MST-Department of Accounting and Finance

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Financial Risk Management and Financial Performance of Tier III Commercial Banks in Kenya
(Kenyatta University, 2025-12) Korane, Mohamud Dubow
Kenya commercial banks’ financial performance is influenced by myriad of challenges that can impact their profitability, operational efficiency and overall stability. Therefore, this review endeavored to ascertain financial risks impacts on Kenya’s commercial banks financial performance, specifically targeting operational, credit, liquidity and market risk impacts. Theories of Miller and Modigliani, financial distress, financial intermediation and modern portfolio underpined the review. Employing descriptive research, all 22 tier III banks formed the target populace and census was used. Financial data was collated from existing published statements using secondary designated collection sheet from 2019-2023. Data collected was analyzed via descriptive techniques (mean, median and standard deviation) and inferential statistics (multiple regression). Findings were organized and depicted clearly, using tables. Diagnostic assessments encompassed multi-collinearity, normality, heteroscedasticity, stationarity, Housman and autocorrelation. Ethical considerations was prioritized and observed at every step. The study revealed that operational, credit, liquidity and market risks had a positive significant effect on Tier III Kenya’s commercial banks’ financial performance. The research concludes that operational risks have the potential to result in operational failures, which may incur additional costs for mitigation and compliance, thereby placing financial strain on banks. The credit risk may occur in a situation whereby the bank does not effectively evaluate the borrower’s creditworthiness resulting to increased number of loan defaulters which also leads to more provisioning costs for bad debts affecting negatively the bank's profitability. The existence of liquidity risk can hinder a bank's ability to effectively manage its liquidity, leading to increased costs related to borrowed funds necessary to meet its obligations, which ultimately diminishes profit margins and impacts the bank's overall financial performance. Fluctuations in interest rates have an impact on the net interest income of banks, which constitutes their revenue stream. This can lead to a reduction in their ability to adapt to such changes, thereby influencing their financial performance. The research suggests that Tier III banks ought to improve their investment in technology by upgrading their information technology systems and implementing more advanced security protocols to reduce the risk of cyber threats. The Tier III banks should adopt a diversified loan portfolio to minimize more reliance of certain industries that could bring higher risks upon economic fluctuations. Tier III banks can properly manage liquidity risks through maintenance of a larger financing base like deposits, loans and other sources of capital mix. The Tier III banks should adopt a comprehensive structure managing risks, carry out a frequent stress test and have a more diversified lending portfolio to solve the possible losses.
Revenue Enhancement Strategies and Growth of Own-Source Revenue in the County Government of Machakos, Kenya
(Kenyatta University, 2025-10) Mutua, Benson Mulinge
Growth of own source revenues (OSR) in counties plays a crucial role in enhancing fiscal autonomy and reducing dependence on national government transfers. However, in Machakos County, OSR performance remains below potential. County revenue reports show that OSR contributed less than 15% of total revenue between 2017 and 2023, despite the Commission on Revenue Allocation (CRA) estimating that counties could generate up to Kshs. 260.6 billion if fiscal instruments were fully optimized. This persistent underperformance points to structural and strategic gaps in revenue generation mechanisms. Therefore, the specific objectives of this study were to determine the effect of revenue diversification strategies, internal control strategies, revenue digitization strategies, and capacity building strategies on the growth of own source revenue in the County Government of Machakos. The study was underpinned by the Resource-Based View, Public Finance Theory, Benefit Theory of Taxation, and Human Capital Theory. A descriptive research design was employed. The study targeted 110 respondents, comprising 105 sub-county revenue staff and 5 senior officers from the finance and planning departments, using purposive sampling. Primary data on the independent variables were collected through structured questionnaires, while secondary data on OSR performance were sourced from official county documents. The data analysis utilized descriptive statistics (means and standard deviations), correlation, and multiple regression to assess the strength and direction of effects. Diagnostic tests conducted included tests for normality, multicollinearity, heteroscedasticity, and autocorrelation. Ethical safeguards such as informed consent, confidentiality, anonymity, voluntary participation, and harm avoidance were strictly upheld. The findings revealed that revenue diversification had a statistically significant positive effect on OSR growth (β = 0.385, p = 0.029), implying that expanding revenue sources enhances fiscal inflows. Internal control strategies, however, showed a statistically significant negative effect (β = –0.532, p < 0.001), suggesting inefficiencies or rigidities in control mechanisms that suppress revenue growth. Revenue digitization strategies were found to have a statistically significant positive effect (β = 0.481, p = 0.011), indicating the usefulness of technology in improving compliance and efficiency. Capacity building strategies also had a statistically significant positive effect (β = 0.674, p < 0.001), confirming that well-trained personnel are instrumental in enhancing revenue collection and management. Based on these findings, the study concludes that revenue diversification, digitization, and capacity building are effective levers for improving OSR performance, while internal controls may require reform to become enablers rather than constraints. It is recommended that the County Government of Machakos adopt a comprehensive strategy that maps untapped revenue areas and digitizes the entire revenue value chain. Moreover, internal control systems should be redesigned to support rather than stifle revenue operations through automation and accountability. Finally, sustainable capacity-building programs tailored to current fiscal demands should be institutionalized to professionalize the county’s revenue management systems. The study reaffirms the importance of evidence-based policy and capacity development in unlocking county fiscal potential.
Financial Inclusion and Access to Credit among Women-Owned Small and Medium Enterprises in Nakuru County, Kenya
(Kenyatta University, 2025-12) Bett, Obadiah
County governments in Kenya are mandated to promote entrepreneurship, strengthen financial systems, and support inclusive economic growth through devolved functions. Central to this mandate is improving access to credit for small and medium enterprises (SMEs), which constitute a backbone of local economies. In Kenya, women-owned SMEs continue to face difficulties in obtaining affordable and sustainable credit, with Nakuru County being no exception. This study examined the effect of financial inclusion on access to credit among women-owned SMEs in Nakuru County, focusing on four key dimensions: availability of financial services, financial literacy, proximity to financial institutions, and digital financial platforms. The study covered the period 2020–2024 and was anchored on the Financial Intermediation Theory, Resource-Based View Theory, Credit Rationing Theory, Technology Acceptance Model, and Pecking Order Theory of Finance. A descriptive research design was adopted, targeting 1,214 registered women-owned SMEs in Nakuru County, from which a sample of 301 firms was selected using simple random sampling. The units of observation were women entrepreneurs actively managing these enterprises. Both primary and secondary data were utilized. Primary data were collected using structured questionnaires, while secondary data were obtained from county government reports, institutional publications, and financial surveys. A pilot study was conducted among 10 SMEs in Nakuru Town to pretest the research instruments. Reliability was assessed through Cronbach’s Alpha Coefficient, while validity was established through content and criterion evaluation. Diagnostic tests including normality, multicollinearity, heteroscedasticity, linearity, and stationarity were carried out to ensure robustness of the regression model. Data were analyzed using SPSS, applying both descriptive statistics (means, standard deviations, and frequencies) and inferential techniques (Pearson’s correlation and multiple regression analysis). The regression analysis revealed that availability of financial services (p < 0.05) and financial literacy (p < 0.05) had statistically significant positive effects on access to credit, showing that reliable and affordable financial services, combined with entrepreneurial knowledge, improve borrowing outcomes. Proximity to financial institutions was negatively related but significant (p < 0.05), indicating that physical distance and high transaction costs constrained women’s ability to secure loans. Digital financial platforms exhibited a positive and significant effect (p < 0.05), demonstrating that mobile banking, digital credit, and online transactions reduced barriers to credit access. The study concludes that while improvements in service availability, financial literacy, and digital adoption enhance women entrepreneurs’ borrowing capacity, challenges related to geographical proximity continue to limit inclusivity. It is recommended that financial institutions and policymakers expand outreach programs, embed literacy training within SME support schemes, leverage digital platforms for inclusive credit scoring, and reduce spatial and cost-related barriers through agency banking and fintech partnerships. The study also calls on county governments, regulators, and development partners to implement gender-responsive financial frameworks tailored to women-owned SMEs. Ethical principles including informed consent, confidentiality, and voluntary participation were fully observed throughout the study.
Government expenditures and the Kenyan economic growth
(Kenyatta University, 2026-11) Magiri, Jonathan Mwenda
The economic growth of a nation is key to that economy as it contributes significantly to the development and well-being of that economy. These benefits are dependent on many factors including government expenditures that need to be addressed through the management of the country’s fiscal policies. Ideally, a country's economic growth is anticipated to enhance lifestyles by providing education, healthcare access, infrastructure, housing, quality food availability, improved roads, and similar amenities. However, this is not always the case. The economic growth of Kenya has recently attracted attention due to widespread volatility in its growth and inability to hit its Vision 2030 target growth of 10% despite huge investment in expenditure by the government. Therefore, the intent of this research is to ascertain the effect of government expenditure on economic growth in Kenya. In particular, the research ascertained the effect of education expenditure, health expenditure, defense and security expenditure, and social services expenditure on the economic growth of Kenya. The research was underpinned on the public finance theory, the theory of maximum social advantage, endogenous economic growth, and Peacock and Wiseman Theory. The causal-effect research approach was utilized in the research. The target audience was Kenya as a country with twenty five observations from 2000 to 2024 which is the unit of analysis. Secondary data was gathered with the aid of documentary guides and data sheets from the World Bank and KNBS. STATA software version 14 was used. Diagnostic tests (Auto correlation, multicollinearity, heteroscedasticity, normality, Co-integration, and unit root test) will be carried out before data analysis. VAR time series regression model was adopted. Descriptive statistics involving the use of frequencies, mean and standard deviation, and, inferential statistics was adopted in data analysis; and displayed in frequency distribution tables, charts, and graphs. The research's results indicate that education expenditure, health expenditure and Defense and security expenditure substantially influenced Kenya's economic growth with pvalues of 0.000, 0.000 and 0.005 respectively. On the other hand services expenditure insignificantly influences economic growth in Kenya with p-value of 0.125. The research recommend that Kenya government should invest in education that provide its citizen with the necessary skills to be utilized in the labour market that will foster economic growth. Additionally, the research recommends that the government should invest in the health program (SHA and UHC) for its citizen that will provide a population health to the masses which will eventually lead to high productivity and hence economic growth. Finally, the research recommends the Kenyan government to secure the country using both physical and technological means that will enhance peace for the country men and women to concentrate to work leading to economic growth
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.

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