MST-Department of Econometrics and Statistics

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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
Effects of non-performing loans on technical efficiency of commercial banks in Kenya
(Kenyatta university, 2022-05) Abuga, Frankline Kianyaga; Susan M. Okeri
ABSTRACT With the formation of very large banks and increased interbank connectivity, the 1992 financial sector reforms resulted in a shift in market power. They also improved the banking sector's resilience and sustainability. The reforms aimed at doing away with regulatory and structured issues hindering efficiency of the sector. However, the increasing trend of Non-performing loans since 2008 as well as the commercial banks’ decline in profitability since 2014, has been a cause of alarm and distress to customers and stakeholders. Although there exists an authority to monitor the operation of banks still their operations are sub-optimal. To improve operations of banks and create assurance to customers and stakeholders this study investigated the role of non-performing loans on technical efficiency of commercial banks in Kenya. The research was motivated by the enormous evidence that the Kenyan financial system is dominated by the banking sphere but little is known about efficiency statistics and determinants of efficiency scores. The study used Data Envelopment Analysis to measure efficiency scores in Kenya's 26 commercial banks; 9 in tier 1, 7 in tier 2, and 10 in tier 3, that existed over the study period (2014-2019); inputs as well as outputs variables were selected depending on the intermediation roles performed by banks. The variables were split into inputs and outputs. The income (a linear combination of non-interest income and interest income) was treated as output. The inputs were non-interest expenditure, equity capital and interest expenditure. The results revealed that there was inefficiency across all the banking categories. Tier one banks operated at 97.5 percent efficiency scores, tier 2 at 78.4 percent and tier 3 at 68.8 percent level. Tobit regression was utilized to examine the impacts of Non-performing loans on the technical efficiency of commercial banks in Kenya. The study regressed Non-performing loans, total loan to total assets ratio, total assets, equity to total assets ratio, and non-interest expenses to total assets ratio on technical efficiency level obtained in the first part. The findings indicated that Non-performing loans have -0.00000000262 effect on technical efficiency of the commercial banks, however the effect is not significant. This study concluded that if the commercial banks need to keep improving their efficiency indices, they need to minimize their non-performing loans by implementing the following recommendations; investing heavily on loan recovery a customer credit score monitoring, relying on private credit collection agencies, that look to solve disputes and seek to refer accounts to the credit reference bureau. This will avoid pilling of non-performing loans on the financial statement of commercial banks and other long term legal process such as court cases.
Effects of mobile money financial technology services on output growth and productivity in Kenya
(Kenyatta university, 2023-11) Wachira, Gladys Njeri; Angelica Njuguna
The advent of mobile money services in Kenya has revolutionized the financial sector in the country. The rate of uptake for the service- specifically M-Pesa has been nothing but phenomenal. Within 4 years of introduction, the service had reached a high proportion of 80 percent of the Kenyan households. This is in stark contrast to the 60 years it took for Kenya to have electricity- an equally important infrastructure. This service continues to grow and evolve - providing new and more services as the years go by. It has led to the financial inclusion of people who were previously unbanked or under-banked. Africa has for years been leading her counterparts in the number of active accounts and transaction value carried out using mobile money and more specifically, M-Pesa has been heralded to be a global leader in terms of mobile money financial technology services. It is, therefore, not surprising that foreign leaders have traversed for long distances to learn about this Kenyan-bred financial service. This study, therefore, takes cognizance of the massive growth of M-Pesa and its uniqueness in providing solutions for financial inclusion particularly in a developing country like Kenya. The general objective of this study was to analyze the effects of mobile money financial technology services on output growth and productivity in Kenya. The specific objectives were to investigate whether there is a structural change in the output growth and productivity in Kenya due mobile money financial technology services; to quantify the effect of mobile money financial technology services on output productivity in Kenya; and to examine the presence of a leapfrog effect of mobile money financial technology services on output productivity in Kenya. Secondary data was obtained for the years 1980 to 2020 and diagnostic tests for unit root, normality, multi-collinearity, auto-correlation and model misspecification were conducted to ensure that the results obtained were not spurious. The study used the Growth Accounting Method to determine Total Factor Productivity’s contribution to the economic growth in Kenya. A regression analysis was then performed to establish the contributions of different factor variables to the Total Factor Productivity. The findings of the study suggest that there is a structural change in output growth and productivity in Kenya as a result of the introduction of mobile money financial technologies. Mobile money financial technology services were also found to have a significant positive effect on output productivity while leapfrogging did not have a significant effect. Given mobile money’s positive effect on productivity, constraints hindering adoption and use of digital technologies such as lack of electricity access, poor network quality, affordability and lack of digital skills should be addressed for increased productivity. Additionally, a robust cyber security system that ensures client transactions and information is secure should be developed and enforced.
Impact of export processing zones foreign direct investments on economic growth in Kenya
(Kenyatta University, 2022-04) kemboi, Gladys Jelagat
Export Processing Zones (EPZs) have emerged to be a crucial policy tool among developing countries as a way of capitalizing on the advantages of globalization in the form of trade which follow the inadequacies in import-substitution program. The acceptance of EPZs as a policy tool has been on an enormous rise for a long time even though many EPZs have failed to meet their primary objectives. Nevertheless, numerous EPZs still contribute significantly to the economic growth through exports and foreign direct investment (FDI) as observed in East Asian countries. From literature, many EPZs activities have failed to impact significantly the economic growth despite high investment and tax foregone by governments. In Kenya, only one known study on assessment of whether EPZs help promote economic growth has been undertaken. However, the study was based on limited scope and was carried out when the program was relatively new under implementation. Thus, the general objective of this research was to assess impacts of EPZs foreign direct investments on economic growth in Kenya. The specific objectives were to measure effects of EPZs foreign direct investments (FDI) on economic growth in Kenya and determine the factors that attracts EPZs foreign direct investment. The study used quarterly secondary data spanning 1993 to 2019. The data was sourced from KEPZA, KNBS, CBK and UNCTAD websites. The autoregressive distributed lag (ARDL) model was employed to achieve the first research objective and to determine the strength of the long run relationship among the variables of interests. The short run dynamics were analyzed using the error correction model (ECM)sincethevariablesinthestudywerecointegrated.TheresultsshowthatFDIwithinEPZs in Kenya have a significant negative association with economic growth. This is because of high turnoverofinvestorwithinthezonesafterexpiryoftaxholidaysandincentivesaccordedtothem. Thus, depriving government its resources that could have otherwise been invested in other productive sectors. On the other hand, the second objective of the study was achieved using the ordinary least squares (OLS) estimation. The OLS results found that inflation coefficient has a negative statistically significant relationship with EPZs foreign direct investment. Gross Domestic Product and real exchange rate coefficients had a positive association with EPZs foreign direct investment. External debt was found to be insignificant in determining the FDI within EPZs in Kenya. From results of data analysis, this study found that EPZs foreign direct investments have a significant negative impact on economic growth which is attributed to generous incentives and tax holiday accorded to the zones which in turn generally benefits the investors and not the host country. EPZs output have a significant positive impact on economic growth in the long run in Kenya. While low inflation, depreciation in exchange rate, low economic growth and high GDP significantly play a positive role in attracting FDI within EPZs. Thus, it can be concluded that despite generous incentives accorded to EPZs in Kenya, FDI within the zones do not translate to economic growth in the long run. This can be attribute to high turnover of investors within the zones after expiry of tax holidays and incentives accorded to them, high rate of inflation, appreciation of exchange rate, low production capacity as well as growth in GDP in Kenya. From the findings, the study recommends that the Kenya government should regulate the incentives and tax holidays given to EPZs such that no investor should withdraw at the expiry of tax holidays. This will reduce high turnover of investors at expiry of tax holidays and retain revenue forgone within the economy. Efforts should also be made to allow local firms into the zones since they invariably retain all their profits in the Kenya economy rather than just benefitting foreign investors. This is because over-reliance on foreign investors will not maximize the full benefits from the operation of EPZs.
Impact of export processing zones foreign direct investments on economic growth in Kenya
(Kenyatta University, 2022-04) Kemboi, Gladys Jelagat; Aflonia Mbuthia
Export Processing Zones (EPZs) have emerged to be a crucial policy tool among developing countries as a way of capitalizing on the advantages of globalization in the form of trade which follow the inadequacies in import-substitution program. The acceptance of EPZs as a policy tool has been on an enormous rise for a long time even though many EPZs have failed to meet their primary objectives. Nevertheless, numerous EPZs still contribute significantly to the economic growth through exports and foreign direct investment (FDI) as observed in East Asian countries. From literature, many EPZs activities have failed to impact significantly the economic growth despite high investment and tax foregone by governments. In Kenya, only one known study on assessment of whether EPZs help promote economic growth has been undertaken. However, the study was based on limited scope and was carried out when the program was relatively new under implementation. Thus, the general objective of this research wastoassessimpactsofEPZs foreign direct investments on economic growth in Kenya. The specific objectives were to measure effects of EPZs foreign direct investments (FDI) on economic growth in Kenya and determine the factors that attracts EPZs foreign direct investment. The study used quarterly secondary data spanning 1993 to 2019. The data was sourced from KEPZA, KNBS, CBK and UNCTAD websites. The autoregressive distributed lag (ARDL) model was employed to achieve the first research objective and to determine the strength of the long run relationship among the variables of interests. The short run dynamics were analyzed using the error correction model (ECM)since the variables in the study were cointegrated.The results show that FDI within EPZs in Kenya have a significant negative association with economic growth. This is because of high turnoverofinvestorwithinthezonesafterexpiryoftaxholidaysandincentivesaccordedtothem. Thus, depriving government its resources that could have otherwise been invested in other productive sectors. On the other hand, the second objective of the study was achieved using the ordinary least squares (OLS) estimation. The OLS results found that inflation coefficient has a negative statistically significant relationship with EPZs foreign direct investment. Gross Domestic Product and real exchange rate coefficients had a positive association with EPZs foreign direct investment. External debt was found to be insignificant in determining the FDI within EPZs in Kenya. From results of data analysis, this study found that EPZs foreign direct investments have a significant negative impact on economic growth which is attributed to generous incentives and tax holiday accorded to the zones which in turn generally benefits the investors and not the host country. EPZs output have a significant positive impact on economic growth in the long run in Kenya. While low inflation, depreciation in exchange rate, low economic growth and high GDP significantly play a positive role in attracting FDI within EPZs. Thus, it can be concluded that despite generous incentives accorded to EPZs in Kenya, FDI within the zones do not translate to economic growth in the long run. This can be attribute to high turnover of investors within the zones after expiry of tax holidays and incentives accorded to them, high rate of inflation, appreciation of exchange rate, low production capacity as well as growth in GDP in Kenya. From the findings, the study recommends that the Kenya government should regulate the incentives and tax holidays given to EPZs such that no investor should withdraw at the expiry of tax holidays. This will reduce high turnover of investors at expiry of tax holidays and retain revenue forgone within the economy. Efforts should also be made to allow local firms into the zones since they invariably retain all their profits in the Kenya economy rather than just benefitting foreign investors. This is because over-reliance on foreign investors will not maximize the full benefits from the operation of EPZs.
Effects of Non-Performing Loans on Technical Efficiency of Commercial Banks in Kenya
(Kenyatta University, 2022) Abuga, Frankline Kianyaga; Susan M. Okeri
With the formation of very large banks and increased interbank connectivity, the 1992 financial sector reforms resulted in a shift in market power. They also improved the banking sector's resilience and sustainability. The reforms aimed at doing away with regulatory and structured issues hindering efficiency of the sector. However, the increasing trend of Non-performing loans since 2008 as well as the commercial banks’ decline in profitability since 2014, has been a cause of alarm and distress to customers and stakeholders. Although there exists an authority to monitor the operation of banks still their operations are sub-optimal. To improve operations of banks and create assurance to customers and stakeholders this study investigated the role of non-performing loans on technical efficiency of commercial banks in Kenya. The research was motivated by the enormous evidence that the Kenyan financial system is dominated by the banking sphere but little is known about efficiency statistics and determinants of efficiency scores. The study used Data Envelopment Analysis to measure efficiency scores in Kenya's 26 commercial banks; 9 in tier 1, 7 in tier 2, and 10 in tier 3, that existed over the study period (2014-2019); inputs as well as outputs variables were selected depending on the intermediation roles performed by banks. The variables were split into inputs and outputs. The income (a linear combination of non-interest income and interest income) was treated as output. The inputs were non-interest expenditure, equity capital and interest expenditure. The results revealed that there was inefficiency across all the banking categories. Tier one banks operated at 79.5 percent efficiency scores, tier 2 at 78.4 percent and tier 3 at 68.8 percent level. Tobit regression was utilized to examine the impacts of Non-performing loans on the technical efficiency of commercial banks in Kenya. The study regressed Non-performing loans, total loan to total assets ratio, total assets, equity to total assets ratio, and non-interest expenses to total assets ratio on technical efficiency level obtained in the first part. The findings indicated that Non-performing loans have -0.00000000262 effect on technical efficiency of the commercial banks, however the effect is not significant. This study concluded that if the commercial banks need to keep improving their efficiency indices, they need to minimize their non-performing loans by implementing the following recommendations; investing heavily on loan recovery a customer credit score monitoring, relying on private credit collection agencies, that look to solve disputes and seek to refer accounts to the credit reference bureau. This will avoid pilling of non-performing loans on the financial statement of commercial banks and other long term legal process such as court cases.
Effects of Non-Performing Loans on Technical Efficiency of Commercial Banks in Kenya
(Kenyatta University, 2022-05) Abuga, Frankline Kianyaga; Dr. Susan M. Okeri
With the formation of very large banks and increased interbank connectivity, the 1992 financial sector reforms resulted in a shift in market power. They also improved the banking sector's resilience and sustainability. The reforms aimed at doing away with regulatory and structured issues hindering efficiency of the sector. However, the increasing trend of Non-performing loans since 2008 as well as the commercial banks’ decline in profitability since 2014, has been a cause of alarm and distress to customers and stakeholders. Although there exists an authority to monitor the operation of banks still their operations are sub-optimal. To improve operations of banks and create assurance to customers and stakeholders this study investigated the role of non-performing loans on technical efficiency of commercial banks in Kenya. The research was motivated by the enormous evidence that the Kenyan financial system is dominated by the banking sphere but little is known about efficiency statistics and determinants of efficiency scores. The study used Data Envelopment Analysis to measure efficiency scores in Kenya's 26 commercial banks; 9 in tier 1, 7 in tier 2, and 10 in tier 3, that existed over the study period (2014-2019); inputs as well as outputs variables were selected depending on the intermediation roles performed by banks. The variables were split into inputs and outputs. The income (a linear combination of non-interest income and interest income) was treated as output. The inputs were non-interest expenditure, equity capital and interest expenditure. The results revealed that there was inefficiency across all the banking categories. Tier one banks operated at 79.5 percent efficiency scores, tier 2 at 78.4 percent and tier 3 at 68.8 percent level. Tobit regression was utilized to examine the impacts of Non-performing loans on the technical efficiency of commercial banks in Kenya. The study regressed Non-performing loans, total loan to total assets ratio, total assets, equity to total assets ratio, and non-interest expenses to total assets ratio on technical efficiency level obtained in the first part. The findings indicated that Non-performing loans have -0.00000000262 effect on technical efficiency of the commercial banks, however the effect is not significant. This study concluded that if the commercial banks need to keep improving their efficiency indices, they need to minimize their non-performing loans by implementing the following recommendations; investing heavily on loan recovery a customer credit score monitoring, relying on private credit collection agencies, that look to solve disputes and seek to refer accounts to the credit reference bureau. This will avoid pilling of non-performing loans on the financial statement of commercial banks and other long term legal process such as court cases
Impact of Social Franchising on Healthcare Expenditure within Private Facilities in Embu County Kenya
(Kenyatta University, 2020) Nyaga, Stephen; Susan Okeri
The Kenyan private health sector is one of the most developed in Sub-Saharan Africa and is highly critical in healthcare delivery. It is often the first point of contact of 47 percent of the first quintile of income earners when they fall sick and 33 percent of women seek family planning services in this sector. Despite private sector ability to provide greater choices for customers, in several parts of Kenya, the cost of health services is a great impediment to service utilization. The concept of social franchising attempts to increase access to services in the private sector through various strategies such as capacity building of healthcare service providers, lowering cost of treatments by provision use of vouchers or supply of subsidized medical supplies and demand creation. However, there is scant literature on the impact of social franchising on healthcare expenditure within private healthcare facilities in Embu County, Kenya. This study investigated how social franchising has affected the consumer expenditure on private healthcare services namely family planning and children treatment services. The family planning methods included three-month short term family planning method Depo-Provera and long term family planning methods IUCD and Norplant’s implants which are supported by social franchisors. The study used a cross-section descriptive study design and conducted a cluster sampling in communities near franchised and non-franchised private health clinics in Embu County. The study used a total of 215 responses analyzed with STATA 14. Descriptive statistics used in this study include mean, median, and frequencies and inferential statistics include binary logistic regression with marginal effects and propensity score matching to determine the impact of social franchising on healthcare expenditure. The results reveal that expenditure on children's illnesses treatments and that of short-term family planning services were not statistically different between franchised and non-franchised health facilities. The study however found that there is a huge variance on the expenditure of long-term family planning services between the two classes of clinics with women in franchised health facilities paying on average $4.5 less due to provision of vouchers by the franchisors. The study recommends expansion of social franchisors network to reach bottom of economic pyramid and scaling up the capacity building of medical workers through training to improve quality of services provided.
Sports Betting Participation and its Effects on Youths’ Welfare in Kenya
(Kenyatta University, 2021) Gathuru, James Muigai; Jennifer Njaramba
Youths in Kenya have been placing bets on football games, with the hope of winning money and as a form of leisure. Participation in sports betting in Kenya has been increasing since 2013. The number of firms registered to provide sports betting services have increased from 1 in 2013 to 28 in 2018 attracting 5 million active customers in 2018 from 2 million in 2016. The increased participation in sports betting according to literature comes with economic benefitssuch as increase in income but also social cost which include breakage of families,suicide and brankruptcy among others.Since sports betting has been in existense for less than a decade , its effects on the population has not been well documentedin many countries . The aim of this study was to explore sports betting participation and its effects on youths’ welfare in Kenya. Primary data was collected using a structured questionnaire on a random sample of 343 youth in Kajiado North constituency. For objective one, a logistic regression model was specified and Maximum Likelihood Estimation method used to establish the key factors influencing participation in sports betting among the youth in Kenya. The study findings indicate that genger, technology, employment and income were more likely to increase participation in sports betting. Male youths were found tohave a higher likelihood to participate in sports betting compared to their female counterparts. These resultssupport the assertion that the lower the income an individual earns the higher the probability participatingin sports betting. Individuals who are in full employment, self-employed and in part-time employment have a higher likelihood to participate in sports relative to youths who are not employed. The second objective was to determine the effect of sports betting participation on youth welfare. A linear model was specified and Two Staged Least Squares estimation method used to obtain estimates.The results found that there was a negative welfare effect on individuals participating in sports betting. The study recommends sensitizations of the youths on the negative effects of sports betting and employment creation to deter youth from participating in sports betting as a source of income.

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