Factors Influencing the Development of Capital Markets in a Developing Economy: A Case Study of Nairobi Securities Exchange in Kenya

The study examined the factors influencing the growth and development of capital markets in an emerging economy.  The study focused on the factors that influence the growth and development of the Nairobi Securities Exchange in Kenya (N.S.E.). This study sought to survey the factors that impinge on the growth and development of the stock market. The Nairobi Securities Exchange has experienced lack luster performance over its entire existence since it was founded in 1954. Over the years the number of stocks traded has stagnated at around 53 quoted companies. Ordinarily one would expect to find a significant degree of correlation between economic growth and the growth of the stock exchange. The former has averaged 3.8% p.a. in the period 1985-1996 while the latter averaged only 0.6% as measured by the number of quoted companies. To achieve the study objectives both primary and secondary data was used. Primary data was generated through the administration of questionnaires to the stakeholders of the NSE. Key informants were drawn from managers of investment banks; staff of the NSE, capital markets Authorities, Ministry of finance, Economic planning and the Central Bureau of statistics. The target population were all the 53 firms listed at N.S.E.  Stratified random sampling based on the segmentation of the trading counters was used for sampling the population of the study.  A sample of 30 firms was selected. Data was summarized using the inferential statistical methods. Descriptive research design was adopted and used for the study. The findings of the study indicated that the government policy reforms were viewed as having major influence on the growth and development of capital markets in Kenya. The NSE has experienced growth over the previous years, however the rate of growth has been dismal. The key factors that influence the growth and development of NSE include the strong regulatory and legal framework, good macroeconomic environment, investor education and awareness, improved market infrastructure, and increased participation by foreign investors. Keywords: Capital Markets, Nairobi Securities Exchang

Effects of Corporate Governance on Micro Finance Institutions Financial Sustainability in Kenya

The study focused on the effects of corporate governance on Microfinance Institutions financial sustainability in Kenya over a period of eleven years from 2000-2011. The study was necessitated by the lack of documented literature on the effects of corporate governance in Kenya given the dynamic structure in the liability composition of these institutions. The main objective of the study was to investigate the effect of corporate governance on Kenyan Microfinance institutions sustainability. The relevant literature was reviewed for the purposes of this study. Explanatory research design was used in trying to establish the causal effect relationship between corporate governance variable (which were; board size; CEO duality; composition of the board and CEO gender) and the financial sustainability of the MFIs in Kenya (measured using ROA). The target population were the 42 registered Micro Finance Institutions under the umbrella body AMFI where a random sample of ten institutions were selected using the cluster sampling technique. Data was collected from both primary sources and secondary sources. Primary data was captured using structured questionnaires completed by the CEOs and the senior management team as they were in a better position to comment on corporate governance affairs. Secondary data was collected from the Mix market which is the most reliable source of microfinance financial data. The study utilized panel data analysis methodology in drawing conclusions about the study. It was found that the average board size was 8 members with 10% of the institutions having the CEO double up as the chairman.40% of the institutions surveyed had a female CEO. Empirical findings confirmed that board size was significant in affecting financial sustainability at 99% confidence level (t values=2.79), CEO gender was significant at 99% confidence level (t values=2.487), CEO duality was significant at 95% confidence level (t values= 7.69) and board composition significant at 99% confidence level (t values=-2.57). The study recommends moderate board size a higher board independence separation of CEO and chairman and a greater incorporation of women in the board. Key Words: Micro-Finance Institutions, Sustainability, Board Size, Board Composition, CEO duality, CEO Gender

Influence of Financial Leverage on Financial Sustainability: A Case of Microfinance Institutions in Kenya

Microfinance institution plays a crucial role in economic development and financial inclusion. Financial sustainability is the key dimension to microfinance institutions growth. This further indicate the importance of which Financial sustainability is. Therefore, the present study investigated the effect of financial leverage on MFI financial sustainability. The specific objective was to establish the effect of financial leverage on the financial sustainability of MFIs. The study was guided by agency theory and life-cycle theory. The study adopted an explanatory research design where a panel approach was used as well as the positivist paradigm. The study adopted the census approach method. Panel data was drawn from 30 MFIs for a period between 2010 and 2018 from the mix market database using the data collection schedule. The study used both descriptive and inferential statistics to analyze data with the help of STATA software. Fixed effect model based on Hausman test (X2 = 45.41, p= 0.000 ≤ 0.05). Based on the findings of the study financial leverage ( the study had a positive and significant effect on the financial sustainability of MFIs. The study recommended MFIs managers to engage in the prudent use of financial leverage so that they enhance their overall profitability and boost investor confidence in their strategic decision-making resulting in financial sustainability. The results have an implication to business managers and policymakers given the vital role in service delivery and the challenges hindering the sector from the realization of financial sustainability in the economy

Does Portfolio Quality Influence Financial Sustainability? A Case of Microfinance Institutions in Kenya

This article studies the relationship between portfolio quality and the financial sustainability of microfinance institutions in Kenya. The analysis is based on a panel dataset of 30 microfinance institutions in the period 2010 to 2018. The study is guided by institutional theory which is built on conformance and continuity. The study adopts an explanatory research design where a panel approach is used under positivist paradigm. The study finds that portfolio quality has a positive significant effect on the financial sustainability at 1% statistical significance level. Based on this finding, the study concludes that portfolio quality is an essential element of MFIs financial sustainability. The study recommends that MFIs managers should devise good collection policies to improve portfolio quality while lessening loan default rate. The portfolio quality may improve the overall profitability and enhance investor confidence in their strategic decision-making on refinancing. It is important to note in order to ensure financial inclusion; the stakeholders must be involved

Improving Performance among Small and Medium Enterprises through Managerial Training and Savings Mobilization: Evidence from MSMEs in Kenya

Kenyan microfinance has shown resiliency despite local droughts and high inflation rates that afflicted the nation in 2008 and 2009. With the Kenyan government and the Central Bank of Kenya emphasizing financial access as a key to modernizing the economy, the sector has been strengthened by progressive policies and innovative approaches to delivering financial services. Based on a study conducted in Githurai Market, situated in Kiambu County, this paper examines the effects of managerial training and savings mobilization on the performance of micro, small and medium enterprises in Kenya. The study utilized an explanatory research design. The target population was the 429 MSMEs registered by the Kiambu Municipal Council. Of these, a sample of 270 SMEs was selected for the purposes of the study using stratified sampling technique. The study utilized multiple regression analysis set draw inferences on the study using Eviews statistical package. From the study findings, savings mobilization portfolio was also significant at 99% confidence level in determining MSMEs performance in Kiambu County, Kenya (t=3.715, p=0.000). The study also found managerial training to be statistically significant in determining MSMEs’ performance in the County (t values=0.109, p=0.004). It was thus concluded that training in micro enterprise investment as a component of micro finance helps clients in business management and minimizing transaction related risks. The study recommends that microfinance service providers and policy development partners could consider including a micro-insurance scheme in the micro finance package. Keywords: Improving Performance, Small, Medium Enterprises, Managerial Training, Savings Mobilization, Kiambu County, Keny