Research Papers
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Item 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 OdondoInterest 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.Item 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 OmbokOver 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.