24 research outputs found
Impact of Education and Training on Entrepreneurial Behavior in Kenya: An Application of the Resource-Based Theories
This study examined the impact of education, training, experience and access to credit on the behavior of entrepreneurs in Kenya. The focus is on the following specific behavioural traits: risk taking, innovativeness, focus on results and the sense of responsibility. To achieve the above objective a survey of over 170 Micro and Small Entreprises (MSEs) engaged in trade, manufacturing, construction, and service ventures was carried out in Kariobangi, Kasarani Division of Nairobi County in Kenya. The study applied non-parametric statistics (chi-square) tests on the null hypotheses of independence between education and training and the specific entrepreneurial behaviours mentioned above. The null hypotheses were all invariably rejected. Furthermore, multivariate analysis of variance was applied on the data. The results demonstrate that education and training, experience and access to credit have a strong influence on risk taking, innovativeness, focus on results and the sense of responsibility of the entrepreneurs. Therefore, this study concludes that both education and training have a significant positive impact on entrepreneurial behavior. Key words: Micro and Small Entreprises, Education, Training, Risk taking Behavior, Innovativeness, Access to Credit, Entrepreneurial Behavior, Manufacturing, Services, Trade, Constructio
The Impact of Attitudes towards Saving, Borrowing and Investment on the Capital Accumulation Process in Kenya: An Application of the Theory of Planned Behavior
The role of attitudes of the entrepreneurs toward saving, investment and borrowing to invest is an important factor in economic development. This study examined how attitude influences the amount and form of funds saved, borrowed and invested by Micro and Small Entreprises (MSEs) in Kenya. It also examined the instruments used for saving, the sources of finance and how these combine to influence the capital accumulation process and poverty alleviation efforts. A survey of MSEs in Ongata Rongai Township showed that attitudes of MSEs influenced their saving, investing and borrowing behavior. This relationship is positive and significant. The MSEs prefer saving with banks but not Microfinance Institutions (MFIs) and other traditional instruments. The MSEs have a positive attitude toward saving, borrowing and investment. However, they are noncommittal to borrowing from the formal financial system. Those who borrow prefer banks to MFIs. This is attributed to the high interest rates, long procedures for obtaining loans, and the rent seeking behaviour of some officers of the MFIs. The MSEs rely mainly on their savings as a source of finance for investment. Reliance on internal finance means that MSEs must first accumulate savings before investing. Since the amounts saved by most MSEs are small and credit is limited, the amount invested and the returns on investment are also small. Thus the capital accumulation process is long and arduous. This could partly explain why we seem to be loosing the war against poverty in Kenya. Therefore any form of intervention to alleviate poverty through microfinance must seriously consider the attitudes and intentions of those being targeted. Keywords: Attitudes, Micro and Small Entreprises, Intentions, Saving, Investment, Borrowing, Capital Accumulation, Theory of Reasoned Action, Theory of Planned Behavior, Subjective Norms, Beliefs, Significant Others, Intention
An Analysis of the Presence of an Entrepreneurial Culture in Kenya: An Application of the Population Ecology Theory and the Resource Dependence Theory
Several factors have been put forward to explain economic development and growth in different countries. The main factors are first, economic resources and second, well functioning economic, social and political institutions. Third, a growing number of authors have argued that culture is also a critical ingredient of economic development and growth. One important aspect of this cultural influence on economic development is the entrepreneurial culture. In Kenya, the debate on the presence or absence of the entrepreneurship culture is old and still raging. This study contributes to this debate by examining whether there is an entrepreneurship culture among micro and small enterprises (MSEs) in Kenya. Specifically, the study inquired into the possible causes of the phenomenal rise in new MSEs in Kenya between 1993 and 2005. Could this be, as is popularly believed, a manifestation of an entrepreneurial culture in Kenya? To answer this question a survey of over 170 entrepreneurs was conducted for different types of ventures in Kariobangi, Kasarani Division of Nairobi County in Kenya. Data was collected on the reasons behind business formations, the constraints to growth and the strategies used to market their goods and services using a questionnaire. A factor analysis technique was used to analyse the data. The evidence adduced shows that the mushrooming of MSEs over the sample period is not an epitome of an entrepreneurial culture in Kenya. The key factors behind this phenomenal growth are desire to supplement income, availability of credit, the desire to generate wealth and retrenchment. These are rational defensive responses to unemployment, retrenchment and poverty. Therefore, the observed increase in MSEs was a response to the harsh social, economic, and political environment at that time. Indeed, the results showed that an economic turn around in the country could lead to a massive close down of many MSEs as formal employment increases. Thus, policy-makers need to initiate policies aimed at reducing unemployment and poverty, which drive people to form MSEs to eke out a livelihood. Key words: Entrepreneurial culture, Economic Growth, Economic Development, MSEs, Institutions, Business Formation, Poverty, Environment, Population Ecology Theory, Resource Dependence Theory
A Survey of Credit Risk Management Techniques Used by Microfinance Institutions in Kenya
This study had two objectives. First, to identify the techniques used by microfinance institutions in the management of credit risk in Kenya. Second, to examine the main challenges facing the microfinance institutions in the management of credit risk. The study used a descriptive research design. A survey research design was used to collect the data. A sample size of thirty microfinance institutions was surveyed. The sampling frame included the Central bank of Kenya Directory (2006) of microfinance institutions. Purposive sampling was used to select one credit officer and one loan officer from each of the sampled institutions. Primary data was collected using semi-structured questionnaires. The questionnaires were dropped and picked up later and others were sent and received via email. The target respondents were the institutions’ loans and credit officers. Data analysis involves computation of summary statistics such as means, percentages and standard deviations. The study established that most microfinance institutions use 6C techniques of credit risk management. The results also revealed that understanding the organizations exposure to credit is treated as critical by the microfinance institutions. To avoid loan losses, the microfinance institutions used follow ups. The results also show that MFIs take loan review analysis as crucial aspects of risk management by doing proper documentation and analysis. The institutions also use litigation in situations where the borrower’s financial situation and structure have been altered and the original promised value of collateral differ. The study established that a majority of the institutions used Credit Metrix to measure the credit migration and default risk. The results also show that the microfinance institutions are faced with the challenge of strict operational regulations from the Central Bank of Kenya. The government had not put any policy in place to govern the operations of the MFIs. Loan recovery is a major challenge to the majority of the institutions. Keywords: Credit Risk Management, Microfinance Institutions, Credit Migration, Credit Metrix, Loan Review Analysi
Effect of Interest Rates on Foreign Exchange Rates in Kenya: A Test of the Forward Premium Puzzle
The main objective of this study was to examine the presence of the forward premium puzzle in the foreign exchange market in Kenya. The study used the Kshs/USD exchange rate for the period 1994 to 2016. That data consisted of monthly observations of the exchange rate, monthly observations of the 91-day Kenya government Treasury Bills Rate and the 91-day US government Treasury Bills rate. As a matter of procedure the data were tested for nonstationarity using the ADF test in level forms and in first differences. The result revealed that foreign exchange rates, interest rates and the risk premium are nonstationary. Furthermore, these variables were found to be cointegrated. Therefore, this study applied the VECM instead of the classical Granger causality tests to the data. The results show that the coefficient of the forward premium is not only negative but also statistically significant at the 5 percent level. This indicates the presence of the forward premium puzzle in the foreign exchange rate market in Kenya. Moreover, the forward premium contains information that can be used to improve the prediction the foreign exchange rate
The Causal Relationship between Exchange Rates and Stock Prices in Kenya
This study examined the causal relationship between foreign exchange rates and stock prices in Kenya from November 1993 to May 1999. The data set consisted of monthly observations of the NSE stock price index and the nominal Kenya shillings per US dollar exchange rates. The objective was to establish the causal linkages between leading prices in the foreign exchange market and the Nairobi Securities Exchange (NSE). The empirical results show that foreign exchange rates and stock prices are nonstationary both in first differences and level forms, and the two variables are integrated of order one, in Kenya. Secondly, we tested for cointegration between exchange rates and stock prices. The results show that the two variables are cointegrated. Thirdly, we used error-correction models instead of the classical Granger-causality tests since the two variables are cointegrated. The empirical results indicate that exchange rates Granger-causes stock prices in Kenya. Keywords: Exchange rate, Stock prices, Causality, Unit root, Error-correction models, Keny
Effects of Micro-credit, Micro-savings and Training on the Growth of Small and Medium Enterprises in MachakosCounty in Kenya
The objective of every micro-entrepreneur is to grow their businesses into large enterprises. To achieve this, most of the micro-entrepreneurs make use of microfinance services and training to improve their productivity and profitability. Many studies have been done in Kenya on SMEs and how they are influenced by microfinance services but none had focused on the effects of microfinance services on the growth of the SMEs. The purpose of this study was to find out the effects of micro-credit, micro-savings and training on the growth of SMEs in Machakos County. A survey research design was applied to study 8 types of business categories in Machakos County. Structured questionnaire was used to collect data from 100 businesses. Multiple regression analysis was used to determine the relationships between micro-credit, micro-savings, training and growth of SMEs. The results show that micro-credit, micro-savings and training jointly contribute positively to SMEs growth. However, the effect of training is not statistically significant. This could be attributed to training that is not based on the real needs of SMEs
Determining the Optimal Portfolio Size on the Nairobi Securities Exchange
There is consensus that diversification results in risk reduction. However there is no consensus on the number of securities required for maximum risk diversification. Studies done on different capital markets have yielded differing results. This study aimed at determining the optimal portfolio size for investors on the Nairobi Securities Exchange in Kenya. The study used mean variance optimization model and secondary data consisting of monthly security returns over a five year period from January 2009 to December 2013. Forty three of the sixty listed firms had complete information on monthly security returns and were used in the study. Portfolios of different sizes were formed by random selection of securities and the portfolio risk was computed. The study found that portfolio risk reduced as the number of securities in the portfolio increased but beyond the optimal portfolio size the risk started rising again. The optimal portfolio size in the Nairobi Securities Exchange was found to lie between 18 and 22 securities
X-Efficiency of Commercial Banks in Kenya
This study sought to determine the X-efficiency of commercial banks in Kenya and to establish whether the X-efficiency of these banks is affected by economies of scale. The data set consisted of annual operation costs of banks including interest expense. Deposits and borrowed funds were the inputs, and the loans to customers and investment and other incomes were the outputs. The data was collected from 33 banks for the period 2000 to 2005. To measure the X-efficiency level of commercial banks in Kenya, the study applied the Stochastic Econometric Cost Frontier approach which involves the estimation of the cost function and the derivation of the X-efficiency estimate based on the deviation from the efficient cost frontier. The empirical results obtained showed that X-efficiency exists in the commercial banks in Kenya and that X-efficiency of the banks is affected by economies of scale. The results showed that the average level of X-efficiency in Kenya’s commercial banks industry is 18%. After controlling for scale differences, the average small bank is found to be relatively less efficient than the average large bank. The persistency of X-efficiency in relation to bank size was measured to determine if inefficient banks tend to remain inefficient over time. The results indicate that the average large bank inefficiency was more persistent than the average small bank inefficiency at the level of 23%. The results also show that bank size affects X-efficiency for large banks. These findings were consistent with the results found in other related studies in US Kwan and Eisenbeis, 1996), Hong Kong (Kwan, 2001) and Namibia (Ikhide, 2000)
An analysis of the efficiency of the foreign exchange market in Kenya
This study examined the Efficiency Market hypothesis in its weak form using run tests, unit root tests and the Ljung-Box Q-statistics. The motivation was to determine whether foreign exchange rate returns follow a random walk. The data covered the period starting January 1994 to June 2007 for the daily closing spot price of the Kenya shillings per US dollar exchange rate. The main finding of this study is that the foreign exchange rate market is not efficient. The results showed that most of the rejections are due to significant patterns, trend stationarity and autocorrelation in foreign exchange returns. This is attributed to both exchange rate undershooting and overshooting phenomena.