Faculty of Business and Economics

Permanent URI for this collectionhttps://repository.tmu.ac.ke/handle/123456789/170

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End date: 2019

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Now showing 1 - 10 of 11
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    Effect of Foreign Multilateral Aid and Foreign Bilateral Aid on Capital Formation in Kenya
    (American Research Institute for Policy Development, 2019-09) Mukhongo Wafula; Alphonce Odondo; Nelson Obange
    Low capital formation in Kenya, averaging rate 20.13% of GDP over the period 2006-2017 has kept unemployment rate above 39% with more than 65 per cent of people living on less than $ 2 a day. Yet previous studies do not have a clear answer to the question of whether increasing bilateral aid/multilateral aidenhances capital formation or not. This study’s purpose was to investigate the effect of multilateral aid and bilateral aid on capital formation in Kenya. The study was anchored by Solow (1956) model. Autoregressive distributed lag estimates for data over 1974-2017 suggested that multilateral aid has positive insignificant effect on capital formation while bilateral aid has negative significant effect after one year. Error correction mechanism model estimates suggest that bilateral aid has positive significant effect on capital formation in the short-run during the programme year but becomes negative thereafter. The results were robust for impulse response analyses. The study concluded that bilateral aid retards capital formation in the long run but enhances it in the short-run during the first year.Soliciting for more bilateral aid was recommended in order accelerate capital formation in Kenya in the short-run.
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    Effect of Domestic Saving on Capital Formation in Kenya
    (www.iiste.org, 2019-08-31) Mukhongo Wafula; Nelson Obange; Alphonce Odondo
    Kenya’s average rate of gross capital formation of 20.13% of GDP over the period 2006-2017 falls short of at least 25% necessary for developing countries to experience sustainable growth. The attendant effects of low capital formation have entrenched unemployment rate above 39% line and consigned more than 65 per cent of the country’s population to living on less than $ 2 a day. The statistics suggest the need for urgent policy intervention aimed at accelerating capital formation in Kenya. But whether the government should respond by mobilizing more domestic saving or not is the question which this study sought to answer. This is because majority of the previous studies that investigated the effects of domestic saving on development indicators limited themselves to growthsaving nexus. Those that investigated the effect of domestic saving on capital formation either restricted themselves to a bivariate framework or controlled for a few sources of capital formation. This implies that the effect of domestic saving on capital formation is not clear. Besides, the response of capital formation to shocks in domestic saving is not clear. The purpose of this study was to investigate the effect of domestic saving and the response of capital formation to shocks in domestic saving. The study was anchored by Solow’s capital accumulation model within a correlational studies research design. Data over 1974-2017 period was sourced from the World Bank. ARDL bounds test found the existence of cointegrating relationship among gross capital formation, gross domestic saving and the controlled variables when gross capital formation was specified as the target variable. The short-run dynamic model estimates indicated that ECM term corrects 39.56% of deviations from long run equilibrium in one year. ARDL estimation indicated that in the long run, gross domestic saving has positive significant effect on gross capital formation. The results were robust for IRFs analysis which found the response of gross capital formation to innovations in gross domestic saving to be positive and significant. The study concluded that in the long-run, Kenya’s capital formation will be driven by domestic saving. Therefore, to achieve high capital formation in the long-run, the study recommended policies that enhance positive effects of domestic saving for consideration by the government of Kenya.
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    EMPLOYEE COMPENSATION ON JOB PERFORMANCE IN THE COUNTY GOVERNMENT OF KAKAMEGA, KENYA
    (strategicjournals.com, 2019-08-13) Puka, S.; Wanyama, K. W.; Aliata, V. L.
    Despite the fact that County Governments have been investing heavily in staff empowerment strategies since inception its effect on job performance still remains vague. Several studies have been conducted on this subject and their results were diverse. More than 25% of organizations reported no significant empowerment-oriented practices in their organizations. The main purpose of this study was to investigate the effect of employee compensation on job performance among staff in the County Government of Kakamega, Kenya. This study was anchored on the Resource Based View Theory. A correlation research design was adopted for the study and the study targeted 242 respondents, drawn from all the county departments in the County Government of Kakamega. A sample size of 171 respondents was used. The questionnaire was the main instrument for data collection. Reliability analysis results illustrated that Cronbach alpha coefficients were above 0.7. The study employed criterion validity, construct validity of the instruments, and face validity. Data analysis and interpretation were based on descriptive statistics as well as inferential statistics using SPSS version 22. The findings of the study illustrated that employee compensation and employee performance were found to be linear, positive and significant (p-value less than 0.05). It was concluded that employee compensation accounted for 62.1% variation of job performance among staff of the County Government of Kakamega. This implied that if employee compensation were enhanced in the County Governments, employee job performance will be automatically improved. It was recommended that the county governments should fairly remunerate their employees through use of various types of bonuses like annual/year-end bonus and incentive bonus to motivate employees to better performance. The output of the study would be utilized by the Department of Human Resources Management by the County Governments of Kenya in the formulation of a systematic process of applying employee compensation. It would further guide formulation of policy in the key areas of employee compensation by County Governments and other policy makers. Finally, it would also contribute to scientific knowledge base for academic purposes for researchers in the area of employee compensation.
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    CAUSALITY BETWEEN REAL INTEREST RATE AND GROSS CAPITAL FORMATION IN KENYA: THE HICKSIAN HYPOTHESIS
    (EPRA JOURNALS, 2018-09-10) Ochieng Otieno Benjack; Dr. Odondo Alphonce Juma
    In 2016, the Government of Kenyan introduced interest rate cap of 14% per annum to spar investments through cheaper credit acquisition from commercial banks. This objective was not realized as evidenced by deteriorating levels of investments as reported by the Central Bank of Kenya (CBK) in 2017. In response to this incongruity, causal relationship between Real Interest Rate (RIR) and Gross Capital Formation (GCF) together with the relevance of Hicksian Hypothesis was tested in Kenya. Correlational research design was adopted and World Bank Time series data from 1980 to 2017 was used. Long run causality was tested using Vector error correction model (VECM) and revealed a long run causality with the speed of adjustment towards equilibrium = 1.696590 at p =0.0061. Wald test pointed to the existence of short run causality between the two variables. The study found a bi directional causality between RIR and GCF in the short and long-run periods. Consequently, investments decisions in Kenya closely follow the Hicksian hypothesis. Although bidirectional causality was established, a weak negative association existed between the two variables, suggesting the existence of other factors which determine GCF in Kenya given the outlined incongruity. Hence, the two variables should be jointly considered together with other GCF determinants during policy formulation in order to enhance investment activities in the economy.
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    Logit Analysis of the Relationship between Interest Rate Ceiling and Micro Lending Market in Kenya
    (Canadian Center of Science and Education, 2018-07-10) Onyango Barnabas Ochieng; Alphonce Juma Odondo
    Interest rate ceilings have been declining over the past decades as most developing countries continue liberalizing their financial policies. Prior to 2015, Kenya‟s banking sector was vibrant and highly profitable. The sector loan book grew at an impressive compound annual rate of 16% in 2011 to 35% in 2015. However, after interest rate cap in 2016, there has been a general slowdown in micro lending and rise in non-performing loans. Some studies argue that the ceiling protects consumers from exploitation and guarantees access to credit while others observe the contrary. This study sought to establish the relationship between interest rate ceiling and micro lending in Kenya. It was anchored on financial accelerator effect theory and the theory of financial repression. The study relied on secondary data from Banks and Micro Entrepreneurs. Logit models were estimated to establish the relevant relationships. It was established that interest rate ceiling had significant negative association with credit supply and default rate. However, it had a significant positive association with cost of Credit. Both Nagelkerke‟s R2 and Cox and Snell‟s showed that the estimated model fitted well. The Wald criterion demonstrated that credit supply, costs of credit and default rate were significantly different from zero. Thus, the independent variables were significantly affected by interest rate ceiling. It is recommended that banks pursuing policy of increasing credit supply and reducing cost of credit should advocate for the repeal of interest rate ceiling while those interested in reducing default rate should advocate for its retention.
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    RELATIONSHIP BETWEEN FINANCIAL LITERACY AND BORROWING BEHAVIOUR OF SMALL-SCALE BUSINESS OWNERS IN HOMA BAY TOWN, KENYA
    (EPRA JOURNALS, 2017-03-03) Dickence Aketcha; Dr. Alphonce Odondo
    Small-scale businesses play an important role in the global economy with over 60% of the population depending on them for employment. About 30% of the population in Kenya depends on Small-scale businesses for their livelihoods. However, up to 70% of the businesses are collapsing under the burden of unserviced loans. In Homa Bay town, 60% of the non-performing loans portfolio among commercial banks is from small-scale businesses, suggesting poor borrowing behaviour. While prior studies indicate that financial literacy generally influences borrowing behaviour, there is no clear link between financial literacy and borrowing behavior of small-scale business owners, particularly in Homa-bay town. On this basis, the study sought to establish the relationship between financial literacy and borrowing behavior among the small business owners. It was guided by correlational research design and anchored on the theory of Reasoned Action and the theory of Planned Behaviour. Out of 1220 business, a sample of 301 small scale business owners was taken. Stratified random sampling technique was used to draw individual respondents. Primary data were collected using questionnaires while secondary data were from the business records. Reliability coefficient for the questionnaires was 0.815 and content validity index was 0.723. Peason correlation and multiple regression were used to establish the relationship. The study revealed that 65% and 49.8% changes in the borrowing behaviour were associated with the business owners’ knowledge of key money concepts and knowledge on the financial institutions respectively. The estimated model could explain up to 59.6% variations in the borrowing behaviour of the business owners. The study concludes that borrowing behavior of the small-scale business owner is significantly related to the owner’s financial literacy. It is recommended that the small-scale business owners be educated more on financial matters, particularly the key money concepts and the existing financial institutions. Findings from the study may benefit both the borrowers and lenders in financial planning. Researchers may also use the findings as a source of literature for further research in the field of study.
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    EFFECT OF FOREIGN REMITTANCES ON PRIVATE CONSUMPTION, INVESTMENT, IMPORT AND OUTPUT IN EAST AFRICA COMMUNITY
    (International Journal of Social Science and Economic Research, 2017-06-06) Penuel Nyaanga Ondieng’a; Dr. Alphonce Juma Odondo (PhD); Dr. Benjamin Owuor Ombok (PhD)
    Foreign remittances to East Africa Community (EAC) have increased considerably in the past two decades becoming one of the largest sources of foreign currency earnings. However, despite the remarkable growth of remittances in EAC, little has been researched on its effect on consumption, investment, import and output at macro level. Most of the available literatures concentrates on its effect on poverty reduction at household levels. This study, therefore, sought to empirically test the link between remittances and consumption, investment, import and output. The study used correlational research design anchored on a linear Keynesian macroeconomic model with a dynamic outlook. Panel data set for the period 2000-2014 from the World Bank database for the five EAC countries, namely; Kenya, Uganda, Tanzania, Rwanda and Burundi were used. The study used a Two Stage Least Square (TSLS) method of estimation and established that of foreign remittances have a positive effect on private consumption, investment, import and output in EAC. The study recommends that macroeconomic policies should focus on its sustainability to promote economic growth and makes implications for policy and further research.
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    RELATIONSHIP BETWEEN FINANCIAL LITERACY AND BORROWING BEHAVIOUROF SMALL-SCALE BUSINESS OWNERS INHOMA BAY TOWN, KENYA
    (EPRA International Journal of Economic and Business Review, 2017-03-03) Dickence Aketcha; Dr. Alphonce Odondo
    S mall-scale businesses play an important role in the global economy with over 60% of the population depending on them for employment. About 30% of the population in Kenya depends on Small-scale businesses for their livelihoods. However, up to 70% of the businesses are collapsing under the burden of unserviced loans. In Homa Bay town, 60% of the non-performing loans portfolio among commercial banks is from small-scale businesses, suggesting poor borrowing behaviour. While prior studies indicate that financial literacy generally influences borrowing behaviour, there is no clear link between financial literacy and borrowing behavior of small-scale business owners, particularly in Homa-bay town. On this basis, the study sought to establish the relationship between financial literacy and borrowing behavior among the small business owners. It was guided by correlational research design and anchored on the theory of Reasoned Action and the theory of Planned Behaviour. Out of 1220 business, a sample of 301 small scale business owners was taken. Stratified random sampling technique was used to draw individual respondents. Primary data were collected using questionnaires while secondary data were from the business records. Reliability coefficient for the questionnaires was 0.815 and content validity index was 0.723. Peason correlation and multiple regression were used to establish the relationship. The study revealed that 65% and 49.8% changes in the borrowing behaviour were associated with the business owners’ knowledge of key money concepts and knowledge on the financial institutions respectively. The estimated model could explain up to 59.6% variations in the borrowing behaviour of the business owners. The study concludes that borrowing behavior of the small-scale business owner is significantly related to the owner’s financial literacy. It is recommended that the small-scale business owners be educated more on financial matters, particularly the key money concepts and the existing financial institutions. Findings from the study may benefit both the borrowers and lenders in financial planning. Researchers may also use the findings as a source of literature for further research in the field of study.
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    EFFECT OF FOREIGN REMITTANCES ON SELECTED MACROECONOMIC VARIABLES IN EAST AFRICA COMMUNITY
    (International Journal of Economics, Commerce and Management, 2017-05-20) Penuel Nyaanga Ondieng’a; Alphonce Juma Odondo; Benjamin Owuor Ombok
    Over the years, remittances in East Africa Community (EAC) have grown remarkably becoming the second largest capital flow after Official Development Assistance (ODA). However, most of the studies conducted on its effects are non EAC specific and have not expanded the analysis beyond output to other macroeconomic variables like consumption, investment and imports. This study therefore, sought to empirically test the link between remittances and its effect at macro level in EAC. The study was anchored on the Keynesian model of Economic growth and was guided by correlational research design. Panel data set for the period 1985-2014 from theWorld Bank database for the five EAC countries consisting of Kenya, Uganda, Tanzania, Rwanda and Burundi were used. The study used Two Stage Least Square (TSLS) method of estimation and established that foreign remittances have positive effects in EAC, an increase ofremittances by one dollar, through impact and dynamic multiplier effects increased consumption, investment, import and output. However, the impact is in the first year and wears out in the subsequent years with exception of Rwanda where it reduces gradually over a fouryear period. The study concludes that foreign remittances have significant positive effects on consumption, investment, import and output. Macroeconomic policies should therefore, focus on its sustainability to promote economic growth. At the end, study makes implications for policy and further research.
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    An Investigation of the Relationship between Government Spending and Private Consumption in Kenya.
    (SAS Publishers (Scholars Academic and Scientific Publishers), 2017-09-30) Kametu Evans Ndia; Dr. Nyongesa Destaings Nyenyi; Dr. Odondo Alphonse Juma
    Over the past years, the relationship between government spending and private consumption remains one of the contentious issues in macroeconomics literature. The question of whether public expenditure is neutral or crowds in or out private consumption has dominated theoretical and empirical debate. Three major schools of thought on the issue are observed in the literature, these are the Ricardian equivalence theorem, the Keynesian framework and the Substitutability hypothesis each with a distinct set of explanations. These contrasting schools of thought have triggered several empirical studies attempting to investigate the relationship between government spending and private consumption. However, conclusions from the empirical studies are inconclusive. Most of the empirical studies, on the subject have mainly focused on the high-income countries which have different structural properties in their economic structure and government spending patterns. There is scanty literature on the relationship between private consumption and government spending in the less developed economies. In Kenya, most of the studies focus on the relationship between government expenditure and economic growth. The government expenditure in Kenya has been increasing gradually over the years. The average value of government expenditure was 9.96 billion U.S. dollars with a minimum of 0.56 billion U.S. dollars in 1961 and a maximum of 50.29 billion U.S. dollars in 2015. On the other hand, the private consumption, average increment was 2.06 billion U.S. dollars with a minimum of 0.09 billion U.S. dollars in 1960 and a maximum of 9.19 billion U.S. dollars in 2015. Though there is upward trend of both private consumption and public spending in Kenya, the relationship between the variables is not clear. This study sought to investigate the relationship between government spending and private consumption in Kenya. The specific objectives of this study were to; determine the correlation between government spending and private consumption, establishthe long run equilibrium linkage between government spending and private consumption and determine the causality link between government spending and private consumption in Kenya. This study was based on correlational research design and used the Autoregressive Distributed Lag (ARDL) estimation technique. The model was subjected to several diagnostic tests, Breusch- Godfrey serial correlation LM test, CUSUM test and Bound test to ensure validity and reliability. The results of the study revealed that government spending has a significant positive effect on private consumption both in short run (= 0.376,) and long-run (= 0.888,). The results also indicated that the variables had a positive trend with a strong, statistically significant positiveassociation (0.998,). The Granger causality test results indicate that there is long run unidirectional causal relationship running from government consumption to private consumption. Based on the results, this study recommends the enhanced use of public spending to stimulate the private consumption.