Master of Science in Finance and Investment
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Item Effect of Competitive Strategy on Financial Performance of Commercial Banks in Kenya. A Case Study of Nairobi County, Kenya(KeMU, 2023-08) Njue, Leonard MugendiCompetitive strategies are critical in the bank’s financial performance. The banks that have effective competitive strategy are likely to achieve better competitiveness in terms of financial and non-financial performance. The study sought to determine the effect of competitive strategy on the financial performance of commercial banks in Nairobi County Kenya. The specific objectives were; to determine the effects of product differentiation strategy on the financial performance of commercial banks in in Nairobi County Kenya, to establish the effect of innovation strategy on the financial performance of commercial banks in Nairobi County Kenya; to analyze the effect of the post-COVID-19 recovery strategy on the financial performance of commercial banks in Nairobi County Kenya; and to establish the effect of human capital strategy on the financial performance of commercial banks in in Nairobi County Kenya. The study was guided by porter's generic competitive strategies theory resource-based theory, knowledge-based view, and agency theory. The study adopted a cross-sectional survey design, targeting the branch managers of licensed commercial banks operating in Nairobi County. A total of 564 banking branch managers were targeted. A sample of 234 branch managers were selected using random sampling. Data was collected using an online questionnaire administered through the Qualtrics survey portal. The data was analyzed using Statistical Package for the Social Sciences version 29. The data was presented in tables and graphs. The pilot study was conducted in Murang’a County, using 20 branch managers in commercial banks. The ordinal logistic regression was used to analyze the relationship between the variables. The result of the regression indicated a positive statistical relationship between product differentiation, COVID-19 recovery strategy, human capital strategy and innovation on financial performance. It was also established that the overall competitive strategy had a statistically significant effect on the bank’s financial performance. It is recommended that the banks should establish strategies aimed at improving the product quality and review strategies to improve product quality to meet the customers’ expectations and focusing on refinancing and restructuring of loans to assist the customers who are unable to pay the loans on time due to the financial challenges. The recommendation for future research includes using the qualitative approach, comparative analysis across different regions in Kenya and using the longitudinal approach.Item Effect of Process Innovations on Financial Performance of Microfinance Institutions in Nairobi County, Kenya(KeMU, 2023-08) Mwirichia, Christine MakenaMicro-Finance Institutions in Nairobi County have experienced intense pressure to adapt to new developments during the past ten years because of market rivalry, advancements in computer technologies, and varying employee demographics. Micro-Finance Institutions that do not innovate run the risk of being surpassed by rivals. The financial sector has been affected by globalization and technological advancement. Locally in Kenya the performance of MFIs has declined. The study's objective was to define the process innovation effects on the financial performance of microfinance institutions in Nairobi County, Kenya. The process innovation variables used were remote data processing, digital cards, point-of-sale terminals, real-time gross settlement, and their effects on the financial performance of MFIs. Task-technology fit theory, diffusion of innovation theory, and theory of financial innovation are the theories on which the study is based. Cross-sectional survey research approach was em`1ployed. The current study concentrated on the head employees of finance, information technology, operations, and credit control from 12 MFIs in Nairobi County that are registered with AMFI. Stratified random sample technique was used. An initial sample of 44 individuals was selected using the Yamane statistical technique. Structured questionnaires were used to gather in-depth data. Pre-testing was conducted to assess validity and reliability of the data collection techniques. Version 26 of the SPSS was used to evaluate the data and guarantee its accuracy. Mean and standard deviation were used to determine descriptive analysis, whereas model brief, ANOVA, and coefficients of regression were used to determine regression analysis. According to the correlation analysis, real-time gross settlement, digital cards, point-of-sale terminals, and remote data processing were all positively correlated with financial performance. The outcomes of the regression showed that every predictor had a favourable, significant effect on financial success. The research concluded that the processes of the MFI have been automated to improve MFIs operations. The study concludes that digital cards introduction in to the Microfinance institutions has attracted more retail depositors to the MFIs. Also the Microfinance institution offers debit cards to its customers. Further, it is concluded that the MFI has sufficient POS infrastructure and the MFIs have put in place security measures on point of sale transactions. The study concludes that the Microfinance institution uses Real time gross settlement to minimize risk related to high value payment settlements. The findings of the study endorsed that in addition to automating core processes, the Microfinance institutions should make it possible for the clients to open and operate accounts remotely. In order to ensure maximum benefits through digital cards use, the Microfinance institution should encourage their customers to use digital cards.Item Effects of Internal Audit System on Financial Performance of SACCOs in Meru County, Kenya(KeMU, 2023-08) Kiambi, James KaimenyiIn today’s business world, the major interest is to enhance accountability, profitability and enjoy competitive advantage. As a way of achieving this, SACCOs employ internal auditing, to enable them monitor the monetary activities to enhance financial performance. Despite the fact that the majority of SACCOs (around 70%) have implemented either an in-house or outsourced audit system, their financial performance remains below expectations, with instances of fraud, poor fund management, and inadequate budget development and utilization. Given these circumstances, the purpose of this research was to examine how the internal audit system affects the financial performance of SACCOs in Meru County. The study concentrated on four primary goals: evaluating the influence of compliance, risk assessment, control function, and monitoring on the financial performance of SACCOs in Meru County. The study's theoretical foundation was built on the agency, legitimacy, and capture theories. To accomplish the research objectives, a descriptive research design was employed, targeting 42 SACCOs that had operated in Meru County for a minimum of ten years. The study adopted a census approach, including all 42 eligible SACCOs in the study. The respondents consisted of the chief executive officers of the respective SACCOs, totaling 42 participants. Data collection involved the use of a structured questionnaire, which was pre-tested in four SACCOs from Tharaka-Nithi County, selected purposively. The collected data were accurately coded based on the responses to various items. In the analysis of data, this study employed SPSS (Version 24) and utilized descriptive and inferential statistics. Multiple linear regression models were used to investigate the connections between the dependent and independent variables. The study's findings uncovered a noteworthy correlation between compliance and the financial performance of SACCOs in Meru County, rejecting the hypothesis that the compliance slope is zero (b = 0). Similarly, a noteworthy relationship was observed between risk assessment and financial performance, rejecting the hypothesis that the risk assessment slope is zero (b = 0). However, no noteworthy impact on financial performance was found for control function and monitoring. The study concluded that compliance plays a vital role in ensuring SACCOs adhere to regulations and guidelines, thereby fostering transparency, accountability, and good governance. Furthermore, effective risk assessment can assist SACCOs in reducing operating costs, enhancing efficiency, and improving financial performance. The study recommends that SACCO management strive for full compliance with relevant regulations to enhance accountability and financial performance. Additionally, implementing robust risk assessment policies is advised to mitigate risks, reduce operational costs, and boost financial performance. Finally, the study suggests expanding the research to encompass other financial institutions to explore potential variations in the correlations between the internal audit system and financial performance.Item Effect of Restructuring on Financial Performance of Commercial Banks in Meru County, Kenya(KeMU, 2023-08) Jepleting, Kipkorir JanetBanking industry is section of financial sector. Its role in economy development cannot be overemphasized. Globally, it facilitates financial intermediation process. In Africa however, the commercial banks have been decreasing owing to tightening regulations, mergers, acquisitions, liquidations and collapses. On the same vein, profitability trend of commercial banks in Kenya have been fluctuating for the past eight years .This could be linked to raising inflationary pressure, emerging risks, concerns of public debt sustainability, fragile economic recovery among others. However, in an effort to enhance performance, commercial banks have been restructuring but it is not clear which restructuring strategy is most successful in doing so. The subject study therefore sought to examine effect of restructuring on financial performance of commercial banks in Meru County. It assessed the effect of technology adoption, downsizing of employees, business process reengineering and outsourcing on financial performance of commercial banks. The study was anchored on financial intermediation theory, resource-based view, technology adoption model and transaction cost theory. It employed descriptive research design, target population of sixty branch management staff and adopted census approach. It made use of structured questionnaire which was reliable for use in actual data collection since Cronbach's Alpha coefficient for each variable was greater than 0.7. The content validity of the questionnaire was enhanced by ensuring questions were formulated based on the objectives. Criterion validity was utilized to test how well results were relevant to measuring the effect of restructuring on financial performance. Additionally, it utilized both qualitative and quantitative data. Pilot testing was carried out in Fina Bank, Nanyuki branch, Laikipia County and Ecobank Kenya Karatina branch, Nyeri County to enhance reliability of questionnaire. Data was coded using SPSS and analyzed using descriptive statistic correlation and multiple regressions. Further, it was presented using charts and tables. The study discovered that downsizing, technology adoption, outsourcing and BPR positively and significantly affected the financial accomplishments of commercial banks in Meru County. The study concluded that downsizing of employees constructively and significantly influenced financial achievements of commercial banks. In addition, technology adoption is essential on financial performance of commercial banks. Likewise, outsourcing of services positively and significantly influenced fiscal performance of commercial banks. Furthermore, it was inferred that BPR enhanced financial accomplishments of commercial banks. Therefore, the study recommended that commercial banks should establish training programs to boost morale and instill commitment spirit among the employees left behind after downsizing process. In addition, they should employ entertaining language to capture the potential market available in social media. They should also outsource services that are expensive to nurture and has declining function. Last but not least, future researchers should consider exploring impact of innovation related risks on financial performance of commercial banks; challenges and opportunities posed by outsourced fintech services on financial performance goals of commercial banks; relationship in between BPR, organizational culture and organization performance. Eventually, the study may be replicated by future researcher in savings and credit societies in Kenya to establish whether the results realized would holdItem Influence of Asset Management Strategies on Financial Performance of SACCOS in Imenti North Sub-County, Kenya(KeMU, 2023-08) Rahima, Atikiya SoraThe consistency of offering asset management products by Saccos enables them to easily settle their obligations when they fall due. Nevertheless, Kenyan Sacco’s have been experiencing low liquidity ratios concerns. The general objective of the study was to examine the influence of asset management strategies on financial performance of Saccos in Imenti North Sub-County, Kenya. The specific objectives were to determine the influence of cash flow management strategy, mortgage loan management strategy, treasury bills management strategy and stock control management strategies on financial performance of Saccos in Imenti North Sub-County, Kenya. The study used pecking order theory, contingency theory and resource based-view theory. Descriptive research design was adopted to collect data from 7 deposit taking Saccos located in Imenti North Sub- County. Further, the selection of representatives from the entire population was done using simple random sampling method to have 13 accounts department officers, 34 tellers, 28 back-office staff and 36 loans officers hence a total of 111 respondents. Quantitative data inform of closed-ended questionnaires and financial statements was collected and measured using SPSS version 24. The study conducted a pilot study in Unison Sacco located in Isiolo county. Descriptive statistics such as frequency, percentage and mean were analyzed while at the same time inferential statistics line Pearson Coefficients and multiple regression were similarly analyzed. The study found out that there was a positive influence of asset management strategies on financial performance of Saccos in Imenti North Sub-County, Kenya. This was because the p-value was 0.000 hence less than 0.05. Notably, the overall r was 0.779 and r-square was 0.607 with a Durbin Watson value of 1.392. Therefore, asset management strategies had a 60.7% influence on financial performance with a positive correlation. The conclusion made regarding cash flow was that the investment department was still undeveloped in many Saccos therefore limiting on the authorization of incorporation of funds in investment options like capital markets. On mortgage loan, there were high cases of default and inconsistent payment of interest, which was brought about by poor communication and follow-up skills applied by the staff when reminding the clients to pay their dues. On treasury bills, the Saccos had not adequately created awareness to their clients on the opportunities that they could generate from investing in treasury bills. On stock control, the Saccos had not invested resources towards acquiring latest stock management software that would offer real time data on the current inventory. Therefore, the study recommends that on cash flows, the BOM should create policies and provide adequate funds to establish an investment department, if there is none, or strengthen it if in existence. On mortgage loans, the management should introduce communication in-job training whereby the staff equipped with basic etiquette, and negotiation skills. On treasury bills, the marketing managers should ensure that they have developed treasury bills campaigns such as having a sensitization week in the branch. where clients get access to information regarding the T-bills. On stock control, the senior management should allocate funds to purchase various stock management software that would be used within the branches to manage their stock levels.Item Relationship between Financial Derivatives and Financial Performance of Selected Listed Commercial Banks in Kenya(KeMU, 2021-08) Muthine, PhilipinoMarket globalization has tremendously increased exposing banks into different forms of financial risks. Financial risks when inadequately managed may cause the financial performance of commercial banks to decline. Managing these financial risks amongest other ways, involve creating tradable instruments such as derivatives to offset them. This study examined the relationship between financial derivatives and financial performance of selected listed commercial banks in Kenya. The objectives of the study were to assess the influence of swaps, options, forwards and futures on financial performance of listed commercial banks in Kenya. Four theories that were espoused in this study included risk management theory, capital irreverence theory, financial intermediation theory and normative decision-making theory to guide swaps, options, forwards and futures respectively. Descriptive research design was used when collecting data using closed ended questionnaires from the selected 11 listed commercial banks in Kenya. Required data was provided by risk managers, operations managers, operations managers and marketing managers to participate in the study. Census sampling technique was used due to the small target population hence every listed commercial bank was included. To ensure validity and reliability, pre-test questionnaires was sent to six respondents who were selected by simple random method of sampling from the non-listed banking sector. The six respondents were junior officers in risk, credit, operations and marketing departments of non-listed commercial banks in Meru Kenya. The collected data was then coded using the SPSS 24.0 software. The coded data was analyzed quantitatively using the descriptive statistics such as mean, percentage and standard deviation while inferential statistics such as person correlation analysis were used. Linear regression models were also used. Further on, the tables, graphs were used when indicating the analysis results. The study indicated that there was a linear relationship between financial derivatives and financial performance of selected listed commercial banks in Kenya. The study discovered that sales of swaps contracts was low and there were increasing costs associated with these kind of derivatives hence reducing profits. In addition, since most forwards take a long time to mature, when banks were restructuring their computerized systems, they lost client’s contact information through misplacement or not correctly capturing in the new system. These results proved that the banks lacked enough qualified staff to amicably handle all issues and report on time. In addition, it was evident that the banks did not have complete infrastructure set up that is required to run financial derivatives such as futures. The study recommends that there should be a aggressive marketing initiatives in the banking sectors to enable incorporation of more clients into derivatives contracts. `