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End date: 2019Subject: search.filters.subject.Finance and Investment

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    The Effect of Operational Risk Management on Financial Performance of Commercial Banks: A Case of Tier Two and Three Commercial Banks in Kenya.
    (KeMU, 2018-09) Kamau, Rose Waithira
    Kenyan banking sector is exposed to risks that initiate from external and internal environments. Operational risk threatens the viability and long-term sustainability of banks. Despite growth in the Kenyan banking sector, operational risk possesses a major challenge therefore, this study examined the impact of operational risk on the financial health of tier two and three commercial banks in Kenya. The inquiry adopted a quantitative research concept with a target population of 36 commercial banks licensed by CBK by December 2017. The banks were grouped under tier two and tier-three categories. Time Series Cross-Sectional unbalanced secondary panel data was analyzed. The panel Data was unbalanced as some of the data was unavailable over the years due to banks that had collapsed merged or bought out. The data was derived from published financial statements of accounts of the 36 commercial banks in Kenya, the CBK annual reports and the Banking survey publications for nine years from 2008 to 2016. Fixed effect dummy variable Regression analysis was applied to establish the effect of Operational risk management on the financial health of tier-two and tier-three commercial banks in Kenya. The dependent variable of the study was the financial performance of tier two and three commercial banks in Kenya and this was measured using the return on equity and return on assets as a percentage. The other variables included the bank size which was measured by a natural logarithm of total assets and operational risk was measured by the cost to income ratio as a percentage. The qualitative variables operational risk management practices, board and senior management oversight were difficult to measure and they were in cooperated in the dummy variable measure categorized under Tier two and Tier three. Under the dummy variable each bank was assigned a value of one if it fell under tier two categories and zero if it falls under tier three. Financial ratio analysis was used in the study together with panel data techniques of fixed effects and panels least squares. Hausmann test was carried out to test whether fixed effect is superior to random effects. Diagnostic tests were carried out to detect any econometric problems the regression models might possess. The study findings indicated that operational risk has a significant negative effect on the financial performance of tier two and three banks. Bank size has a significant positive effect on the financial performance of tier two and three banks. The conclusion of the study was that financial performance of tier two and three banks has an inverse relationship with operational risk which was measured by cost to income ratio. The study also concluded that tier three banks are not able to mitigate operational risks as well as tier two banks through the dummy variable measure. Banks are therefore encouraged to develop effective risk management and measurements techniques to avoid huge operational losses that negatively affect the financial health of the institutions.
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    Influence of Market Information on Decision to Invest through Nairobi Securities Exchange among Youth Groups of Kisumu County in Kenya
    (KeMU, 2018-09) Kibegwa, John
    This study sought to understand the market factors that influence the youths in making investment decisions at the Nairobi securities exchange market. The youths in Kenya are specifically looked at because of the pivotal role that they play in the Kenyan economy and the emphasis the government has put on youth empowerment programs to enable them to improve their financial welfare and participate in economic development as a way of achieving the tenets of Vision 2030.The government through the youth enterprise fund has invested heavily in providing seed capital for youth willing to start their own businesses. The Nairobi securities exchange provides lucrative investment opportunities following the revolution that has taken place in the market. However, the number of youth investing through it is still low. The specific objectives of the study were to; establish the extent to which price changes contribute to investment decision amongst the youth investors, examine the contribution of the market information to investment decision amongst the youth investors, assess the contribution of the past trends of the stock to investment decision among the youth investors and investigate how customer preference contribute to investment decisions amongst the youth investors. The researcher adopted descriptive survey design on youth groups registered by Youth Enterprise Development Fund in Kisumu County. In 2016 there are 380 youth groups registered and financed by Youth Enterprise Fund in Kisumu County. The study targeted the chairpersons of the youth groups or their representatives who were knowledgeable on the group investment strategies. The target population therefore was 380 chairpersons of youth groups from which a sample of 69 chairpersons was selected using stratified and random sampling method. Secondary data was obtained from the Youth Enterprise Fund, Nyanza Region for the four constituencies in Kisumu County while primary data was collected using questionnaires administered to the chair persons. The data collected was analyzed using descriptive statistics while inferential statistics was employed to determine the significance and the strength of the relationship for two independence samples. It was found that: price changes and market trends did not significantly influence youth decisions to invest through the Nairobi Securities Exchange. On the other hand, customer preferences and market information were found to significantly influence youth investment decisions. It is recommended that there is need for youth groups interested in investing through the NSE to be well trained on how market volatility influence returns on investment and the possible measures to cushion their investments in a volatile market environment, market trends analysis and the projection of market behavior. Furthermore, there is need for the capital markets authority to link the youth to platforms for accessing real-time capital markets data as well as empowering them on how to use the data in making investment decisions.
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    Factors Affecting Uptake of Agency Banking Services among Customers in Rural Kenya: A Case of Narok County
    (KeMU, 2018-09) Githae, Lilian Wambui
    The purpose of this study was to analyze factors affecting uptake of agency banking services among customers in rural Kenya. Specifically, the study sought to examine the effect of fraud on uptake of agency banking services among customers in Kenya; To determine the extent to which skills of agents affect uptake of agency banking services among customers in Kenya; To establish the effect of location on uptake of agency banking services among customers in Kenya and to find out how confidentiality affect agency banking services uptake among rural customers in Kenya. The study was informed by agency theory, delegated monitoring theory, transaction cost theory, financial intermediation theory and property right theory. The targeted population comprised of approximately 14 bank branch managers, 81 bank agents and 12,000 customers from four Cooperative Bank of Kenya, Kenya commercial Bank, Post bank and Equity Bank in Narok County, Kenya. The study sample size therefore comprised of 371 customers from the rural community, 81 bank agents and 14 branch managers in Narok County. Questionnaires were used in this study since they gather data over a large and diverse sample. A multivariate regression model was applied to determine the relative importance of each of the four variables. The research indicated that bank agent skills, location and confidentiality were found to be statistically significant in explaining uptake of agency banking services. It was recommends that agents should to always inform the bank in case there is a robbery. Banks should create awareness to the public that the bank agent‘s premises adheres to standard security measures and should also hire security services from security firms to transport cash to and from the agents where necessary. Banks should also train the agency banking agents on how to detect fake money and fraud. The study revealed that agents‘ skills affected uptake of agency banking services by rural community in Narok County. The study recommends banks to offer training to agents before they start providing specific services on behalf of the banks to improve their customer handling skills and increase the uptake of the agency banking services.
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    Effect of Working Capital Management Practices on Financial Performance of Supermarkets in Nairobi, Kenya
    (KeMU, 2018-09) Ndege, Tabitha Wanjira
    Working capital management is not only improving financial performance in today’s cash-strapped and uncertain economy, but it is the question of meeting retail stores day to day operation. Recently, Kenya has had cases of some of the Supermarkets collapsing and some experiencing empty shelves. Large number of supermarkets failures in the past in Kenya like the case of Uchumi supermarket has been blamed on the inability of the financial manager to plan and control the working capital of their respective Supermarkets. The purpose of this study therefore was to evaluate the effects of working capital management practices on financial performance of the supermarkets in Nairobi County, Kenya. Specifically, the study focused on cash flow management practices, inventory management practices, account receivable management practices and account payable management practices. The study was guided by Agency theory, Liquidity preference theory, credit risk management theory, and Economic order model. A descriptive research design was adopted for this study. The target population of the study was the Supermarket in Nairobi. Operations managers, finance managers and procurement officers were the respondents in the study. Census approach was used to include all 26 supermarket in the study. The study used a sample of 72 respondents comprising operations managers, finance managers and procurement officers of the participating supermarkets. The study used both primary and secondary data. Primary data was collected using a structured questionnaire. Secondary data was obtained from financial reports of the supermarkets. A response rate of 92% was achieved in the study. Descriptive statistics such as frequencies, percentages, mean and standard deviations was used to organize findings. Regression analysis was conducted to analyze the data and test for relationships. The study found that cash flow management practices (p=0.000), account receivables management practices (p=0.025) and account payables management practices (p=0.004) were significant. There was strong positive correlation (r=0.805) between working capital management practices and financial performance of supermarkets whereby64.9%of the financial performance of the supermarkets could be attributed to working capital management practices. The findings also showed that working capital management practices were significant (F=29.110 (4,67), P=0.00) to financial performance of the supermarkets. The study concluded that working capital management practices are very important in enhancing financial performance of supermarkets. Of the four practices under investigation in the study, cash flow management practices, account receivables and account payables practices emerged as the most important in predicting financial performance of supermarkets. Cash flow management practices was the most affecting. The study recommended that supermarkets should seek to invest the cash above the optimal levels to enhance their financial performance. The study also recommended that supermarkets invest in ICT technologies for reducing lead time to enhance inventory management.
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    Determinants of Financial Sustainability of Housing Cooperatives in Kenya: (A Survey of Housing Cooperatives in Nyeri County)
    (KeMU, 2018-09) Thangaru, Lucy Wangechi
    Housing not only provides shelter, but also housing has a significant impact on the lives of the inhabitants as it is the cornerstone of community life, it brings societal esteem, it is a source of income generation, the center of family activities and most valuable asset for the households. Housing cooperatives offer affordability, a sense of empowerment in that resident has control of their own living situations, and the permanence and stability that comes with home ownership. However, housing cooperatives face many challenges in achieving this dream. Many housing cooperatives such as Posta Investment Co-operative Society, Ukulima Housing Co-operative Housing Society, and Romokia Housing have collapsed while others such as Kamuthi Housing and Chai Housing Society are in financial problems. The study sought to establish the determinants of financial sustainability of housing cooperatives in real estate development in Kenya. Specifically, the study sought to establish the influence of funding, government financial policy, financial accountability and investments on sustainability of housing cooperatives. The study was anchored in the resource-based view of the firm, contingency theory, agency theory and modern portfolio theory. This research used the descriptive survey research design. The study targeted housing cooperatives in Nyeri County. Senior management members of housing cooperatives were the respondents in the study. Slovins formula was used to come up with a sample of 152 respondents. Stratified random sampling was used to recruit respondents in the study. Data was collected by use of self-administered questionnaires. Univariate analysis for each variable was done so as to yield descriptive statistics that will be used to describe the variables. Regression analysis was conducted with the help of SPSS. Presentation of the findings was done through tables and graphs. The study found that the main source of funding was members’ deposits. Majority of the housing cooperatives had a capital base of between KES 1M and KES 50M. There was a strong positive correlation (r=0.796) between the independent variables (funding, government policy, accountability and investments) and financial sustainability of housing cooperatives in Kenya. The findings show that 63.3% of the financial sustainability of housing cooperatives in Kenya can be attributed to the independent variables. The findings show that funding (p=0.007), financial accountability (p=0.02) and investments (p=0.000) were significant. The study concluded that funding is the main determinant of financial sustainability of housing cooperatives. The study recommended that housing cooperatives review their strategies and fix gaps to ensure that are attractive organizations to banks who can lend them monies to enhance their investments.