MPPM Thesis and Dissertations (2023)

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Browsing MPPM Thesis and Dissertations (2023) by Author "Oginga, R. O. W."

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    Factors affecting commercial banks participation in road infrastructure financing in Kenya
    (Strathmore University, 2023) Oginga, R. O. W.
    Road infrastructure investment is paramount in the achievement of desired economic objectives. Though the contribution of roads infrastructure to the economic development is acknowledged, its quality and quantity of accessibility is below par in developing economies. The trend seems to change due to increased government expenditure and private participation through public-private partnerships (PPP) and private financing through commercial banks. Since the year 2000, private players’ participation in infrastructural projects has increased from around 6.5% to almost total financing. With this growth in the financing from commercial banks, this research is motivated to analyze how specific bank characteristics, project characteristics and macroeconomic indicators have influenced the investments in infrastructural projects. Thus, the main research will be to establish how bank characteristics and macroeconomic factors on the road infrastructure financing by commercial banks in Kenya. The specific objectives of the study were to establish the effect of bank characteristics on road infrastructure project financing by commercial banks in Kenya and to investigate the effects of macroeconomic factors on road infrastructure project financing by commercial banks in Kenya. The study was guided by the modernization theory and agency theory. This study used explanatory research design. Time series data was collected from July 2005 to December 2022. Data was analysed using descriptive and inferential statistics through use of Views and Stata. Study findings were presented using figures and tables. The study found that bank characteristics had mixed effects with liquidity has inverse though not statistically significant effect on commercial banks road infrastructure financing. There was a positive effect of nonperforming loans on commercial banks road infrastructure financing. Further, there was positive and not statistically significant effect of total assets and commercial bank road infrastructure financing. There was an inverse and not statistically significant effect of capital adequacy on commercial banks road infrastructure financing. Secondly, regarding the effect of project characteristics on commercial banks road infrastructure financing. Thirdly, an examination on the effect of macro-economic characteristics on commercial banks road infrastructure financing in Kenya depicts that there was an inverse effect of inflation rate on commercial bank road infrastructure financing. There was a positive effect of increase GDP growth rate and road infrastructure financing. There was an inverse effect of exchange rate on commercial bank’s road infrastructure financing. There was positive effect of interest rate on commercial banks road infrastructure financing. This indicates that there was a positive effect of interest rate on commercial banks road infrastructure financing. There is need for policy development that will liberalize commercial banks operations to enhance its participation public private partnership. There is need for commercial banks to develop strategies on liquidity, profitability, nonperforming loans and capital adequacy so as to optimize their credit creation capacity. There are higher odds of increased information asymmetry regarding project costs hence the need for commercial banks to have robust department that would aid in evaluation of value benefits associated with respective projects level of involvement. Key words: Project Financing, Public-Private Partnership (PPP), Commercial Banks