Financial Factors Determining Micro-Loan Uptake by Women Enterprise Groups in Nakuru East Constituency, Nakuru County

The study sought to determine financial factors determining micro-loan uptake by women enterprise groups in Nakuru East Constituency, Nakuru County. The government of Kenya acknowledging that women had been marginalized in access to formal financing, and hence introduced the Women Enterprise Fund (WEF) to provide an alternative, easily accessible and affordable finance. However despite the efforts made by the government, most women enterprises still are not accessing the funds as anticipated in this government endeavors.  There has been concern among various stakeholders that even though the government has availed affordable funds for women with minimal regulatory factors, some of these funds lie idle with lenders therefore Specifically, the study sought to establish the extent to which financial characteristics, lending procedures, financial literacy and loan repayment policies affect micro-loan uptake by women enterprise groups in Nakuru East Constituency, Nakuru County. The research employed descriptive research design. The target population was 322 women groups in Nakuru Town East Constituency. Nassiuma’s formula was employed to sampled 82 groups. Primary data was collected through semi structured self-administered questionnaires.  Both descriptive and inferential statistics were used to analyze data. Multiple regression analysis was used as the principal data analysis method.  From the study findings,financial characteristic, lending procedures, and financial literacy and loan repayment policies has a significance influence on uptake of micro-loans by women enterprise groups in Nakuru East Constituency, Nakuru County. From the finding the researcher recommended that MFIs and governments should design products specifically tailored to meet the needs of women so as to address their challenges. Women should be equipped with financial literacy skills; this can be through conducting workshops to teach these women how to start and maintain their businesses in proper financial state at all times. The study suggested that further research should be carried out to assess the effect of group dynamic on loan repayment Key terms: Financial Factors Micro-Loan Uptake, Women Enterprise Groups DOI: 10.7176/RJFA/10-8-19 Publication date: April 30th 201

Institutional Micro Credit Determinants and Portfolio Quality of Investment Groups

Micro-credit plays a major role in development strategies. This is in view of its direct relationship to both poverty alleviation and improvement of the living standards. However, commercial banks are still largely absent in the provision of micro credit. This phenomenon may be attributed to credit policies associated with loans provided by the formal sector. Since many businesses in small and micro enterprise sector are largely poor and lack tangible assets that can be pledged as collateral in conventional lending, banks are unwilling to provide credit facilities to them. For this reason, The objectives of the study were to determine the effects of macroeconomic, group leverage, group capitalization and group characteristics on the portfolio quality of investment groups financed by the Sidian bank in Nairobi region The study adopted a descriptive survey research design since it establishes the relationship between the dependent and the independent variable. With the target population being all the 56 investment groups in the 9 branches under the Sidian bank within Nairobi region. The study used secondary data, which was obtained from the Sidian bank offices in each of the branches within Nairobi region. Data analysis was conducted using descriptive statistics including percentages, frequencies, means and standard deviation. In addition, inferential analysis was carried out using correlation analysis and multiple regression analysis. The study found that macroeconomic variables, group leverage level, group capitalization and group characteristics influences portfolio quality of investment groups financed by the Sidian bank in Kenya positively and significantly. The study concluded that group leverage level had the greatest influence on portfolio quality of investment groups financed by Sidian bank in Kenya followed by macroeconomic variables, group capitalization level and finally group characteristics had the least effect. The study recommends that the Sidian bank need to manage their portfolios, by understanding that not only the risk posed by each credit but also howthe risks of individual loans and portfolios are interrelated. The study also recommended that, banks should be allowed to invest more in loans and advances as long as such banks have enough reserves to finance such investments. The study further recommends that regulatory authority (CBK) and other stake holders should create an enabling environment that removes all these inefficiencies to the policy concern of high cost of credit. &nbsp

The Applicability of Pecking Order Theory in Kenyan Listed Firms

The focus of this study was to test the applicability of pecking order theory in capital structure formation of Kenyan firms listed on Nairobi Securities Exchange over the period 2002-2009. The study begins by addressing the factors affecting the formation of capital structure to Kenyan firms. The determinants of capital structure are relevant in testing the applicability of pecking order theory. The pecking order theory is based on the idea of asymmetric information between managers and investors. Managers know more about the true value of the firm and the firm’s riskiness than less informed outside investors. Existing studies have produced conflicting evidence on applicability of the theories hence increasing the need to test the pecking order theory by using data from the emerging markets like Kenya. Significant gaps exist in finance literature as to whether the theory has any application on emerging markets like Kenya. Hence the objective of the study was to test the applicability of pecking order theory. The dependent variable for this study was gearing ratio while the independent variables were internal fund deficit and firm-specific factors like profitability, size, asset tangibility, non-tax shield and growth opportunities. Panel Data were obtained from financial tables of 30 firms processed in NSE and Multivariate Regression was used to analyze the data and test the hypotheses.  The study established that size, non-tax shield, profitability, growth and tangibility are determinants of capital structure as predicted by pecking order theory. The study however found evidence supporting applicability of weak form of pecking order theory on listed Kenyan firms. The results are consistent to previous studies in developed countries. The study recommends for improvement of the bond market in Kenya to increase the availability of long-term external source of funds and provide Kenyan firms with more alternative sources of finance. Keywords: Pecking Order Theory, Gearing, Fund Deficit, Surplus, Capital Structur

Prudential Regulations and Financial Performance of Commercial Banks in Kenya

Prudential regulation forms a critical part of operations in the banking sector. The aim of the regulations is to protect investors and consumers and ensure systemic stability. Consequently, commercial banks are required to maintain adequate level of capital, liquidity, asset quality, credit risk and management efficiency. In Kenya, the CBK implemented the prudential regulations in 2013. However, there is no consensus from existing studies whether the new regulations have a positive or negative influence on bank performance. The main objective of this study was to determine the effect of prudential regulations on the financial performance of commercial banks in Kenya. The sample comprised of all 43commercial banks operating in Kenya observed over the study period, 2013-2017.Data was extracted from annual financial reports of the banks and Central bank of Kenya (CBK) annual regulatory reports, which reduced the sample to 36 banks. The study adopted correlation research design and examined the relationship between the independent variables and performance. Multiple regression model was used to determine the linear relationship to examine the effect of the prudential regulations of profitability of commercial banks. From study findings, liquidity management, credit risk management and management efficiency has significant effect on the financial performance of commercial banks while capital adequacy and asset quality has no significant effect on the performance of commercial banks in Kenya. The research findings are useful to the CBK and banks, as it demonstrates the extent to which new prudential regulations influence the financial performance. Variables contributing positively to financial performance should be strengthened while those influencing performance negatively should be reviewed. This will enable the formulation of policies and strategies that will help in running the operations of commercial banks. The investment advisors and analysts use the research outcome to advise their clients on the future prospects and sustainability of investments in commercial banks. The study recommends adoption of the regulation as it affects banks financial performance thus improve banks stability and reduces chances of insolvency.Keywords: liquidity and credit risk management, management efficiency, capital adequacy and asset quality, financial performanceDOI: 10.7176/RJFA/11-14-06Publication date:July 31st 202

The Effects of Credit Risk Management Practices on Growth of SACCO's Wealth in Nakuru Town

Credit risk simply as the potential that a bank borrower or counterpart will fail to meet its obligations in accordance with agrees terms. Credit risk or default risk involves inability or unwillingness of a customer or counterparty to meet commitments in relation to lending, trading, hedging, settlement and other financial transactions.  Increasing profitability is a priority for all managers in financial institutions. For Sacco managers, credit risk management is equally very important. On the one hand Sacco managers need to reduce the risk of loan default because the institutions financial viability is weakened by the loss of principal and interest, yet on the other hand SACCO’s operate under objectives of maximizing benefits to members which include the social role of providing loans to help members achieve their standard of living goals . The main objective of the study will be to investigate the effect of credit risk management practices on growth of SACCOs' wealth. A descriptive survey was used and the target population was all savings and credit cooperative societies licensed by Sasra in Nakuru as at January 2015.     Primary data was collected using questionnaires and analyzed by correlation and regression. The study concluded that collectively, credit risk identification, credit risk analysis and credit risk monitoring do not have significant effect on growth of SACCOs. It was evident that credit risk management is not key determinant of wealth of SACCOs and therefore SACCOs can not invest in such practices in attempt to achieve improved growth in wealth. Keywords: Credit Risk ,Management Practices,  Saccos' Wealt

The Effect of Macroeconomic Variables on Stock Returns of Companies Listed in the Nairobi Securities Exchange, Kenya

This study sought to determine the effect of macroeconomic variables on the stock returns for the companies listed in Nairobi securities exchange. The macroeconomic variables used in this study were money supply, oil prices, gross domestic product and interest rates.  The target population for this study was 20 companies Listed in Nairobi securities exchange used in the computation of the NSE 20 share index. This study used secondary data and the data was collected using data collection sheet. The sample data covering a period of 5 years from 2014 - 2018 was collected from various sources.. The descriptive analysis was done using frequencies, percentages, means and standard deviations for all the variables for this study while inferential statistics used in this study were Pearson correlation and both simple and multiple regression analysis. The study found out that Money Supply, Gross Domestic Product, Oil Prices and Interest rates contributed to 71.4% variation in the stock returns meaning that other factors not included in this study accounted for 28.6%. The study concluded that money supply, oil prices, gross domestic product and interest rate positively affected the stock returns of companies listed in Nairobi Securities Exchange. This study recommends that the macroeconomic environment should be closely monitored in order to ensure stability in the stock market. Keywords: Macroeconomic Variables, Stock Returns, Nairobi Securities Exchange. DOI: 10.7176/RJFA/12-10-04 Publication date:May 31st 202

Influence of Selected Factors on the Choice of Capital Structure of Small and Medium Enterprises (SMEs) in Kiambu County, Kenya

This study is on the effect of selected factors influencing the capital structure of small and medium size enterprises in Kiambu County, Kenya. SMEs play a pivotal role towards the achievement of the broad goals outlined in vision 2030 and are critical drivers towards making Kenya an industrialized country with high quality of life for its citizens. The study observes that despite their significance, past statistics indicate that 3 out of 5 SMEs fail within the first few months of operation and those that continue 80 per cent fail before the fifth year; it is therefore necessary to eliminate the many constraints facing these small businesses for Kenya to become an industrialized state by the year 2030. The objectives of the study were to determine the effect of firm size, information availability, purpose of finance, cost of finance, and collateral requirement on the capital structure of SMEs in Kiambu County. The study findings will assist Government planners in understanding how to come up with policies that will help the SMEs sector in raising affordable capital as this will have a great impact on the country’s economic growth; financiers will benefit from the findings by developing a better understanding of the factors that influence the capital structure of SMEs. In addition, the findings from the study will contribute to knowledge about financing decisions of SMEs. The study was guided by pecking order theory, credit rationing theory, the agency theory, and the life cycle approach. This study utilized descriptive research design, employing survey methods. The population of interest are the 889 SMEs in Kiambu County registered in the Kiambu Business Directory. The study used proportionate sampling by utilizing a sample of 268 respondents, determined by Fisher’s formula. The data were collected from interview schedules using questionnaires. Descriptive and inferential statistics (Pearson’s correlation and regression). Data were presented in figures and percentages on pie charts and frequency distribution tables for easier interpretation.  The study findings indicated that the size of the business influenced the capital structure of the firms to great extent (33.6%) and to greatest extent (33.6%) respectively compared with those who were not sure at 18.7%. Availability of information influenced choice of capital structure to a great extent (36.2%) and to greatest extent (45.5%) respectively.  The purpose of the finance influenced choice of capital structure to a great and greatest extent according to 39.9% and 47.8% of the respondents. Personal savings were generally recommended for SMEs with 22.0%, 29.1% and 48.9% of the respondents indicating average, high and very high recommendation. Family and friends borrowing got mixed recommendation with 23.5% and 24.3% of the respondents indicating low and high recommendation respectively, compared with 45.1% who gave average recommendation. Finally, the research sought to test the hypotheses in order to fulfill the objectives of the study by using Pearson’s correlation and regression model and applying t-test to test for the significance in the relationship. All of the null hypotheses were rejected on the basis that the significance of the t-statistic was 0.000 which was less than p-value 0.05 set for the study. Therefore, all the selected factors had an impact on the choice of capital structure for SMEs in Kiambu County. Keywords: Capital Structure, Small and Medium Enterprise

Effect of Determinants of Lending Interest Rate Fluctuations on the Profitability of Commercial Banks in Kenya

Volatility in lending interest rates represents one of the key forms of financial risk faced by commercial banks in Kenya. The aim of this research project was to identify and assess the effect that the determinants of lending interest rate volatility have on the profit levels realized by commercial banks in Kenya for the period 2010-2015.  This study used profitability measured by Net Interest Margin as the dependent variable, while the independent variables were Borrowers’ Default Rate, Central Bank of Kenya Liquidity Ratio, Central Bank Kenya Cash Reserve Ratio, Inflation Rate and Maturity Mismatch. The study population was the total 42 commercial banks that were in operation as at the end of 2015, with a sample size of 20 banks. The study used secondary data collected from individual commercial banks, among them audited financial statements, published bank supervision reports by Central Bank of Kenya, data on inflation was obtained from Kenya National Bureau of Statistics. Data analysis involved both descriptive and inferential statistics; with descriptive statistics involving the use of mean, standard deviation, minimum and maximum values of data collected, while the inferential statistics comprising the use of regression coefficients to test the hypotheses ywith values generated using the Statistical Package for Social Sciences software. The findings of the study revealed that Borrower’s Default Rate, Inflation Rate and Maturity Mismatch Risk would impact negatively on the profitability of banks, whereas Cash Reserve Ratio and Liquidity Ratio would impact positively on the profitability of commercial banks in Kenya. The study therefore concluded that commercial banks should work in tandem with Central Bank of Kenya in order to constantly monitor the Cash Reserve Ratio and Liquidity levels to avoid cases of instability; the Inflation Rate should be watched as well in order to know and study the borrowing culture of the various bank clientele, and that both Maturity Mismatch and Borrowers Default Rate levels should be contained to avoid growth in Non-Performing Loans and to keep the banks’ loan book open and in constant flow. Key words: interest rate fluctuation, Default Rate, Liquidity Ratio, Cash Reserve Ratio DOI: 10.7176/RJFA/10-8-21 Publication date: April 30th 201

The Effect of Selected Factors on the Development of Nairobi Securities Exchange

This study aimed to find out the effect of selected factors on the development of the Nairobi Securities Exchange. The general objective of this study was to determine the effect of selected factors on the development of the NSE. The specific objectives were to determine the effect of market information; market efficiency; market transparency; market openness; transaction processing system and operating/transaction cost; legal and regulatory framework on the development of the NSE. Both primary and secondary data collection methods were used. A structured data collection questionnaire was used to collect data on market infrastructure factors. The population of study was the Nairobi Securities Exchange. Secondary data was collected on market capitalization from 2006 to 2015 which was used as the indicator of NSE development.  This study used a descriptive research design to describe the empirical data. A regression model was used for data analysis and hypothesis tested with a 0.05 significance level. The regression results of the study indicated that the predictor variables in the regression model explained 80.19% of the variation in development of the NSE; where a unit increase in market information  leads to a 0.382 increase in NSE development,  a unit increase in Market efficiency leads to a 0.097 increase in NSE development, a unit increase in Market transparency leads to a 0.348 increase in NSE development, a unit increase in Market openness leads to a 0.368 increase in NSE development, a unit increase in Transaction processing system and Operating/transaction cost leads to a 0.507 increase in NSE development and a unit increase in Legal and regulatory framework leads to a 0.226 increase in NSE development. Given the effect of the predictor variables on NSE development, the government should improve the market infrastructure which is the center on which financial market revolves. This can be done through initiation of policies that foster growth and development as countries liberalize their financial systems and further enhance domestic resource mobilization, public education awareness programmes, elimination of excessive barriers to the market and putting in place tax regimes and incentives geared towards stimulating companies to be listed in the stock market. Public education awareness programme. This study is of great importance to researchers and academics, government policymakers, regulators and investors and the results should lead to the creation of an enabling environment, development of good regulatory framework and thus faster development of the securities market. Keywords: Market Information Efficiency, Transparency, Openness, NSE Development

Firm Specific Factors and Financial Performance of Real Estate Firms Listed at the Nairobi Securities Exchange In Kenya

This study sought to find the effect of selected firm specific factors on real estate firm financial performance. Financial performance was measured by return on assets (ROA) and return on equity (ROE). The objectives of the study were to; determine the effect of liquidity on financial performance; assess the effect of leverage on financial performance; and examine the effect of firm size on financial. The study was based on the Trade-off theory, Shiftable theory and Liquidity preference theory. The study used descriptive survey research design in an attempt to investigate the effect of selected firm specific factors on firm financial performance. The population of this study comprised the five (5) real estate firms listed under the investment subsector of the Nairobi Securities Exchange (NSE). The study used data covering a period of ten years from 2008 to 2017. The data was collected from published audited financial annual reports of the four (4) real estate firms listed in the Nairobi Securities Exchange. One was not studied due to unavailability of financial statements for the whole period of the study. The secondary data was collected using a data collection sheet. To describe profiles of the firms and research variables, means, standard deviations and coefficient of variation were used; and Pearson’s correlation was used to examine relationships. The diagnostic tests done were normality and autocorrelation tests. The researcher used SPSS software to assist in analyzing the data. The results revealed significant negative relationship between liquidity and financial performance. The results also showed insignificant positive relationship between leverage and financial performance. The results also showed insignificant positive relationship between firm size and financial performance. Further, the results evidenced that all the variables combined had a statistically significant effect on the financial performance. The study recommends further research on other firm specific factors not included in the study to determine whether they have a significant effect on financial performance of real estate in Kenya or not. Keywords: Firm Specific Factors, Financial Performance, Real Estate Firms, NSE DOI: 10.7176/RJFA/11-14-18 Publication date:July 31st 202