimated Instrumental Variable (V) method and Control Function Approach (CFA) to address the second objective. Diagnostic tests, namely normality test, multicollinearity, and heteroscedasticity were conducted. The study found that several factors, such as GDP, infrastructural development, trade openness, resource endowment, and Foreign direct investment (FDI) in the East African Community depends on how easy it is to do business there, whereas the exchange rate was a drag on FDI. Additionally, the results revealed that there was an endogeneity of exchange rate and GDP with respect to FDI in the EAC. The research suggests that policymakers in the EAC need to prioritize improving economic growth in the region by promoting policies that stimulate economic development. EAC countries can foster an environment favourable for business growth by reducing regulatory burdens, promoting transparency, and enhancing the region's ease of doing business generally. Moreover, policymakers in EAC countries should work to stabilize the exchange rate by adopting policies that promote macroeconomic stability. Further research is suggested to be conducted in other regions to compare the results obtained from this study with those obtained from other regions.
Effects of Mobile Money Financial Technology Services on Output Growth and Productivity in Kenya
(Kenyatta University, 2023-11) Wachira, Gladys Njeri; Angelica Njuguna
Relationship between macroeconomic factors and foreign direct investment in east African community
(Kenyatta university, 2023-11) Wambua, Mwalya; Stephen Gitahi Njuru
Foreign direct investments (FDI) are key for the growth of a nation’s economy, since it transfers money, technology, and knowledge to the receiving nation. Governments of many countries actively seek FDI to promote economic growth and development and may offer incentives. FDI has resulted from globalization through the integration of local or domestic markets with international markets across the globe. However, the inflows of FDI into the East African Community (EAC) remain low compared to other regions. Therefore, the goal of this research was to examine how macroeconomic factors (exchange rate and GDP) affect FDI in EAC countries, through infrastructural development, trade openness, inflation, resource endowment, ease of doing business as control factors. The study sought to address two specific objectives; to examine the effect of exchange rate on FDI in the East African Community; and to establish if there is an endogeneity of exchange rate and GDP with respect to foreign direct investment in the East African Community. The target population included Burundi, Kenya, Rwanda, Tanzania, Uganda, and DRC. However, South Sudan, one of the EAC countries, was excluded from the study because it had not been reporting its data to the World Development Index. The study used non-experimental research design, and theories such as eclectic paradigm, Keynesian, and Classical to support study variables. The study used published annual data from 2000 to 2021 to estimate Pooled Panel Ordinary Least Square (OLS) to answer the first objective and estimated Instrumental Variable (IV) method and Control Function Approach (CFA) to address the second objective. Diagnostic tests, namely normality test, multicollinearity, and heteroscedasticity were conducted. The study found that several factors, such as GDP, infrastructural development, trade openness, resource endowment, and Foreign direct investment (FDI) in the East African Community depends on how easy it is to do business there, whereas the exchange rate was a drag on FDI. Additionally, the results revealed that there was an endogeneity of exchange rate and GDP with respect to FDI in the EAC. The research suggests that policymakers in the EAC need to prioritize improving economic growth in the region by promoting policies that stimulate economic development. EAC countries can foster an environment favourable for business growth by reducing regulatory burdens, promoting transparency, and enhancing the region's ease of doing business generally. Moreover, policymakers in EAC countries should work to stabilize the exchange rate by adopting policies that promote macroeconomic stability. Further research is suggested to be conducted in other regions to compare the results obtained from this study with those obtained from other regions
Effect of foreign direct investment on employment and welfare in Kenya
(Kenyatta university, 2023-11) Mwangangi, Cornelius Malinda; Steve Makambi
The principal external source of finance for emerging nation is foreign direct investment. Throughout the last 10 years, Kenya has managed to attract a significant amount of FDI which could be due to incentives and stable investment environment which attract foreign investors. However, while attraction and inflow of FDI has been observed, it is not clear whether FDI translates to improvement of employment and welfare. Effectiveness of FDI can either be felt directly or indirectly which include technology transfer, spillovers, employment opportunities, training of laborers among others. Ultimately the study aims to examine the effect of foreign direct investment on employment and whether it translates to improvement of welfare in Kenya. Specific objectives include:(i) to examine the effect of foreign direct investment on employment in Kenya; (ii) to determine the effect of foreign direct investment on welfare in Kenya. Welfare was approached from two perspectives which included the human development index and the gini index. Secondary time series data used was retrieved and compiled from the following databases which included World Bank, the United Nations Development Programme, and the yearly economic surveys conducted by the Kenya National Bureau of Statistics all between 1990 to 2020. Several diagnostics tests were run which include; unit root test, cointegration bound test, autocorrelation test, test for normality, heteroskedasticity test, omitted variable test and model specification test. To address the first objective and the second objectives of the study the ARDL model was used to investigate the effect of FDI on employment and welfare in Kenya. The following conclusion were made from the study; First, HDI was a better measurement of welfare compared to the gini index since FDI, savings, inflation, and GDP have an effect on HDI and on the other hand only savings had an effect on the Gini index. Second, since there exists a negative relationship between FDI and HDI in the short run there is need for government intervention in order to curb the negative effect to avoid compromising education, per capita income and life expectancy. Also, the study concluded that FDI plays a major a role when it comes to employment creation and improvement of long term and short-term welfare in an economy. The study made recommendations on the following; First, the ministry of investment, trade and industry should make the investing environment more friendly to foreign investors, second, to reduce the cost of investment licenses and setting up companies, third, the government of Kenya should maintain a stable political environment, fourth, the government should constantly revise their policies to protect domestic companies from foreign companies and finally the government should channel FDI inflows into investments projects that favour the poor in order to improve welfare

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