MST-Department of Accounting and Finance

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International Financial Reporting Standard 9 and Performance of Commercial Banks in Kenya
(Kenyatta University, 2025-09) Thogo, Mburu Daniel
Despite the implementation of International Financial Reporting Standard 9 (IFRS 9) aimed at strengthening bank financial performance through robust credit risk management and forward-looking loan loss provisioning, conflicting evidence exists regarding its actual impact on commercial bank performance. Since IFRS 9's global implementation in 2018, studies have produced mixed results, with some indicating adverse effects on financial performance due to early recognition of expected credit loss provisions, while others suggest positive outcomes. In Kenya's context specifically, the banking sector has experienced continued consolidation and performance disparities across different bank tiers, raising questions about IFRS 9's effectiveness in achieving its intended objectives. Commercial banks serve as key intermediaries in resource allocation, facilitating fund flows from depositors to investors. Following the 2007-2008 financial crisis, the International Accounting Standards Board introduced IFRS 9 in 2014 to replace IAS 39, establishing a forward-looking expected credit loss framework designed to enhance financial stability and transparency. The purpose of this research was to analyze the influence of IFRS 9 on the financial performance of commercial banks in Kenya. The specific objectives examined the effects of loan loss provisioning, credit risk management, and capital adequacy on bank performance under the IFRS 9 framework, with bank competition tested as a moderating variable. The study was grounded in Credit Risk Theory, Asymmetric Information Theory, Agency Theory, Basel Capital Adequacy Framework, and Structure-Conduct-Performance Theory. A positivist philosophy and longitudinal research design were adopted, utilizing secondary panel data from all 39 commercial banks in Kenya over the period 2018-2022. Data was obtained from audited financial statements and Central Bank of Kenya supervision reports. Descriptive statistics and panel regression analysis were employed for data analysis, with comprehensive diagnostic tests conducted to ensure model validity. The findings revealed positive significant effects of loan loss provisioning (β = 0.402, p < 0.001), credit risk management (β = 0.737, p < 0.001), and capital adequacy (β = 0.188, p < 0.05) on bank performance measured by return on assets. Bank competition, measured through market share concentration, was found to significantly moderate these relationships, with the moderation model explaining 45.71% of performance variance compared to 40.32% in the direct effects model. The study recommends that bank managers enhance loan loss provisioning practices as a strategic tool rather than viewing provisions as performance constraints, maintain adequate capital buffers to support regulatory compliance and lending operations, and pursue market share growth strategies to leverage competitive advantages under IFRS 9. These findings contribute to the understanding of how international accounting standards can create competitive advantages when properly implemented in emerging market banking sectors.
Financial Literacy and Financial Growth of Small and Micro Enterprises in Embu Town, Kenya
(Kenyatta University, 2025-08) Nyaga, Rosemary Njeri
The small and medium-sized enterprises (SMEs) located in Embu Town, Kenya, have encountered significant challenges that have hindered their ability to achieve their financial growth objectives. Statistics show that only about 30% of SMEs in Embu have access to formal financial services, while around 50% rely on personal savings or informal sources for funding. Additionally, 70% of loan applicants were denied or received less than requested, and interest rates range from 14% to 18%, which many SMEs consider prohibitively high. As a result, many SMEs in this region find themselves struggling to realize their full potential and contribute to the local economy as they had initially intended. This study examined how financial literacy influences the financial growth of small and micro enterprises in Embu Town, Kenya. Specifically, it assessed the impact of budgeting skills, financial planning, and debt management on SME financial growth. The research was anchored on pecking order theory, modern portfolio theory, behavioral finance theory, and growth theory. A descriptive research design was employed, targeting 126 registered SMEs in Embu Town, with all SME owners participating. The study used stratified sampling method to sample respondents as per their SME group. Simple random sampling method was used in selecting the respondents. The sample size was 95 respondents. Data collection was conducted through a structured questionnaire, validated using a content validity test involving 12 respondents. Reliability was evaluated through the Cronbach alpha test. The study obtained quantitative data, which was analyzed using descriptive statistics such as means and standard deviations. Diagnostic tests conducted included normality, multicollinearity, and heteroscedasticity assessments. Inferential analyses, such as correlation and multiple regression, were performed. The results were displayed through tables and figures. The study identified a significant positive impact of budgeting skills, financial planning, and debt management on financial growth. It concludes that efficient budgeting allows business owners to develop a clear understanding of their financial status, facilitating effective tracking of income and expenditures. Financial planning enables SMEs to allocate their resources more efficiently enabling SMEs to prioritize investments in areas that yield the highest returns, thereby optimizing their operational efficiency and proper debt management allows SMEs to meet their operational expenses, pay suppliers on time, and invest in growth opportunities without the constant worry of financial strain. The study suggests that SMEs prioritize hosting frequent workshops on budgeting strategies to equip entrepreneurs with vital financial skills. SMEs should develop tailored financial literacy programs for local entrepreneurs, covering key areas like budgeting, cash flow management, and investment strategies to enhance informed financial decision-making. Providing financial literacy training can also equip entrepreneurs with the knowledge needed to manage debt effectively
Capital Structure and Profitability of Deposit Taking Savings and Credit Cooperative Societies in Nairobi City County, Kenya
(Kenyatta University, 2025-10) Abduba, Godana Dida
The profitability of SACCOs in Kenya has become a growing concern despite their critical role in promoting financial inclusion and economic empowerment. Many SACCOs continue to record fluctuating and, in some cases, declining profitability levels, with increasing financing costs, inefficient capital utilization, and weak liquidity positions undermining their sustainability. The total ROA has significantly decreased from an average of 2.01% in 2017 to 1.01% in 2022. Inefficient management of debt and equity financing has limited operational performance and profitability, yet there is limited empirical evidence on how different capital structure components influence SACCO profitability in Kenya. Adopting a positivist philosophy and an explanatory research design, the study undertakes a census of all 42 formally registered deposit-taking SACCOs in Nairobi City County, analyzing secondary financial data spanning the period 2018–2023. Data analysis involved descriptive statistics to summarize financial performance, correlation and regression analysis to test hypothesized relationships, and moderation analysis to explore the influence of liquidity, all conducted using STATA software. The findings reveal that long-term debt and internal equity have a significant positive effect on SACCO profitability whereas short-term debt and external equity do not exhibit significant effects (p > 0.05). Liquidity significantly moderates the, highlighting its critical role in financial stability. The study concludes that SACCOs should adopt a conservative approach to long-term debt financing, prioritize internal equity for sustainable growth, limit reliance on short-term debt, and maintain adequate liquidity to optimize profitability. These findings provide practical insights for SACCO managers, policymakers, and regulators seeking to strengthen the financial performance and resilience of Kenya’s SACCO sector.
Financial Risk Hedging and Financial Performance of Commercial Banks Listed in Nairobi Securities Exchange, Kenya
(Kenyatta University, 2025-11) Mohamud, Ahmed Mohamed
Commercial bank contributes economic growth that is the GDP worldwide but there is no clearly compounded percentage to show how much contributed by commercial banks worldwide each country has its own percentage in UK 177% GDP and USA 184% of GDP in 2021 as same as African no single percentage but each country has its own percentage like south Africa 58.6%.In Kenya financial institutions specially commercial banks play key role in economy development by contributing 47.1% growth of GDP in 2021; they receive and lend money to the investors. Due to the nature of their function’s commercial banks face financial risks that originate from the market which affects their financial performance. In the past 10 years, the commercial Banks reported decline of Return on Asset. The hedging techniques are tools used to minimize the financial risks that can affects value of firms. This study's specific goal is to determine whether financial risk hedging and Kenyan commercial banks' financial performance which are publicly traded on the Nairobi Security Exchange (NSE) are related. The study's specific objectives include forward contract, future contract, currency diversification of currencies, and swaps hence bank size is used as moderating variables. The agency theory, profit maximization theory, Modern portfolio theory, Enterprise risk management theory and capital asset pricing theory are all supporting hypotheses in the study. The study used a descriptive correlational approach to target all publicly traded commercial banks in Kenya and conducted a census. Secondary data was gathered annually over a five-year period (2017-2021) from publications by the Nairobi Securities Exchange and the respective commercial banks using a data collection form. Normality, multicollinearity, heteroscedasticity, and stationarity tests were performed as part of the diagnostic process, where hence the data collected shown normality. Means and standard deviation were used for descriptive statistics. Correlation and regression analysis were used to test hypotheses and develop conclusions. The correlation analysis revealed that using forward contracts as a hedging strategy has a strong positive and significant impact on financial performance. The futures, swaps, and currency diversifications also they had positive correlation against financial performance,hence they significantly related. The regression anaylsis was used to test the hypothesis hence the study shiown that the null hypothesis was rejected and indicated that there was strong and positive relationship between the indepedent variables; forwad contructs,future contracts swaps and currency diversifications and dependent variables which is financial performance of commercial banks. Size had a strong impact on between risk hedging and financial performance which was the larger size the higher the risk. The study suggested that the commercial bank to use on more financial derivatives as risk hedging hence it mitigates the risk and adds value to firms . the CBK Kenya and other regulatory bodies should encourage and offer more traning in financial derivatives since it indroduced recenctly that is 2019.
Firm Characteristics and Financial Stability of Insurance Companies, Kenya
(Kenyatta University, 2025-11) Ndwiga, Ruth Marie Mwende
The stability of the financial industry, along with the broader health of the national economy, was adversely affected by instability within the sector. Such instability exposed financial companies to numerous disruptions, potentially leading to insolvency and eventual closure due to the high costs involved in maintaining stability in intermediary roles. Insurance companies in Kenya experienced significant challenges to their financial stability between 2018 and 2022, largely linked to inadequate attention to firm characteristics. The study investigated firm characteristics that affect financial stability of insurance companies in Kenya. In particular, it examined how capital adequacy, premium growth, and firm liquidity influenced financial stability. The research also evaluated the moderating effect of firm size on the association between firm characteristics and financial stability. This research was founded on the theoretical framework of agency theory, economies of scale theory, capital buffer theory, and liquidity preference theory. The research was descriptive in nature and targeted all 56 insurance firms in Kenya. The secondary information was sourced using the data provided by the Insurance Regulatory Authority and the financial records of the companies between the years 2018 and 2023. Quantitative research was employed, with descriptive statistics and inferential analysis being applied. Correlation and panel data regression were conducted. The level of significance of the results was 5%. The diagnostic tests were heteroskedasticity, multicollinearity, normality, autocorrelation, stationarity, and the Hausman test to validate the results. Ethical considerations were upheld through the use of authorized data sources, confidentiality of firm records, and compliance with academic integrity standards. The research concluded that capital adequacy (β =0.423, p<0.05) and premium growth (β =0.315, p<0.05) had a positive influence on financial stability whereas firm liquidity (β =-0.278, p<0.05) had a negative impact. Firm size moderated these relationships (β =0.192, p<0.05), improving financial stability. The results emphasized the importance of high capital cushions and premium growth strategies that are sustainable. The results were informative to policymakers, regulators, and insurance companies to improve financial stability with specific strategies aimed at premium growth and liquidity management. The study indicated the direction of future research on other moderating factors and the exterior nomic factors that are having a positive impact on insurance corporations in Kenya
Microfinance Interventions and Growth of Small-Scale Enterprises in Kiambu County, Kenya
(Kenyatta University, 2025-10) Mungai Ruth Njeri
This study sought to evaluate the influence of microfinance interventions on the expansion of small and medium-sized enterprises (SMEs) within Kiambu County, Kenya. The specific objective of the study were; to determine the effect of financing intervention on growth of small and medium enterprises in Kiambu county Kenya, to determine the effects of financial literacy education on growth of small and medium enterprises in Kiambu county Kenya, to evaluate the effect of managerial capacity building on growth of small and medium enterprises in Kiambu county and to assess the effect of market networking on growth of small and medium enterprises in Kiambu county Kenya. The research concentrated on four primary support mechanisms provided by microfinance institutions to SMEs: financial accessibility, enhancement of financial management capabilities, instruction in business administration, and connections to potential clientele. The study was anchored in the Pecking Order Theory, Network Theory, and Evolutionary Theory. A stratified random sampling approach was employed to select 398 SMEs, and data collection followed a descriptive research design. Participants included either proprietors or organizational managers. Quantitative data were analyzed through both descriptive and inferential statistical techniques, with regression analysis executed using SPSS software. Validity tests and diagnostic procedures, including normality, heteroscedasticity, and multicollinearity, were undertaken to guarantee the accuracy and reliability of the findings. The study was conducted while adhering to ethical principles and ensuring the confidentiality of the data. The results showed that financial initiatives contributed to increases in SME growth (p <0.05). Financial literacy positively influenced SME growth at a 95% confidence level (p < 0.05). The results showed that managerial capacity building had a positive influence on SME growth (p < 0.05). Engaging in market networking significantly contributed to the growth of SMEs (p = 0.027). The study concluded that microfinance institutions provide comprehensive support, expand outreach initiatives, improve networking opportunities, leverage technology, and work together with public and development partners to boost SME growth. The study therefore recommended that government officials and policymakers should collaborate with Microfinance institutions to design flexible loan products that suit the operational realities of the small businesses while minimizing the risk of default. It is also recommended that Microfinance institutions should strengthen their financial literacy programs while incorporating digital forms of education to equip small business owners with skills on how to manage loans and other investments effectively, and that the training should be practical and need-based, delivered in formats that accommodate varying literacy levels in both urban and rural establishments.
Internal Control Systems and Financial Performance of Kenya Power and Lighting Company
(Kenyatta University, 2025-06) Njihia, Jeffrey Njoroge
Kenya Power's recent financial performance, particularly its Return on Assets (ROA) over the past five years, has raised concerns. In 2018, the ROA was 1.01%, but subsequent years saw fluctuations, with a low of -1.71% in 2020. The most recent data for 2022 indicates a decrease of -1.23%, underscoring the need of analyzing the influence of internal control procedures on this pattern. In order to address these issues, the study set out to assess the financial performance and the internal governance mechanisms of Kenya Power and Lighting Company within the Central Rift Region. This research sought to provide a comprehensive analysis of the linkage between control structures and financial outcomes in the energy industry. Accordingly, it aimed to evaluate the influence of these internal control measures on the financial results of Kenya Power in the Central Rift Region. The research specifically aimed to determine the impact of inventory audits, cash reconciliations, cash management, and division of tasks on Kenya Power's financial performance in the Central Rift Region. This investigation was informed by the theories of agency, attribution, and dependability. The research design used in this study was quantitative. A sample of 62 employees was chosen using a proportionate stratified random sampling approach from the target population, which included 155 employees from the finance division of all Kenya Power Central Rift districts. To gather information, the researcher used a standardized questionnaire. Seven workers, or 10% of the sample total, were randomly given questionnaires as part of a pilot research at Kenya Power in the Central Rift. The credibility of the material was verified through an assessment of construct literature. Reliability was measured using Cronbach's alpha coefficient. Data collection followed the drop-and-pick-later approach. SPSS 25 was utilized for data analysis, incorporating both descriptive statistics—such as proportions, percentages, averages, and standard deviations—and inferential statistics, including regression and correlation. The research's findings were shown in tables. According to the report, Kenya Power has enough workers in the Central Rift Region to do every assignment. It also revealed that the organization regularly does surprise cash checks and that each employee's authority and duty are well-defined. Regression research revealed that cash management, inventory audits, cash reconciliations, and division of responsibilities all had a favourable and statistically significant impact on Kenya Power's financial performance in the Central Rift Region. According to the report, Kenya Power should examine and update its personnel rules on a regular basis to reflect evolving industry standards and organizational demands. Furthermore, funding ongoing training and development initiatives would provide staff members the abilities and know-how to succeed in their positions. In order to improve operational efficiency, the report also suggested that Kenya Power use technological solutions, such as inventory management software, to automate inventory monitoring and expedite record-keeping procedures
Corporate Governance and Financial Performance of Commercial Banks in Kenya
(Kenyatta University, 2025-10) Muhindi, Alfred Okello
Commercial banks are key financial intermediaries and major drivers of economic development worldwide. The sustainability of these banks, like any organization, depends on their financial performance. In Kenya, the financial performance of commercial banks has shown variability, prompting consolidations and takeovers in some institutions and the failure of others due to poor management, weak internal controls, and inadequate corporate governance. This study examined the relationship between corporate governance and the financial performance of commercial banks in Kenya. Specifically, it evaluated the effects of ownership structure, board diversity, audit quality, and board transparency on financial performance, while also assessing the moderating role of bank size. The study was anchored in Agency Theory, Lending Credibility Theory, Stakeholder Theory, and Resource Dependency Theory. A correlational research design was employed, focusing on thirty-eight officially listed commercial banks in Kenya. Secondary data were collected from published financial statements and analyzed using descriptive statistics, correlation analysis, and multivariate regression techniques. Validation tests, including assessments for normality, autocorrelation, multicollinearity, and heteroscedasticity, were conducted to ensure the reliability of the regression models. The results revealed that ownership structure had a negative impact on financial performance, while board diversity, audit quality, and bank size positively and significantly influenced financial outcomes. Board transparency exhibited a minor negative effect on performance. Bank size significantly moderated the relationship between corporate governance and financial performance. The findings underscore the critical role of corporate governance in enhancing the financial performance of commercial banks and recommend strengthening board diversity, improving audit processes, and strategically managing ownership and transparency practices. The study provides valuable insights for bank managers, policymakers, regulators, and scholars seeking to optimize financial performance in the banking sector. Additionally, validation checks such as the normalcy assessment, autocorrelation examination, collinearity test, and heteroscedasticity evaluation were conducted to confirm the foundational premises of the regression model were satisfied. The study revealed that proprietorship arrangement adversely impacts financial performance, while directorial variety, scrutiny excellence, and institution scale have beneficial and notable impacts. Council openness exhibited a minor yet adverse impact on the fiscal efficacy of Kenyan commercial banks. Moreover, institution scale notably influenced the relationships between organizational oversight frameworks and performance. The study infers that corporate governance serves a vital function in boosting monetary outcomes in commercial banks, particularly when institution scale is factored in. It advises bolstering directorial variety, refining examination procedures, and tactically overseeing proprietorship and transparency policies to optimize financial performance. The study's findings will be valuable to administering commercial banks, strategists, overseers, academics, and progressing finance theories.
Contextual Factors and Quality of Financial Reporting in Selected Public Technical Training Institutes in Kenya
(Kenyatta University, 2025-11) Chemogos, Peter Kiprotich
This study explored the contextual factors and quality of financial reporting in selected Technical Training Institutes (TTIs) in Kenya. Governments in today’s world continue to value financial reports and consider such reports valuable aids that can contribute positively to public confidence in improving public services. Nonetheless, due to the challenges in producing reliable TTIs' financial reports, the quality of financial reporting hinders the competitiveness of TTIs in today’s economy. Such circumstances reveal the need for significant change and improvement in the reporting systems in TVET institutions. The present literature on this subject remains scant. Therefore, this review endeavoured to cover this literature gap. Its specific research objectives were to: To explore internal control system impacts on quality of financial reporting of Kenya’s public TTIs, To ascertain International Public Sector Accounting Standards (IPSAS) adoption effects on quality of financial reporting of Kenya’s public TTIs, To identify audit committee effects on quality of financial reporting of Kenya’s public TTIs, To examine approved budget impacts on quality of financial reporting of Kenya’s public TTIs. The theoretical basis for the study drew upon Accounting Theory, Information Asymmetry Theory, and Agency Theory. The researcher collected primary data using questionnaires with closed and open questions. In selecting the participants, only staff members and board officials from ten TTIs across Kenya were used through a random sampling technique by targeting 145 participants. Data was analysed via multiple linear regression and descriptive methods then summarized in text and tables. According to study outcomes, internal controls, audit committee, IPSAS adoption, and approved budget implementation were revealed as the key factors of financial reporting quality. Consequently, internal control systems were established to have the most significant effect on the results reporting process, whilst audit committees, IPSAS standards, and budget execution have also been revealed to be crucial. This study established that internal control is significant for increasing the accuracy of the reports, reliability, and efficiency of the reporting process but can only be attained when it is strong and effective. Functional audit committees also statistically notably, positively related to financial reporting quality. For IPSAS adoption, implication was made clear that reporting practices were to be enhanced, and the observation done showed a valid and positive association with IPSAS, even though implementation in the public sector of Kenya is still underway. These outcomes audit committee’s vitality in enhancing internal and financial reporting and improving the accountability. It is beneficial to enhance financial reporting frameworks in public institutions to identify core facets regarding the financial statements’ integrity. It also attaches great significance to internal control systems as every financial activity's reliable and sound framework. The results are believed to enhance confidence in utilizing funds sourced from donors within the public sector entities. Therefore, the study suggests that stewardship authorities should demand compliance with sound financial and reporting practices and ensure that all the organizations in the public sector adhere to the set standards. This, in turn, calls for improved internal control procedures and audit control mechanisms to improve the reliability of the TTIs and similar entities’ financial reports.
Corporate Board Diversity and Profitability of Construction and Allied Firms Listed At the Nairobi Securities Exchange, Kenya
(Kenyatta University, 2025-11) Hassan, Grace Ndanu
Globally, organizations in the construction and allied industry contribute greatly to the expansion and advancement of both the building sector and society as a whole serve as key pillars for Kenya's financial system. However, numerous indexed firms at the Nairobi Securities Exchange have experienced great financial challenges in recent years because of a number of concerns regarding control, such as board diversity which often resulted in the possibility of project stalling and has led to the sequestration, reorganization, and delisting of certain firms. The goal of this investigation is to look into the connection between corporate board diversity and the profitability of construction and related companies that Nairobi Securities Exchange listed in Kenya. The investigation also evaluated the impact of board nationality, education level, age, and gender composition on the firms' profitability. The theories of Agency, stewardship and stakeholder were all used as the study's theoretical foundation. The study and data analysis was executed using a descriptive research design. The people of interest for the research was the five construction and related companies that are registered with the Nairobi Securities Exchange. There was a design of census sampling used. The Nairobi Securities Exchange construction and affiliated companies' financial reports was a source of secondary data. Panel technique regression was used to evaluate the data and determine how the investigated variables from the years 2017 to 2023 relate to one another. Several evaluation analyses were carried out to assess the suitability of the study framework. Ethical standards was put into considerations and adhered to accordingly. Findings from the outcome noted that board age has an insignificant positive effect on the profitability of the listed firms in Kenya with the conclusion that board age does not play a critical role in enhancing the firms’ profitability. Indicatively obtained from the outcome, board gender composition has an insignificantly positive effect on the profitability of these firms and conclusively arrived that board-composition performs an insignificant function in the determination of these firms profitability. Also, unveiled by the outcome, board education significantly affects the profitability of these firms positively with the study concluding that the board’s educational background plays a major role in driving profitability of these firms. Unraveled by the outcome, board nationality has a significant positive effect on the listed firms’ profitability leading to the conclusion that the nationality of the board significantly drives profitability of the listed firms. The recommendation is that policymakers should implement initiatives aimed at increasing the educational qualifications of board members. This could involve establishing a regulatory framework that mandates a minimum level of educational attainment for board members, particularly in fields relevant to construction and management. Companies can implement targeted outreach programs to attract international talent and establish partnerships with global organizations to facilitate knowledge exchange. The study reinforces the foundations of agency, stewardship, and
Macroeconomic Variables and Foreign Direct Investment in Kenya
(Kenyatta University, 2025-11) Mukabane, Gloria Valerie
Foreign direct investment has emerged as a noteworthy source of capital flow that links the economies of several emerging nations, including Kenya. As a result, it has become a crucial driver of economic progress in these nations. Over time, foreign direct investments in Kenya have changed, notwithstanding their importance to economic progress. When foreign investors decide to invest or infuse capital into various enterprises, macroeconomic considerations play a significant role. Determining whether Kenya's macroeconomic conditions impact Foreign Direct Investment is therefore crucial. The primary objective of the present investigation is to explore the effects of macroeconomic factors on foreign direct investment in Kenya. The research analysed how inflation, the interest rate, the foreign exchange rate, taxation policy, and the rate of gross domestic product growth affect the inflow of foreign direct investment into Kenya. The study is based on the eclectic paradigm, the purchasing power parity theory, the macroeconomic stability theory and neoclassical growth theory. The research was based on a quantitative correlational type of study design, whereby secondary quarterly time-series data collected by the Central Bank of Kenya and the Kenya National Bureau of statistics were used. The study period is the year 1990 to 2024. Sample techniques, investigation approach, data collection strategies, and analysis methods were presented. The information collected was thereafter subjected to different diagnostic tests (heteroscedasticity, multicollinearity, stationarity, serial correlation, and normality tests), which are relevant for panel data regression to ensure the validity of the results to be obtained. The data was analyzed based on inferential as well as descriptive statistics and multiple regression modeling. All ethical considerations were duly followed. Findings disclosed that the interest rate negatively and significantly affected foreign direct investment. Inflation rate positively and significantly determines foreign direct investment. Exchange rate influence is said to have affected foreign direct investments positively. Taxation policy provided a significantly positive effect on foreign direct investment. GDP growth rate has a significantly positive effect on foreign direct investment in Kenya. The study recommends that the Central Bank of Kenya ought to pursue a policy of keeping interest rates at rates that do not promote macroeconomic instability, but rates that are not so high as to cause a rise in the cost of borrowing funds that could push away any foreign investors. This was to make Kenya an attractive place to investors because it was easier to earn money in the stable and predictable interest rate environment, fostering a steady flow of capital in the form of investments towards economic growth and development. Such should be accompanied by sensible coordination of fiscal and exchange rate policy so as to achieve a generally supportive climate within which investment takes place
Macroeconomic Variables and Financial Performance of Commercial Banks in Kenya
(Kenyatta University, 2025-09) Mungai, Francis Njenga
Kenya’s banking sector plays a pivotal role in financial intermediation by connecting savers with borrowers, facilitating international transactions, and supporting overall economic growth. However, in recent years the sector has been exposed to domestic and global shocks that have strained financial stability and challenged profitability. This study sought to examine the influence of selected macroeconomic variables; namely inflation, interest rates, money supply, and exchange rate fluctuations, on the financial performance of all 42 licensed commercial banks in Kenya. Financial performance was measured using return on assets, with firm size considered as a moderating factor. The analysis covered the period 2018 to 2023, a timeframe marked by major regulatory reforms and the effects of the COVID-19 pandemic. Guided by theories of interest, balance of payments, deflation, organization, and the quantity theory of money, the study adopted an explanatory research design and relied on secondary data drawn from banks’ audited financial statements and publications of the Central Bank of Kenya and the Kenya National Bureau of Statistics. Data analysis employed descriptive statistics, multiple regression, correlation tests, and diagnostic checks. The results revealed that inflation, exchange rate, interest rate, and money supply each had a positive and statistically significant effect on financial performance, with interest rate effects being the strongest. The findings imply that rising inflation and interest rates enhance bank profitability through higher loan pricing, while exchange rate movements and money supply growth create opportunities for income diversification and liquidity management. The study concludes that macroeconomic conditions materially shape banking outcomes, with larger banks benefiting more due to economies of scale. It recommends that banks adopt proactive interest rate adjustments, diversify foreign currency operations, engage in forward contracts to hedge against exchange rate risks, and expand into underserved market segments to strengthen resilience. Policymakers, particularly the Central Bank of Kenya, should employ balanced monetary interventions that stabilize inflation and exchange rate volatility without stifling bank profitability. This study contributes to the existing body of knowledge by providing empirical evidence on how macroeconomic variables jointly and significantly influence bank performance in an African emerging economy context, offering practical insights for both regulators and bank managers in formulating strategies to enhance financial sector stability and growth.
Firm Characteristics and Financial Performance of Licensed Microfinance Banks in Kenya
(Kenyatta University, 2025-09) Muli, Munyithya Veronica
Microfinance institutions (MFIs) significantly contribute to the financial sector by providing credit facilities to low-income earners and the unbanked population. However, the rising economic crisis in Kenya has adversely affected the financial performance of MFIs, raising concerns about their sustainability. This study aimed to investigate how firm characteristics such as capital adequacy, bank size, and management efficiency impact the financial health of microfinance banks in Kenya. The research spanned a six-year period from 2018 to 2023, a time marked by rapid expansion in the microfinance sector and significant economic challenges, including the devaluation of the Kenyan shilling, corporate consolidation, and the takeover of financial institutions. The theoretical framework of the study was underpinned by Capital Buffer Theory, Efficiency Structure Theory, and Performance Management Theory. A descriptive research design was employed, collected secondary data from the published financial reports of the 13 licensed microfinance banks in Kenya, using a census sampling method. Ethical and logistical standards were rigorously followed, ensuring voluntary participation and maintaining data confidentiality. The panel regression analysis results revealed that capital adequacy and management efficiency have a significant positive impact on the financial performance of licensed microfinance banks in Kenya. Capital adequacy showed a positive relationship with ROA, with a coefficient of 2.4464 (SE = 0.3452, p = 0.021), indicating that a unit increase in capital leads to a 2.4464-unit increase in ROA. This supports the hypothesis that well-capitalized banks perform better financially. Management efficiency was the strongest predictor, with a coefficient of 3.9905 (SE = 1.181, p = 0.001), suggesting that improved management practices increase ROA by 3.9905 units. Bank size also showed a positive effect on ROA, with a coefficient of 1.1403 (SE = 0.3667, p = 0.003), indicating that larger banks tend to have higher profitability. The model was statistically significant (F = 9.084, p < 0.001) and explained 37.2% of the variation in ROA, confirming that capital adequacy and management efficiency play a crucial role in enhancing financial performance. Conclusions from the study indicated that firm characteristics significantly influenced financial performance. Larger banks, due to economies of scale and diversified portfolios, tend to perform better, implying that growth and expansion strategies can enhance financial stability. Capital adequacy emerged as a crucial determinant of financial health, with well-capitalized banks being more resilient to financial shocks and better positioned for growth. Management efficiency also played a key role, with better-managed institutions showing higher profitability through cost control and optimal resource allocation. These insights can guide policymakers and bank managers in crafting strategies to bolster the financial resilience of MFIs, with an emphasis on maintaining robust capital adequacy ratios and enhancing managerial capabilities to drive long-term sustainability and competitiveness
Public Financial Management Practices and Financial Sustainability of Narok County Government, Kenya
(Kenyatta University, 2025-10) Sanoe, Stephen Simai
Narok County's financial stability has been called into question following major fluctuations in its Own Source Revenue. In 2022/2023 fiscal year, the county faced a substantial shortfall of 32.07%, with actual revenue falling from the projected Kshs 4,516.6 million to Kshs 3,067.67 million, as outlined in Auditor General's 2024 report. This shortfall raises concerns about the county's fiscal health and its aptitude to fund indispensable services and initiatives, where actual funds allocated to development expenditure decreased from an initial estimate of Kshs 4,827,658,645 at the beginning of the financial year to Kshs 3,969,520,819 by the end of that year. The County faces overall growth rate of only 0.97% over the past decade indicating a pressing need for enhanced revenue generation strategies (Office of the Auditor-General, 2023). While effective financial management practices are essential for improving revenue collection, allocating resources appropriately, and promoting accountability and transparency, there was a dearth of literature addressing the specific practices that could bolster financial sustainability in county governments, particularly within the context of Narok County. Consequently, this study aimed to investigate PFM practices on Narok County Government financial sustainability with specifics on impacts of financial planning, revenue mobilization, financial reporting, and internal control. Fiscal Sociology, Agency, Stewardship and Institutional Theories was anchor the study. The target population comprises 76 respondents, including FED department, employees, a member of county assembly, director and eight chief officers. For representative sampling sample size was obtained by random stratification to include 62 participants based on established statistical methods. Data was collected using a questionnaires as well as data extraction tool for the secondary data. Research tool’s reliability and validity was assessed through expert consultations and Cronbach's Alpha analysis, while ethical considerations ensured informed consent and participant confidentiality. Other diagnostic tests included normality, linearity, multicollinearlity and heteroskedasticity. Using SPSS, data underwent descriptive statistics and regression analysis, adhering to ethical standards throughout the research process. The study established that financial planning, resource mobilization, financial reporting and internal control positively significantly affected financial sustainability of Narok County. The study concludes that proper financial planning assists the County in allocating resources in an effective manner making sure that money is geared towards the most needed areas like in the health, education and infrastructure sectors. Proper resource mobilization enables the County in diversifying its sources of funds minimizing dependence on one way of generating income. Effective financial reporting promotes transparency with the County’s operations making stakeholder have a clearer perspective of the County’s financial health. Proper implementation of internal control systems makes the County be transparent and accountable it its financial operations preventing fraud and misappropriation of County’s resources thus protecting the public funds. It was recommended that a complete system for managing county finances that is in line with its strategic objectives to ensure that the financial activities back long term sustainability be developed. The County should develop an all-encompassing structure for allocating resource by prioritizing resources. The study recommends that County should develop a comprehensive risk management framework to identify and mitigate financial risks within Narok County
Tech-Driven Financial Services, Credit Information Sharing and Credit Risk of Selected Commercial Banks in Kenya
(Kenyatta University, 2025-11) Kamau, Robert Wandu
Lending risk, the possibility of borrowers defaulting on loans, is a significant concern for financial institutions in Kenya. Financial institutions have been facing many challenges with high NPL ratios, indicating a concerning number of loan defaults. This has raised concern among different stakeholders in the sector. It’s also a concern for the CBK who is the regulator of banks in Kenya. The economy is driven by commercial banks and therefore any instability of the banking sector can lead to serious economic shock. The study therefore probed into impacts of tech-driven financial services and credit information sharing on selected Kenyan commercial credit risks. Its specific objective was to examine the effect Internet Banking, Mobile Banking, ATM Banking) on the dependent variable (Credit Risk) as well as investigating credit information sharing’ moderating role in these relationships. Theories of stakeholder, institutional and Isomorphism steered the review. This research considered 39 Kenyan commercial banks operational from 2014-2023. Secondary data collected was summarized, coded, and tabulated using STATA 13. Diagnostic tests, including, heteroscedasticity, multi-collinearity, and normality tests were performed. Random Effect Regression Model was used for estimation and findings revealed that all three explanatory variables significantly positively affected Kenyan commercial banks’ credit risk. Credit information sharing did not significantly moderate this information. This suggests that while credit information sharing plays an essential role in reducing credit risk, it may not substantially credit risk’s relationship with tech-driven financial services. The study concluded that while the rise of tech-driven financial services offers tremendous opportunities for increasing financial inclusion and convenience, it also presents challenges in terms of managing credit risk. Given that internet banking, mobile banking, and ATM transactions significantly influence credit risk, commercial banks should strengthen their risk management systems specific to digital platforms.
Audit Committee Attributes and Corporate Governance in State Corporations under the National Treasury in Kenya
(Kenyatta University, 2025-10) Chepngetich, Rhodah
The role of state corporations in national economies is pivotal, given their mandate to implement government policy, provide essential services, and drive socio-economic development. Despite governance frameworks such as the Mwongozo and CMA Codes, challenges persist: between 2019 and 2020, the Office of the Ombudsman recorded 3,831 administrative complaints, the Ethics and Anti-Corruption Commission reported 6,021 corruption cases, and pending bills in state corporations rose from KSh 94.4 billion in 2021 to KSh 379.8 billion in 2024. These statistics indicate weak accountability, poor financial management, and inadequate oversight, underscoring the need for effective audit committees. This study sought to bridge this gap by analyzing the effects of audit committee attributes on corporate governance among state corporations overseen by the National Treasury. By addressing methodological and contextual limitations in previous research, the study aimed to offer evidence-based insights that can inform governance reforms and strengthen accountability mechanisms in Kenya’s state-owned enterprises. The target population comprised 136 respondents from 34 public institutions under the National Treasury. Due to the relatively small population, the study employed a census approach, ensuring that all 136 respondents within these corporations participated. Data were primarily collected using a structured questionnaire. The questionnaire was tested for reliability to produce Cronbach's alpha coefficient and validity using content analysis. Quantitative data analysis involved statistical methods, including the calculation of means and standard deviations, while qualitative data was analysed thematically and descriptively. Additionally, an empirical analysis was conducted to assess the effects of audit committee attributes on the governance of state-owned enterprises. Findings were further illustrated using frequency tables. The data were subjected to heteroscedasticity, multicollinearity, and normality tests to validate the reliability of the multiple regression model. The study was granted ethical clearance by NACOSTI, alongside an authorization letter from Kenyatta University, to uphold participant confidentiality and data integrity. The analysis showed that all four audit committee attributes had significant positive effects on corporate governance. Audit committee independence enhanced objectivity and accountability; committee size contributed to workload distribution and governance coverage; diversity promoted inclusive and balanced decision-making; and expertise had the greatest impact, enabling informed oversight and risk management. The regression model explained 60.4% of the variance in corporate governance, underscoring the relevance of audit committee structure and capability in public sector governance. The study concluded that audit committee attributes are critical determinants of good governance in state corporations. Recommendations include strengthening independence through institutional safeguards, optimizing committee size, institutionalizing diversity via inclusive recruitment, and investing in continuous professional development to enhance expertise. Implementing these measures will improve governance practices, reinforce public trust, and enhance service delivery. The study also provides empirical support for Agency, Stakeholder, Legitimacy, and Upper Echelons theories, offering validated measures of audit committee attributes for future research in public sector governance
Electronic Banking Channels and Financial Inclusion Among Small and Medium-Sized Enterprises in Mogadishu, Somalia
(Kenyatta University, 2025-10) Warsame, Abdiaziz Omar
Small and Medium-sized Enterprises play a vital role in driving economic growth and generating employment opportunities worldwide, including in Mogadishu, Somalia. They stimulate creation of jobs, generation of income, and reduction of poverty, particularly among youth, while promoting social inclusion, gender equality, and cultural preservation. Financial inclusion significantly affects SMEs by offering essential financial services access. Despite the rise of electronic banking channels, many SMEs still struggle to integrate these services into their operations due to low financial literacy, infrastructural challenges, and a lack of trust in digital platforms. This study evaluated electronic banking channels effect on financial inclusion among Mogadishu’s small and medium enterprises. It assessed how mobile, Internet banking, Automated Teller Machine banking, and agency banking affect these enterprises financial inclusion, while allowing for financial literacy role. The following theoretical frameworks; technology acceptance model, financial intermediation theory, and financial repression theory were utilized. An explanatory approach was employed. According to Mogadishu Municipal Authority, there are 5,431 Small and Medium sized Enterprises from various sectors, including retail, services, and manufacturing which served as the target population of this investigation. 461 respondnets were chosen through sampling of random stratification. Data was gathered using a semi-structured questionnaire. Employing descriptive statistics, correlation, and multiple regression analysis were utilize to interpret the quantitative data. Tests of normality, homoscedasticity and multicollinearity were carried out before inferential analysis. Qualitative data underwent content analysis. The analysis findings were illustrated on tables and figures. Findings revealed that mobile banking significantly and positively (β=0.2452; ρ=0.000) affect financial inclusion; internet banks also noted a significant positive (β=0.3633; ρ=0.000) effect on financial inclusion; automated teller machine unveiled also significant positive effect (β=0.2167; ρ=0.000) on financial inclusion while agency banking uncovered inverse (β= -0.0997) and insignificant (ρ=0.082) effect on financial inclusion. Furthermore, financial literacy unveiled an inverse (β= - 0.0606) and insignificant (ρ=0.458) moderating effect on the connection concerning electronic banking channels and financial inclusion of these Mogadishu’s enterprises in Somalia. The survey advocates that the government and financial institutions should collaborate to develop and promote tailored mobile banking solutions specifically designed for SMEs. By addressing the unique needs and difficulties confronted by these enterprises, such as limited access to credit and financial literacy, such initiatives can empower business owners to leverage digital financial services effectively.
Capital Lifecycle and Financial Stability of Women Table Banking Groups in Nakuru County, Kenya
(Kenyatta University, 2025-10) Oguna, Selline Atieno
Poverty remains a significant challenge for women in Sub-Saharan Africa, with many experiencing economic marginalization and limited access to financial resources. While table banking has shown promise in empowering women through microfinance services, the financial stability of these groups in Nakuru County is under threat, with many failing to sustain operations beyond three years. The consistent underperformance and lower Gross Profit Margins compared to national averages highlight critical issues that jeopardize the long-term effectiveness of table banking in the region. This research aimed to ascertain how Capital life cycle influences the fiscal soundness of women's table banking collectives within Nakuru County, Kenya. Specifically, it probed the effect of Capital generation, Capital distribution, Capital deployment, and capital reinvestment on the financial resilience of these groups in Nakuru County, Kenya. The study's timeframe spanned from January 1st, 2021, to December 31st, 2023. It drew from Resource Mobilization Theory, Social capital theory, life cycle hypothesis, and financial intermediation Theory. A descriptive research design was used. The analysis unit comprised 322 table banking groups in Nakuru County. Data was gathered from chairpersons or leaders of each targeted women's group. Nassiuma's formula guided the sampling of 82 groups. Simple random sampling was employed for selection. A questionnaire was used for primary data collection. A preliminary study in Nakuru town involved 8 women's groups. Research instrument reliability was assessed via Cronbach's Alpha. Evaluative assessments such as Normality, Multicollinearity, autocorrelation, Stationarity, heteroscedasticity, and evaluations for constant/stochastic effects were performed. Descriptive (averages, dispersion) and inferential (Panel regressions, Pearson's coefficient) metrics were employed for analysis. Practicable Generalized Least Squares (FGLS) regression denoted noteworthy affirmative influences of Capital Generation (p=0.044), Capital Distribution (p=0.012), and Capital Reinvestment (p=0.0000) on monetary soundness. Conversely, Capital deployment exhibited a statistically significant negative effect (p=0.034) on financial soundness. Coefficient analysis revealed that Capital Generation and Capital Reinvestment showed a slight positive relationship with monetary soundness; Capital Distribution displayed a robust positive relationship with financial soundness, whereas Capital deployment presented a strong negative relationship with financial soundness. The study concluded that increases in Capital Formation, Capital Allocation, and Capital Recycling are positively associated with enhanced financial stability for women’s table banking groups in Nakuru County. However, when Capital Utilization rises, it may lead to difficulties in sustaining stable financial outcomes. Subsequently, it is recommended that women’s table banking groups in Nakuru County focus on strengthening Capital Formation by encouraging savings and efficient resource mobilization. Additionally, improving Capital Allocation processes to ensure that resources are directed towards the most productive and impactful areas can further enhance financial stability. Furthermore, promoting effective Capital Recycling practices will help maintain and improve financial health over time. Finally, caution should be exercised in increasing Capital Utilization, ensuring that it is balanced and does not compromise the group’s overall financial stability
Prudential Guidelines and the Financial Performance of Tier 2 Banks Kenya
(Kenyatta University, 2025-10) Khamusali, John Wenslause
Commercial Banks have an important function in driving the Development of a country. There is a huge necessity for banks to be closely monitored and regulated to provide protection to both those making deposits and those making investments, inorder to ensure overall financial stability. In Kenya, the challenge of effectively overseeing Tier 2 banks in line with Basel guidelines remains unresolved. This research aimed to assess the effect of prudential policies on the financial performance of second-tier banks in Kenya. By exploring key variables such as credit control, liquidity, corporate governance, and capital regulations, the research uncovered the mechanisms that influence financial performance within this sector. The study was framed within several theoretical perspectives, including public interest theory, risk management theory, efficiency theory, and corporate governance theory, to clarify the function of prudential policies in shaping the financial prowess of Tier 2 Commercial Banks. The research focused on 100 bank employees from Nairobi County, utilizing a census sampling approach. A descriptive research design was adopted, with structured questionnaires used to gather data. Ethical concerns were carefully considered and addressed throughout the research. Descriptive and inferential methods of statistics were employed, using SPSS version 25 for data analysis. To ensure the reliability and validity of the data, four diagnostic tests normality, multicollinearity, heteroscedasticity, and Hausman were performed. Descriptive statistics confirmed the appropriateness of the respondents, while inferential analysis revealed that the regulatory factors (credit, liquidity, capital, and corporate governance) showed varying degrees of significance in relation to the financial performance of Tier 2 banks. All four factors had p-values higher than 0.05, indicating that they did not have a statistically significant impact on financial performance. The coefficient of determination (R²) was found to be 0.797, suggesting that the model explains 79.7% of the variation in financial performance. The adjusted R² value of 0.771 indicated that 77.1% of the fluctuations in financial performance could be attributed to the regulatory and governance factors analyzed in the study. Based on these findings, the research recommends that Tier 2 banks reassess their existing prudential policies to improve financial outcomes. It also suggests that the Central Bank of Kenya (CBK) should establish new regulations, procedures, and guidelines aimed at enhancing financial performance. Future research should explore additional factors influencing the financial performance of Tier 2 banks and the broader banking sector
Financial Inclusion and Financial Health of Registered Women Self Help Groups in Kakamega County, Kenya
(Kenyatta University, 2025-11) Murunga, Thomas Imuriai Aquinata
Women’s self-help associations played a pivotal role in alleviating poverty and fostering global economic progress. Despite numerous efforts over time, the objective of attaining financial stability among women remained unmet. As reported in the 2023 SME review, many female-owned enterprises in Kenya failed to reach the expansion phase of their business cycle due to inadequate and costly access to financial services. Strengthening the financial well-being of women’s self-help initiatives contributed to economic empowerment, broader financial inclusion, societal advancement, and transformative change. The primary objective of this study was to assess the effect of financial access on the economic stability of registered women's self-help groups in Kakamega County, Kenya. More precisely, the research sought to investigate the role of financial service availability, utilization, and the standard of financial products on the financial health of these registered collectives. The research framework was anchored in diffusion innovation theory, financial accelerator theory, and knowledge spillover theory. The study adopted a correlational research approach. The target population comprised 1,689 officially registered women’s self-help organizations in Kakamega County. A representative subset of 323 groups was selected based on industry categories, including food establishments, garment production, vegetable vending, fruit sales, cereal trade, kiosk operations, and dairy enterprises. Data were gathered through structured questionnaires. Descriptive statistics involved frequency distributions, percentage allocations, mean values, and standard deviations. Inferential statistical analysis applied Pearson correlation tests and linear regression modeling. The multiple regression equation was structured, and the moderation model was developed. Essential diagnostic evaluations such as normality assessments, multicollinearity diagnostics, and linearity tests were conducted. The study obtained ethical clearance before proceeding with data collection. The regression analysis revealed a moderate to strong positive relationship (R=0.654) between financial inclusion dimensions and women SHGs' financial health. The model explains 49.5% of variance (R²=0.495), which is acceptable for social science research. ANOVA confirmed the model's statistical significance (F=17.3, p<0.001). All predictors access, usage, quality of financial products, and group size significantly contribute to financial health, with access and group size showing strongest influence. Financial inclusion significantly enhances women SHGs' financial well-being in Kakamega County. Access to financial products is fundamental, while effective usage drives stability and growth. Quality services ensure sustained engagement and build institutional trust. Medium-sized groups optimize benefits by balancing operational efficiency with member participation. Therefore, comprehensive financial inclusion, supported by appropriate group structures and quality services, substantially improves registered women SHGs' financial health outcomes. Policymakers should expand rural financial infrastructure, simplify SHG account requirements, and promote tailored financial products with flexible terms. Comprehensive financial literacy programs targeting all members are essential. SHGs should diversify financial portfolios, participate in continuous training, and establish internal governance structures. Financial institutions must design SHG-specific products with collective guarantees, provide multilingual support, simplify processes, and train field officers to enhance women's financial system engagement.

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