MST-Department of Accounting and Finance

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Political Risk, Credit Risk Management and Liquidity of Commercial Banks in Kenya
(Kenyatta University, 2025-10) Warsame, Mohamed Osman
Liquidity has remained a challenge among commercial banks in Kenya. For instance, the ratio of loans against deposits of the said banks stood at 0.740969, 0.74092, 1, 0.713654 and 0.795822 with an average value being 0.798273 across the period 2018, 2019, 2020, 2021 and 2022 respectively. This implies that most of the commercial banks did not have adequate assets as compared to deposits needed to finance customer loan requests which provide evidence of liquidity concerns among commercial banks in Kenya. Commercial banks can play an important role in the economy of developing countries like Kenya through their financial intermediation role, supporting borrowing and investment and hence economic growth. However, the aforementioned concerns imply that Kenya is yet to enjoy the significant role of a banking sector. Thus, this study sought to establish the effect of credit risk management on liquidity of commercial banks in Kenya. More specifically, the link between credit information sharing, loan loss provisioning and lending requirements and liquidity of commercial banks in Kenya with political risk as a moderator variable was considered in this study. The study was guided by the information asymmetry, transaction cost, the modern portfolio theory and liquidity preference theory. Positivist research philosophy was adopted in this study besides explanatory design. The study targeted 39 Kenyan banks and census was used. Information was collected from primary sources on information sharing and lending requirements while secondary data on a period 2018-2022 was gathered on loan loss provisioning and liquidity. The questionnaire was pilot tested before data gathering process among 4 credit managers from commercial banks in Kenya. The reason for pilot testing was to determine reliability of questionnaire while its validity was ensured by supervisor and two experts in the field of finance. Processing of the gathered data was done descriptively and inferentially and presented in tabular and graphical forms. Multicolinearity, normality was conducted as diagnostic tests before regression analysis to test its assumptions. The ethical issues that were considered in this study included appropriate citation and referencing of the information reviewed to avoid plagiarism and voluntary participation by respondents. The findings were that credit information sharing (p<0.05), loan loss provisioning (p<0.05) and lending requirements (p<0.05) had significant effect on liquidityof commercial banks as moderated by political risk (p<0.05). The study concluded that credit risk management and liquidity of commercial banks in Kenya are significantly related with each other with political risk as a moderator variable. It was recommended that Credit Managers working among commercial banks in Kenya should invest in latest technologies for carrying out timely credit information of customers with the licensed Reference Bureaus. The loan officers working with commercial banks in Kenya should diversify into loan portfolio in order to remain stable and have meaningful contribution to the growth of an economy. Managers working with commercial banks in Kenya should effectively invest in lending requirements like land tittle deeds and logbooks in order to improve on their credit risk management which in turn can allow them achieve optimal and required liquidity levels. The government of Kenya should seek to improve on the existing political environment in the country so as to positively influence liquidity level and thus promoting financial stability of the commercial banks
Fundamental Risk Factors and Financial Performance of Insurance Firms in Kenya
(Kenyatta University, 2025-09) Wanyonyi, Douglas Sifuna
The financial performance of Insurance firms holds a vital function in increasing the Insurance sector's market value and leads to the economy's overall growth. There exists substantial empirical evidence on fundamental risk factors and financial performance in other sectors. However, there are limited studies that have delved into the link between fundamental risk factors and the financial performance of Insurance firms. The tendency of declining financial performance of the Insurance firms in Kenya is a cause for concern among various stakeholders. The financial performance showed a downward trend from 2011 to 2018 before a little bullish movement in 2019. This research aimed to analyze fundamental risk factors and financial performance of Insurance firms in Kenya. The financial performance of Insurance firms was measured by the operating ratio. The study's specific objectives were to ascertain the effect of inflation, interest, and exchange rates on the financial performance of Kenya's insurance firms. The research further established the moderating effect of capital adequacy regarding fundamental risk factors and the financial performance of the Insurance firms in Kenya. The research was supported by the portfolio, expectations, and the Liquidity theories. The study adopted the Positivism philosophy and an Explanatory research design. The study used quarterly data from the insurance firms in Kenya and used STATA software to analyze. Data analysis was done through Descriptive statistics, Pearson's simple correlation, and time-series regression over a scope of 10 years. The hypothesis was tested at the 0.05 level of significance; findings indicate that Interest rates had a negative but not statistically significant effect on financial performance at p value of 0.081. In addition, Inflation rates had a negative but not statistically significant effect on financial performance with a p value (p value=0.863), and exchange rates had a positive statistically significant effect on financial performance (p value= 0.000). Lastly, capital adequacy with a (P=0.0000<0.05) had a significant moderating effect on the relationship between fundamental risk factors and financial performance. As a result, Insurance firms should focus on managing the risk posed by exchange rate movement to reduce the operating ratio. Secondly, Kenyan Insurance firms should strategically select debt capital taking into account the timing, cost, and debt capital structure to positively control the incidence of interest rates on their financial performance. Thirdly, Kenyan insurance firms should factor in the effect of inflation rates while pricing insurance contracts to strategically distribute the effect inflation rates to the policyholder in the quest to achieve a positive outlook on financial performance.
Carbon Financing and Profitability of Renewable Energy Firms Registered under the Energy and Petroleum Regulatory Authority, Kenya
(Kenyatta University, 2025-11) Wainaina, Kareithi Samuel
Erratic profitability for renewable energy firms has pushed them to looking for additional sources of funding and carbon financing has emerged as a critical source which also contributes to achieving sustainable growth. By allowing businesses to generate revenue through the sale of carbon credits, carbon financing offers a powerful incentive for investing in cleaner technologies and processes. This financial mechanism not only supports companies in meeting regulatory climate commitments but also opens new revenue streams, increasing profitability and enhancing their financial resilience. Despite Kenya’s rich potential, high capital costs, inconsistent regulations, limited financing, and operational inefficiencies hinder firms’ financial sustainability. Additional issues like grid connectivity, market competition, and currency fluctuations further complicate their profitability. The study’s principal aim was to establish a link between carbon financing and profitability of renewable firms registered under Kenya’s Energy and Petroleum Regulatory Authority. More precisely, the study examined key carbon financing variables that include carbon credits, project initial cost, credit issuance and transactional costs, tax incentives and their effect on profitability. Profitability was assessed using Return on Investment, which revealed varying trends across firms, with higher return on investment generally associated with effective utilization of carbon financing mechanisms. The size of the firm was the moderating variable. The study was based on and supported by the resource-based view theory, market-based theory, agency theory, and firm size theory. The study employed a descriptive survey design and adopted a positivist research philosophy. The research design relied on primary data collected using a structured questionnaire that relates to carbon financing. The target population was fifty (50) renewable energy companies registered under Energy and Petroleum Regulatory Authority, and a population approach was used. Both descriptive and inferential statistics was used for data analysis with the help of Scientific Package Social Sciences. Descriptive statistics including mean and standard deviation. A multiple regression model was performed to estimate the relationship between carbon financing and profitability. The results were presented on frequency tables, charts, and graphs. The results revealed that carbon credit, tax incentives, credit issuance and transactional costs and projects costs have significant effect on the profitability of renewable energy firms registered under the Energy and Petroleum Regulatory Authority. Further, firm size does have a significant moderating effect on the relationship between carbon financing and profitability of renewable energy firms registered under the Energy and Petroleum Regulatory Authority. Therefore, the hypotheses on carbon credits, initial project cost, credit issuance and transactional cost and tax incentives moderated by firm size were not supported. The study concluded that carbon financing has significant effect on profitability of renewable energy firms registered under the Energy and Petroleum Regulatory Authority and this effect is strengthened by firm size. The study recommended that management should consider diversifying the types of carbon credit projects in which the firm engages. Expanding into various carbon credit initiatives, such as forest preservation and renewable energy projects, can help mitigate risks associated with fluctuations in carbon credit prices and market demand. The government should continue to support the development and growth of carbon credit markets, both locally and internationally. Policies should focus on creating a stable and transparent regulatory framework that encourages both local and foreign investments in carbon credit projects
Structure of Infrastructure Bonds and Operational Performance of Road Projects in Nairobi Metropolitan Region, Kenya
(Kenyatta University, 2025-12) Aoko, Roselyn Anyango
Infrastructure projects in Kenya frequently encounter challenges related to adequate funding and timely completion. The present study seeks to evaluate how the configuration of infrastructure bonds affects the operational efficiency of road development initiatives within the Nairobi Metropolitan Region. In particular, the investigation focused on the extent to which bond interest rates, bond returns, and amortization schedules shape the performance outcomes of road projects in Nairobi, Kenya. Furthermore, the research explored the moderating role of inflation in influencing the relationship between infrastructure bonds and project performance in the region. The inquiry was anchored on three theoretical frameworks: the Efficient Market Hypothesis, the Liquidity Preference Theory, and the Theory of Constraints. A longitudinal research design was adopted to adequately address the study objectives. The target population comprised all 18 road construction undertakings implemented in the Nairobi Metropolitan Region between 2014 and 2022, from which the entire set of projects was examined. A detailed survey of these projects was conducted. Secondary data covering the period 2014–2022 were obtained from multiple institutions, including the Central Bank of Kenya, the National Treasury, the Ministry of Transport, Infrastructure, Housing, Urban Development and Public Works, and the Kenya Urban Roads Authority, using structured data collection templates. The dataset was analyzed through both descriptive and inferential statistical techniques, facilitated by STATA version 14.0. Hypothesized associations were tested using panel regression analysis at a 95% confidence level. The findings revealed that infrastructure bond interest rates, bond returns, and amortization structures exert a significant influence on the performance of road projects within the NMR. The results revealed that higher interest rates and bond yields negatively affect project execution by increasing borrowing costs and constraining available funds, while well-structured amortization schedules positively impact completion by facilitating predictable cash flow and efficient resource allocation. Descriptive analysis showed relative stability in these bond parameters, enhancing investor confidence and reducing financial uncertainty. The findings align with the Liquidity Preference Theory and the Theory of Constraints, highlighting the importance of managing financing costs and systemic bottlenecks to sustain project performance. Based on these results, the study recommends that the National Treasury stabilize bond interest rates and yields through clear issuance schedules and aligned maturities. The Treasury should also enhance amortization management to maintain high, steady repayment rates. The Central Bank of Kenya should continue managing inflation and interest rates to support predictable, affordable financing, while project managers ensure cash flows align with bond repayment schedules to minimize funding gaps and delays
Agency Banking and Profitability of Commercial Banks Listed at the Nairobi Securities Exchange, Kenya
(Kenyatta University, 2025-10) Mukhtar, Hassan Matan
Listed commercial banks in Kenyan context are encountering concern in regard to their profit trajectory. This is supported by decreasing Return of Equity in the period 2018-2022. Thus, the study aimed at determining implication of agency banking liquidity, fee, market share and perceived risks with age as a moderator in relation to profit trend. The transaction cost theory, market power theory and public interest rate theory guided this study. Key empirical inquiries were reviewed to suggest gaps and development of conceptual framework. The paradigm adopted was positivist supported by explanatory design. The study adopted direct regression model and moderation regression model to achieve the analysis of the findings. A total of twelve listed banking entities were targeted on the period 2019-2023. Insights were obtained from auxiliary sources and analysis was through descriptive and inferential tools using SPSS software. The analysis started with diagnostic tests that validated the regression model. Key ethical concerns were adhered during data collection in this study. The analysis was that agency banking liquidity, fee, market share and perceived risks all exert significant implication on profit trend moderated by age. It was concluded that agency banking is a core element that drives profit trend of an institution. Managers and policy makers working with commercial banks in Kenya should implement a robust risk-based management framework to mitigate against agency banking risks for greater profits.
Prudential Requirements and Financial Performance of Commercial Banks Listed at the Nairobi Securities Exchange, Kenya
(Kenyatta University, 2025-09) Musili, Johnstone Muimi
Commercial banks have a vital and varied function they perform. In Kenya, commercial banks are essential to industrialization and job creation as well as the financial development of the majority of market participants. Nonetheless, commercial banks' financial performance has been deteriorating over time. For example, profitability fell to Ksh.112.1 billion in 2020 from Ksh.159.1 billion in the prior financial period—a 29.5% negative shift. The conceptual linkage between commercial banks' financial performance and regulatory standards has portrayed dissimilar debate amongst scholars over the years. This study focused on the precise goals listed; exploring the influence of liquidity, capital adequacy, and asset management on the Nairobi Securities Exchange's (NSE) listing commercial banks' operating results. The investigation was anchored on Keynes liquidity preference, the capital buffer and the liabilities management theories. The investigation utilized causal-effect research approach. The target audience comprise of eleven (11) listed commercial banks in NSE, Kenya whereby census approach was used therein. The study analysis was based on descriptive as well as panel regression analysis.Prior to drawing investigational deductions and conclusions, diagnostic testing was conducted. The outcome was presented using tables and figures. Ethical issues were given pre-eminence where a permit from Kenyatta University graduate school was sought and NACOSTI in that order. Findings unveiled that liquidity exhibited a statistically significant direct influence on financial performance; capital adequacy indeed exerts a significant and positive influence on financial performance; and asset management depicted negative influence on financial performance, which was statistically significant. The survey advices that the banks should focus on other risk management strategies, such as credit risk, operational risk, and market risk to enhance their performance financially. Implementing robust risk management frameworks and diversifying risk exposure would help ensure overall financial stability and resilience
Housing Costs and Financial Health of Housing Development Institutions in Nairobi Metropolitan Area, Kenya
(Kenyatta University, 2025-09) Mokembo, Josephat Nyauncho
Housing development institutions play a critical role in Kenya’s economic development by contributing significantly to the gross domestic product and addressing the nation’s housing needs. For these institutions to remain sustainable, their financial health is essential. This study examined the effect of housing costs on the financial health of housing development institutions in the Nairobi Metropolitan Area, Kenya, with a particular focus on construction costs, operating costs, and financing costs. The study was anchored on the housing adjustment theory, urban economics theory, the positive theory of housing, and the Marxist theory of housing, which collectively provided insights into how housing costs interact with institutional behavior, market dynamics, and socio-economic structures. The target population consisted of 53 housing development institutions registered with the Kenya Property Developers Association, from which 16 were purposively selected. Secondary data were collected using a Data Collection Sheet from the institutions’ published financial statements covering the period 2016–2023. Financial ratios were employed to measure construction costs, operating costs, financing costs, and financial health, while descriptive statistics and panel data regression analysis, specifically the fixed effects model, were used to analyze the data with the aid of SPSS version 26. The findings revealed that construction costs (β = 0.018; p = 0.000), operating costs (β = 0.692; p = 0.000), and financing costs (β = 0.747; p = 0.000) all had a positive and significant effect on the financial health of housing development institutions. The study concludes that effective project planning, prudent cost management, and securing affordable financing are crucial for the long-term sustainability of these institutions. It further recommends that housing development institutions strengthen internal cost-control mechanisms, optimize resource allocation, and diversify financing sources by exploring partnerships, capital markets, and public-private collaborations. In addition, institutions should invest in innovative construction technologies and sustainable building materials to reduce long-term costs, improve operational efficiency through digitalization and capacity building, and enhance risk management strategies to mitigate financing and market risks. Moreover, transparent governance structures and accountability mechanisms should be established to attract investors and build stakeholder confidence. Finally, aligning housing development with government affordable housing programs and urban planning frameworks, while fostering research and data-driven decision-making, will position housing institutions for greater resilience, policy support, and sustainable financial health.
Financial Behavioral Biases and Growth of Commercial Real Estate Investment Firms in Nairobi City County, Kenya
(Kenyatta University, 2025-11) Mososi, Gilbert Oyugi
Investment in real estate is essential for reducing poverty, improving income distribution, creating job opportunities, and providing housing for households. Key investors were drawn to real estate, which is most likely to be a significant driver of economic growth. Recent evaluations indicate a shortfall of approximately 2.1 million housing units, particularly in the category of small and mid-sized dwellings, with nearly 51% of private households residing in informal settlements. This research aimed to examine the role of financial decision-making biases on the growth of commercial property investment enterprises. Specifically, the investigation focused on effect of heuristic biases on the growth of commercial real estate investment firms in Kenya, to evaluate the effect of prospect biases on the growth of commercial real estate investment firms in Kenya, to find the effect of herding biases on the growth of commercial real estate investment firms in Kenya and to establish the effect of market factors driven behavior on growth of commercial real estate investment firms in Kenya. The study was anchored on behavioral theory, heuristic constructs, and the theory of prospects. A descriptive approach was adopted as the study’s methodological framework. The target population comprised 69 commercial real estate organizations registered under the KPDA within Nairobi City County. From each organization, responses were obtained from five key managerial positions namely finance, property, residential site, and portfolio managers resulting in a respondent pool of 276 individuals. A sample of 164 managers was selected using a non probability convenience sampling method. Primary data was collected using structured survey instruments. Quantitative data analysis incorporated both descriptive statistics including averages, deviations, percentage distributions, and frequency counts and inferential techniques. Data processing and interpretation were executed using SPSS software, version 22. Regression coefficient analysis revealed that heuristic bias exhibited a statistically significant and negative impact on the expansion of commercial property investment enterprises within Nairobi City County, Kenya (β = -0.225, p = 0.018). Further regression outcomes indicated that prospect bias also demonstrated a negative and significant association with firm development in Nairobi City County’s commercial real estate sector (β = -0.211, p = 0.012). Additionally, the analysis showed that herding bias was negatively and significantly related to the progress of commercial real estate investment firms (β = -0.235, p = 0.013). Finally, it was discovered that behavioral distortions associated to the market had a negative and significant impact on the expansion of commercial real estate businesses (β = -0.184, p = 0.043). The study concluded that recognizing these psychological patterns is essential for enhancing investment decisions and accurately assessing property values. Furthermore, it was observed that Kenyan real estate investors exhibit greater sensitivity to losses than satisfaction from gains, often opting for caution in gain-related decisions and risk-taking in loss scenarios. Moreover, investor trust is more commonly placed in peers and acquaintances rather than in professional agents. To address the adverse effects of heuristic decision-making, property managers are encouraged to identify and counteract prevalent biases such as anchoring, selective recall, and confirmation tendencies. The research also advised managers to avoid excessive dependence on initial or less relevant information when making strategic decisions.
Tax Audits and Tax Compliance in Kenya Revenue Authority, Kenya
(Kenyatta University, 2025-08) Mutai, Clara
Taxation plays a crucial role in financing a country's expenditure by generating revenue that funds public services, infrastructure, and government functions, contributing significantly to economic stability and development. Despite surpassing its revenue target in 2020/2021, Kenya Revenue Authority (KRA) faced a shortfall of approximately Kshs. 70 billion (around 4.2%) in 2021/2022, and a further shortfall of Kshs. 100 billion (about 5.3%) in 2022/2023, indicating persistent challenges with tax compliance. Therefore, the study sought to examine how tax audits affect tax compliance in Kenya Revenue Authority. The specific objectives of the study were to examine the effect of desk audit, field audit, correspondence audit and back duty audit on tax compliance in Kenya Revenue Authority. This research was anchored on economic deterrence theory, cognitive dissonance theory, social norms theory and theory of planned behavior. The study adopted an explanatory research design. The unit of analysis in this study was Kenya Revenue Authority. The target population was all 232 staffs in seven departments in Kenya Revenue Authority. Yamane's Formula was utilized to establish study sample size. Using this formula, 146 respondents were selected from target population. The study utilized both primary and secondary data. Moreover, secondary data was acquired from Kenya Revenue Authority yearly reports. Primary data was collected using semi-structured questionnaires. Moreover, questionnaires will produce qualitative and also quantitative data. Moreover, thematic analysis was utilized for qualitative data analysis and the findings shall be displayed in narrative format. Further, descriptive and inferential statistics was deployed in analyzing quantitative data with assistance of SPSS version 24. Descriptive statistics comprise of mean, standard deviation, percent and frequencies. Inferential statistics included correlation analysis and regression analysis. Diagnostic tests in the study included the normality test, linearity test, autocorrelation test, multicollinearity test and also heteroscedasticity test. The study results were then displayed in figures and tables. Ethical considerations were strictly adhered to, with informed consent gathered from participants, confidentiality ensured through the secure handling of data, and anonymity maintained by not recording personal identifiers. The study found that desk audit had a positive and significant effect on tax compliance in Kenya Revenue Authority. Further, field audit had a positive and significant effect on tax compliance in Kenya Revenue Authority. In addition, the study found that correspondence audit had a positive and significant effect on tax compliance in Kenya Revenue Authority. Also, the results indicated that back duty audit had a positive and significant effect on tax compliance in Kenya Revenue Authority. The study concluded that desk audit, field audit, correspondence audit, and back duty audit all have a positive and significant effect on tax compliance within the Kenya Revenue Authority. The study recommends that Kenya Revenue Authority should strengthen desk audits by requiring more comprehensive documentation from taxpayers and expand field audits to include in-person visits, including home assessments. In addition, Kenya Revenue Authority should improve correspondence audits using emails and phone calls for clarification, while enhancing back duty audits through increased taxpayer appointments and financial record analysis. Further, the study suggests further researches on tax audits and tax compliance in Kenya from perspective of taxpayers.
Financial Inclusion Strategies and Profitability of Microfinance Banks in Nairobi City County, Kenya
(2025-12) Cheteka, Christine Bukokhe
Profitability in Kenya’s microfinance banking sector has faced persistent challenges, with many institutions in Nairobi City County recording financial losses despite expanding outreach to underserved populations. Existing studies have largely examined operational and institutional factors, leaving limited empirical evidence on how financial inclusion strategies relate to profitability. This study examined how financial inclusion strategies affect the profitability of microfinance banks in Nairobi City County. Specifically, the study examined how digital financial services, group lending models, and financial literacy programs influence the profitability of microfinance banks. Guided by financial intermediation theory, the group lending model, financial literacy theory, and profit maximization theory, the study explored how the three financial inclusion strategies—digital financial services, group lending mechanisms, and financial literacy initiatives—relate to institutional performance. An explanatory research design was adopted, targeting 14 licensed microfinance banks in Nairobi City County. Primary data were obtained using structured questionnaires, while secondary data were drawn from audited financial statements covering the period 2016–2024. Data analysis involved descriptive statistics, correlation, and multiple regression, supported by relevant diagnostic tests. The findings revealed that digital financial services, group lending models, and financial literacy programs each contributed positively to profitability by improving operational efficiency, strengthening repayment behavior, and enhancing clients’ financial capability. The study concludes that financial inclusion strategies play a significant role in supporting the financial sustainability of microfinance banks. It recommends strengthening digital infrastructure, improving the structure and monitoring of group lending practices, and institutionalizing financial literacy programs to ensure that financial inclusion efforts translate into sustained profitability.
Sustainable Finance and Financial Performance of Selected Commercial Banks in Kenya
(Kenyatta University, 2025-11) Maroa, Ibrahim Jackson
This study generally aimed at examining sustainable finance and financial performance of identified Kenyan commercial banks. The specific objectives were to examine the effect of impact investments on the financial performance of selected commercial banks in Kenya; assess how green banking affects the financial performance of selected commercial banks in Kenya; examine the effect of credit risk sustainability assessment on the financial performance of selected commercial banks in Kenya; determine the moderating effect of bank size on the relationship between sustainable finance and financial performance of selected commercial banks in Kenya. A causal research design was employed in answering the pertinent questions. Particularly, 10 commercial banks that have complied with the regulations of sustainable finance within Nairobi City County were targeted. All of the commercial banks which have initiated and adopted sustainable finance programs in their activities were purposively selected. Data was gathered out of the two sources, primary and secondary. Therefore, original evidence collected from surveys, while existing materials from previous research, print media and the internet sources were also gathered. Questionnaires were utilized in the collection of raw information from 41 participants, after which it was refined and structured for analysis using numerical numbers. The data was then uploaded into SPSS software for analysis. Measurement of how the variables related to each other entailed the analysis of distributions, as well as predictive data. Content analysis technique enhanced qualitative data analysis. The outcome established that the regression model for this study was highly significant, with an F-statistic of 213.407 (p < 0.05) and an adjusted R-squared of 0.671, indicating the model explained 67.1% of the variance in bank financial performance. Impact investment and credit risk sustainability assessment (β = 0.109, p = 0.001) have a statistically significant and positive effect on the financial performance of commercial banks in Kenya (β = 2.682, p = 0.045, and β = 0.109, p = 0.00, respectively). In contrast, green banking exhibited a significant negative relationship with financial performance (β = -3.702, p = 0.000). The moderating effect of bank size produced mixed outcomes, with no significant moderation for impact investment (β = -0.014, p = 0.269) and green banking (β = -0.147, p = 0.156), but a strong positive moderation for credit risk sustainability assessment (β = 0.575, p = 0.005), showing that larger banks derive greater financial benefits from sustainability-linked risk management practices. It was concluded that while impact investments and sustainability-linked credit risk assessments enhance financial performance, green banking currently poses short-term financial challenges for commercial banks in Kenya due to high implementation costs and low market uptake. The study recommends that banks should strategically allocate capital to measurable impact investments, adopt phased and cost-effective green banking initiatives, and integrate ESG criteria into credit risk assessment processes to improve portfolio quality and profitability. Future studies should explore sustainable finance practices across other sectors to assess comparative outcomes and identify strategies for aligning financial sustainability with broader corporate performance goals. This study contributes to knowledge by demonstrating that sustainable finance is multidimensional, producing distinct financial effects depending on the specific practice and institutional context.
Micro Finance Services and Financial Performance of Deposit Taking Saccos in Nairobi City County, Kenya
(Kenyatta University, 2025-09) Siameto, Margaret Kamurar
DT SACCOs are financial institutions which offer microfinance services to their members and as a result pivotal contribution towards poverty eradication and creation of jobs arises. However, the conceptual linkage between micro finance services they offer to their members and the fluctuating financial performance is still controversial. The academic focus of the current investigation was to interrogate the degree to which micro finance services influence financial performance of those DT-SACCOs carrying out their ordinary business activities in the County of Nairobi City Kenya. Specifically, it aimed to determine the effect of micro credit on financial performance of DT-SACCOs in Nairobi City County, Kenya, to evaluate the effect of micro savings on financial performance of DT-SACCOs in Nairobi City County, Kenya and to examine the effect of micro insurance on financial performance of DT-SACCOs in Nairobi City County, Kenya. Finance growth nexus theory, microfinance theory and bank-led theory are the three key suppositions underpinning the current investigation. Since the populace was made up of 42 DT SACCOs operating in the City of Nairobi, located in Nairobi County, survey approach was be relied upon by the researcher when collecting the necessary data. Questionnaires were the tools dropped and picked by the researcher after they were duly filed. The unit of observation was the corresponding 42 top management members of each SACCO aforementioned. A data collection schedule was most appropriate and was used for collecting the secondary data. Descriptive, correlational and inferential data analysis were performed after the diagnostic test was completed. The key research findings were as follows, micro credit influenced financial performance which was statistically significant and of direct nature. For micro savings there was direct influence on financial performance and for the case of micro insurance, there was statistically significant adjustment of financial performance, which was direct. The management group of DT-SACCOs domiciled in the Nairobi City County, Kenya will benefit from the research findings for well-informed decision making will be much in order as far as financial performance improvement is concerned. The point here is that those financial institutions will be able to project the profitability in future with micro credit, micro savings and micro insurance which they are aware of their prediction power when considered as a composite score and not each in isolation. SASRA which is a government arm will benefit from the research findings for it will establish user friendly policies which factor in techno innovation for more job creation. In the academic frontier the empirical results act as a cornerstone to guide them on identifying the other relevant contextually researchable areas. That is the outcome depicts the philosophical linkage between other micro finance services and profitability where by other unit of analysis such as commercial banks, Microfinance Banks which are financial institutions can be brought to research books. Therefore, more suitable empirical models may be created by factoring other micro finance service aspects which significantly address each financial institution.
Credit Management Practices and Bad Debt Levels of Microfinance Institutions in Nairobi City County, Kenya
(Kenyatta University, 2025-10) Choda, Linus James Odongo
Between the years 2018 to 2021, the bad debt levels of MFIs in Nairobi City County, Kenya have been increasing by 12.46% annually. The increasing bad debt levels have negatively affected MFIs’ operations and their profits to the extent of some being declared bankrupt. The general objective of the study is to establish the effect of credit management practices on bad debt levels of microfinance institutions in Nairobi City County, Kenya. The specific objectives of the study include to evaluate the effect of credit risk identification on bad debt levels of microfinance institutions in Nairobi City County, Kenya, to assess the effect of credit risk monitoring on bad debt levels of microfinance institutions in Nairobi City County, Kenya, to assess the effect of collection policies on the bad debt levels of microfinance institutions in Kenya, to establish the effects of credit appraisal policies on the bad debt levels of microfinance institutions in Nairobi City County, Kenya, and to determine the effect of CBK regulations on bad debt levels of microfinance institutions in Nairobi City County, Kenya. The theories underpinning this study include; anticipated income theory, modern portfolio theory (MPT), capital asset pricing model (CAPM), credit risk theory, PRISM model of credit risk management, and public interest theory. The study employed descriptive research design with a target population of 13 active microfinance institutions based in Nairobi City County, Kenya. A sample size of 13 microfinance institutions was selected through census. Both secondary (for bad debt levels) and primary data for credit management practices was collected. Secondary data was collected from journal articles, books, universities repositories for unpublished dissertation and documentary letters. The data collection sheets and questionnaires were administered to the microfinance institutions middle and senior employees such as credit managers, finance analysts, accounts and debt portfolio assistants through the drop and pick technique. The data analysis and entry were done using the SPSS (Statistical Package for Social Science) software. The diagnostic tests that were carried out include normality, multicollinearity, heteroscedasticity, stationarity, autocorrelation, and model specification The ethical considerations that were employed in the study include anonymity were assured; responses were used purely for academic purposes and treated with confident. To determine the reliability and validity of the data instruments a pilot test was conducted. The data collected from different respondents was sorted, cleaned, coded, and analyzed using SPPS software version 29. The data was analyzed using descriptive statistics and diagnostic statistics such as normality, multicollinearity, heteroscedasticity, and the Hausman tests and inferential statistics including correlation analysis, regression analysis, and hypothesis testing. The study established that despite many microfinance institutions developing and implementing credit management practices they were still ineffective to cap the increasing bad debt levels. The study concluded that instant loan issuance without collateral, straightforward loan application processes and the lenient credit monitoring and collection policies have led to a significant proportion of consumers failing to repay their delinquent loans increasing the number of borrowers while concurrently increasing the number of defaulters, resulting into high levels of bad debt among microfinance institutions in Nairobi City County, Kenya. The study recommends that microfinance institutions should adopt technological advancements such as artificial intelligence and big data analytics to enhance their credit management practices and decrease the ballooning bad debt levels. The study also recommends the need for a harmonious credit identification policy where when one microfinance institution has disbursed loan to a borrower that information should be readily available through an integrated system to be used by other microfinance institutions to reduce high bad debt levels occasioned by borrowers moving from one microfinance institution to another with outstanding loans
Front Office Products Income and Liquidity of Deposit Taking Savings and Credit Cooperative Societies in Nairobi City County, Kenya
(Kenyatta University, 2025-07) Kiplagat, Kipsuge
This study examined how income from Front Office Service Activity (FOSA) products influences the liquidity of deposit-taking Savings and Credit Cooperative Societies (SACCOs) operating in Nairobi City County, Kenya. Liquidity remains a persistent concern for SACCOs, undermining their ability to meet short-term financial obligations. This study focused on three key income streams: loan products, investment products, and utility services. The study also considered the role of firm size as a moderating variable. The general objective of the study was to assess the effect of income generated from FOSA services on the liquidity of deposit-taking SACCOs. Specifically, the study aimed to: determine the effect of income from FOSA loan products on liquidity, assess the effect of income from FOSA investment products on liquidity, examine the effect of income from FOSA utility services on liquidity, and evaluate the moderating role of firm size on the relationship between FOSA income and liquidity. A census approach was employed, targeting all 34 licensed deposit-taking SACCOs within Nairobi City County. Secondary data was collected from published financial statements covering a five-year period, from 2018 to 2022. Descriptive statistics were used to summarize the data, while inferential analysis using multiple regression was conducted to examine the relationships among variables. The findings showed that income from loan products, investment products, and utility services each positively influenced SACCO liquidity. These results imply that diversified income streams from FOSA activities enhance the SACCOs' ability to meet short-term financial obligations. However, firm size was found to negatively moderate these relationships, suggesting that as SACCOs grow larger, their liquidity position may become more strained due to increased operational demands. Based on the findings, the study recommends that SACCOs strengthen their FOSA product lines to ensure consistent income generation. Policymakers and SACCO regulators should consider creating enabling environments and reviewing regulations to allow SACCOs more flexibility in product innovation. Additionally, SACCOs should regularly evaluate their liquidity management strategies and ensure that growth in firm size is accompanied by improved financial controls and risk mitigation measures. This study contributes to the body of knowledge by offering a multidimensional analysis of FOSA income, liquidity, and firm size. It provides insights relevant to SACCO managers, policymakers, and stakeholders seeking to enhance financial resilience and service delivery within Kenya’s cooperative sector
Lease Financing and Financial Performance of Manufacturing Firms Listed in the Nairobi Securities Exchange, Kenya
(Kenyatta University, 2025-08) Mutai, Kenneth Kiptum
Manufacturing firms listed at Nairobi securities exchange have experienced variations in their financial performance in the past with some firms facing declines and others stagnating. This has raised concerns among various stakeholders including the Government, potential investors and even the shareholders. Financial managers of these firms always investigate maximizing shareholders’ wealth and the best way to do this is by making profits via various techniques among them being cost alleviations. Some firms in Kenya are considering and employing lease financing in a view to cutting down asset acquisition cost. The research opted to determine the effect of lease financing on the financial performance of the manufacturing firms listed at Nairobi securities exchange. The specific objectives of the research were to assess the effects of operating lease, finance lease and leverage financing on financial performance of manufacturing firms listed at Nairobi securities exchange, Kenya. The other specific objective was to determine the moderating effect of liquidity on the relationship between lease financing and financial performance. The study was anchored by four theories: Financial contracting theory, Walker’s theory of profit, trade-off theory and liquidity preference theory. Descriptive research design was employed, and all the eight listed manufacturing firms were studied. Secondary data from 2017 through to the year 2022 was used in this study. With the use of EVIEWS system, inferential statistics and descriptive statics were carried out, Descriptive statistics like mean and standard deviation and inferential analysis like correlation analysis and regression analysis were employed, further, diagnostic tests employed to test whether the model was relevant, and it depicted that the model was workable. Ethical consideration was adhered to by getting a research permit from NACOSTI to conduct the research. The study, with p-value 0.05 significance level, determined that both operating lease and leverage finance were statistically significant and with a positive effect while finance lease was statistically significant and with a negative effect on financial performance of the listed manufacturing firms. Liquidity was found not to have a moderating effect on the relationship between lease financing and financial performance. Therefore, all the research null hypotheses were rejected except for the fourth, where the researcher failed to reject. The study recommends that financial managers should employ operating lease and leverage financing given their significant positive effect on financial performance. Finance lease had a significant negative effect on financial performance and financial managers should avoid employing it. The researcher suggests more study be carried out on lease financing fields in different sectors as its potential seems not to have been exploited.
Capital Expenditure Announcements and Stock Returns of Firms Listed at the Nairobi Securities Exchange, Kenya
(Kenyatta University, 2025-11) Jackson Sankale Keton
Capital expenditure announcements by listed companies constitute one of several avenues through which rational investors seek to realize gains in the form of stock returns. Within the framework of market efficiency, such announcements would not be expected to generate excess returns, as the information should already be incorporated into prevailing stock prices. Empirical research conducted in both advanced and emerging economies has produced mixed evidence regarding the market response to capital expenditure announcements, with some studies reporting positive investor reactions while others find no statistically significant effects. At the Nairobi Securities Exchange (NSE), episodes of inconsistent stock return patterns suggest deviations from strict market efficiency. The aim of this study was to investigate the impact of capital expenditure announcements on stock returns of firms listed at the Nairobi Securities Exchange, Kenya. Specifically, the study sought to determine the effect of product diversification announcements, examine the effect of asset expenditure announcements, and investigate the effect of research and development announcements on stock returns at the NSE. The study was grounded on four key theories: Efficient Market Hypothesis (EMH), Random Walk Theory, Arbitrage Pricing Theory (APT), and the Theory of Rational Expectations. A causal research design was adopted, encompassing all sixty-three companies listed on the NSE between 2012 and 2025. From this population, a purposive and judgmental sampling strategy was applied to select six firms that had issued capital expenditure announcements during the study period. Secondary data were obtained from the NSE and Financial Times databases, and data collection was facilitated through a desk review instrument. Analytical procedures were undertaken using Microsoft Excel. The study employed an event study methodology, utilizing the market model to estimate abnormal stock returns within the event window surrounding announcement dates. The analyzed data were found to be normally distributed. The study found that product diversification announcements had an effect on stock returns, whereas asset expenditure and research and development announcements had no effect on stock returns at the NSE. Aggregation of the three categories revealed that, overall, capital expenditure announcements have no significant effect on stock returns at the NSE. The study recommends that organizations should strategically use product diversification announcements to boost investor confidence, supported by sound financial analysis. Investors and analysts should monitor these announcements closely while adopting a long-term view for asset expenditure and R&D disclosures. Regulators such as the CMA and NSE should enforce timely and transparent disclosure of material information to enhance market efficiency and reduce information asymmetry. Strengthening disclosure standards and best practices in investor communication will improve market integrity and optimize decision-making.
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.

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