BBSE Research Projects (2021)

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Estimating the effects hydro climatic variability and its extreme events have on economic growth of Kenya
(Strathmore University, 2021) Wainaina, Jessica
The cunent effect of climate change on economic growth needs to be understood. Climate change has affected the hydro climatic system and thus rising temperatures and unpredictable rainfall have led to hydroclimatic variability. Due to this, extreme weather events such as floods, droughts and heavy storms have increased in frequency and intensity. This study seeks to investigate the effects ofhydroclimatic variability on the economic growth ofKenya and detennine which hydroclimatic extreme event has a substantial effect on the economic growth of Kenya. A time series analysis covering the years 1965 to 2019 is canied out with the Mankiw-Weil-Romer growth model based on the Neoclassical growth theory. We see the effects climate variables: temperature and rainfall variability have on GDP growth rate while also including other variables that affect growth namely gross fixed capital, population and human capital. To capture the extreme events namely drought and floods in the model, a precipitation index called Weighted Anomaly Standardized Precipitation (WASP) index is applied. From analysis ofhydroclimatic variability, we establish that change in temperature has a positive effect on economic growth both in short run and long run. Severe droughts are the most occuning extreme event followed by the severe floods. Drought effects have a higher magnitude of effect on GDP growth rate compared to floods. Moderate drought has a slightly higher effect on GDP growth rate but the magnitude of severe drought is still very high. Severe drought still has a negative effect on the economy growth in the long run and is thus worth looking into solving this issue.
An econometric analysis of factors that influence the performance of green bonds in emerging markets
(Strathmore University, 2021) Atieno, Ogwayo Melissa
Developing nations are the most vulnerable to the effects of Climate change. This acts as a hindrance in the fight against poverty and improving the livelihoods of their citizens. Green bonds were created to finance projects that fight climate change. They are intended to help developing countries fight climate change while they grow their economies. The perfonnance of green bonds in developed markets has been analyzed in numerous studies but there exists a deficiency in the emerging market space. This study involves econometrically analyzing factors that influence the performance of green bonds in emerging markets. The countries used in this study are Brazil, Mexico, and South Africa as they have successfully issued these securities. These factors include macroeconomic and stock market conditions as the independent variables. The number of active green bonds acts as the dependent variable. The macroeconomic conditions include short term interest rates, exchange rates, industrial output, and inflation. The macroeconomic conditions are represented by Treasury bill rates, Real Broad Effective Exchange Rate, the Industrial Production Index, and Consumer Price Index of the selected countries. The stock market conditions are represented by the countries' stock indices. Panel data regressions are used. The model used to evaluate the factors that influence the performance of green bonds in the selected countries was found to not be jointly significant given the macroeconomic conditions specified in the regression. The Consumer Price Index is the only significant macroeconomic variable. The second model sought to identify the implications of stock market conditions on the performance of green bonds in the selected countries. It was found that stock market conditions have a positive but insignificant influence on the overall green bond market in the selected countries. Green bonds issued by corporates are found to be the most popular in developing countries, but higher amounts are issued by agencies, and Municipal bonds are seen to pay higher coupons.
Informal employment in poverty reduction in Kenya
(Strathmore University, 2021) Macharia, Sherlyn
The most widely held definition of poverty economically is the situation of an individual eaming less than $1.90 a day. The World Bank improves this definition and extends it beyond monetary definitions to include standards of living and basic needs. According tr the Britannica Encyclopaedia, poverty has also been associated to high levels of disorderly behaviour, improvidence, and inability to work. Overtime, the definition of poverty has continually been built up to include other metrics. Despite povetty being a worldwide issue, there is no general cause for it (Vale, 2018). There are varied causes ofpovetty that are country-specific and period-specific.
Predicting malaria incidence in Kenya using the ARIMA and SARIMA models
(Strathmore University, 2021) Ali, Amira Abdulkadir
Malaria is considered a public health challenge across the world. Approximately 40 percent of the population of the world is at risk of malaria. In this study we will employ time series analysis models to predict malatia incidence and it will also use climate variables such as temperature and rainfall as exogenous inputs. Future malaria incidences will be projected based on detennined trend patterns. The Auto-regressive integrated moving average (ARIMA) and Seasonal Auto-regressive integrated (SARIMA) models were used in this study to predict and forecast monthly malaria incidence (the spread of malaria in Kenya). Considering the results, ARIMA (0, 1, 0) appeared fit for forecasting monthly malaria incidence in Kenya further on the SARIMA model was used to compare which model had the best results and to remove seasonality from the data the best fit for SARIMA model was (0, 1 ,0) (0, 1 ,0)[ 12]. The models that usually give slightly better results are the ones that have the lowest AICc values. In addition to that a regression analysis was carried out to detennine the effects of rainfall and temperature on malaria incidence in Kenya. The variables have different orders; we estimate a V AR regression because V AR regression enables us to dynamically measure variables with combination I different order. The results obtained from the regression analysis indicate that temperature has no significant impact on the number of malaria cases however rainfall has a significant impact.
The relationship between stock market development and economic growtb: A Kenyan case study.
(Strathmore University, 2021) Wamubu, Linda Wambui
The study employs ARDL Bounds test of cointegration technique and VECM based Granger Causality to determine the short-run and long-run relationship between stock market development and economic growth for the period 2005-2019. Evidence from the model where real GDP growth is the dependent variable reveals that both market capitalization ratio and total value traded ratio are insignificant in expiaining growth. The evidence from modei 2 where reai GDP and oniy the short run dynamics are considered reveal that only market capitalization ratio is significant in explaining economic growth. Results from the Granger causality test show a unidirectional relationship from economic growth to totai value traded ratio (liquidity of the stock market).
Modelling the optimal growth- maximizing public debt threshold: A case for Kenya
(Strathmore University, 2021) Chakairu, Isabel Wamuyu-
This paper attempts to estimate the optimal growth -maximizing public debt threshold for Kenya by assessing the relationship between public debt and economic growth. The analysis determines the tipping point beyond which Kenya's economic growth would be adversely affected. The paper thus contributes to the debate in Kenya on whether the move by government to take up huge bilateral and multilateral debt will in the long run be detrimental to the economy. A bilateral quadratic equation is used to fit the non - linear relationship. The results confirm existence of a concave relationship between public debt and economic growth which is estimated to be optimal at around 45 to 50 percent for Kenya. The policy implication for the analysis· is the need to ensure that public debt management policies are in line with the growth - maximizing public debt threshold. This will ensure sustained economic growth and employment rates, which are key tenets for sustainable economic development.
Flood hazard mapping using GIS in Kenya- A HEC-RAS model applied to mapping the Enkare Narok River
(Strathmore University, 2021) Alvin, Igobwa Mugwe
The purpose of this project is to come up with a visual tool to aid in the visualization of flood prone areas, determine the causes of floods and estimate the total damage caused by floods in Narok town. The study uses Advanced Spaceborne Thermal Emission and Reflection Radiometer(ASTER) 30m resolution Digital Elevation Models (DEMs) for the extraction of the river properties and geometry and Hydrological Engineering Center -River Analysis System (HEC-RAS) for the hydrological routing of the Enkare Narok river so as to carry out the unsteady flow simulation that yields the production of the flood prone areas, and the cause of flooding. This flood hazard map will help in the forecasting of floods and further help in the creation of an early warning system.
Revenue allocation and expenditure in counties: The rift between recurrent and development expenditure in Public Finance Management
(Strathmore University, 2021) Daisy, Edel Ekappel
Decentralization of fiscal functions has enabled counties in Kenya to control their expenditure under the guidelines of the Public Finance Management Act. The first objective of this study is to investigate the factors that cause the rift in the distribution of revenue between recurrent and development expenditure in different counties in Kenya. The population of the first analysis in this study was all the 47 counties. The data was collected over a six year period from financial year 2013/2014 until 2018/2019. The study used a two-step system GMM estimation method to treat the Nickel Bias found in the dynamic panel data. The ratio of recurrent to development expenditure was the dependent variable which represented the rift. The findings from this study showed that revenue, personnel emoluments and the election period were determinants affecting the rift between recurrent and development expenditure. The second objective of this study is to establish the factors that make some counties fail to absorb their development budget. Data was collected from 10 randomly selected counties over the six year period. The second analysis also used a two-step GMM estimation method and the results showed that only own-source revenue had an effect on the development absorption rate.
The impact of efficiency of deposit-taking Sacco’s on the cost of credit in Kenya
(Strathmore University, 2021) Chebii, Allan
The study aimed to determine the impact of efficiency of deposit-taking SACCOs on the cost of credit in Kenya. To be more precise, establish the level of efficiency of deposit-taking SACCO establish the nexus of SACCO efficiency, and the intervening inflation effect on the cost of creditin Kenya. The study used a correlation research design to determine the relationship. The sample used 42 deposit-taking SACCOs in the country which was compiled from the SASRA regulations 2019. The study used secondary data for five years, 3Pt December 2015 to 3Pt December 2019, which will be considered sufficient for the study and will be analyzed to determine the relationship between the variables to be used in the study. From the findings, 52% was the average value of the DT-SACCO technical efficiency and Afya Sacco Societies Limited was the most technically efficient overall. Technical efficiency had a negative relationship with the control variables and this resulted in a drop in their operations while cost efficiency had the same negative relationship but resulted in a rise in their operations. The independent variables, inclusive of control variables, had different impacts on the Cost of Credit in Kenya. Technical efficiency and competition had a positive impact of 505.27 and 0.000000414 respectively while cost efficiency and size had a negative impact of -48,884.79 and -3,171.53 respectively. The mediating variable, inflation rate, had a negative intervening effect of -5.2830 on the impact ofDT-SACCO efficiency on the Cost of Credit in Kenya. The study recommends that the DT-SACCOs should cap and inform the people of their cost of credit to ease the research for future purposes and for the smaller DT -SACCOs to merge to form bigger ones resulting in economies of scale. Hence, the study concluded, by meeting all objectives, that the efficiency of deposit taking SACCOs has an impact on the Cost of Credit in Kenya.
Modelling home advantage in soccer without fans
(Strathmore University, 2021) Owoko, Trevor
The occmTence of COVID-19 in 2020, midway through the 2019/2020 soccer season brought rise to the stop and re-emergence of the English Football League. The re-emergence brought with it a new aspect in that football matches were being played but 'behind closed doors ' in that no fans were allowed into the venue- because of the COVID-19 safety restrictions, the absence of fans in the stands to suppOii their teams provided a niche for the study below. The purpose of this study is to investigate the effect between crowd presence and its relationship to Home Advantage, comparison between games when fans were present (pre-covid) and matches without t~1ns (post-covid). The study was guided by research objectives that were seeking to identify the relationship between crowd presence and home advantage whether if present and significant towards the outcome of a soccer match and the et!ect of yellow cards and reel cards on the outcome of a game. Tl1e study population consisted of 6 leagues: German Bundesliga, the Spanish Ia Liga Santander, the Italian Serie A, the French Ligue, the English Premier League and the English Championship. The quantitative secondary data was collected from a published website on shots, yellow cards, red cards and attendance. Regression analysis is used in data analysis with the application of R-studio . The study established that football matches played post-COVID period show that fan presence does not have a significant effect on the outcome of a game as previously thought. Yellow and reel cards are seen to hold greater impact on the home games without fan presence. Based on the findings of the study referees need more help and suppOii instead of admonishment in their decision making. What is deemed to be fairer by the crowd should not be treated with such great impmiance, to a point where trained referees ' decisions are not supported. There is also need for further analysis with more data as the study was clone with limited data and hence there might be room for further learning. The phenomena of home advantage is seen to continue eluding researchers with its exact causality not yet identified as observed in this p2per that it is not crowd presence.
How financial self-efficacy and financial attitudes affect saving behavior among Sacco members: an empirical study in Kericho County
(Strathmore University, 2021) Chepngetich, Michelle
This paper seeks to examine the impact of financial attitudes and financial self-efficacy on saving behavior. It investigates how financial attitudes affect the saving behavior, the relationship between financial self-efficacy and saving behavior of Sacco members in Kericho county, and the moderating effect of financial self-efficacy on the relationship between financial attitudes and saving behavior according to Sacco members. The study was conducted in Kericho county in November and December 2020, with a focus on Imarisha Sacco and Ndege Chai Sacco. The data was collected by issuing questionnaires. Ordinal logistic regression was employed to derive the .I results. The findings from the study are as follows: financial attitudes and financial self-efficacy have a positive significant impact on saving behavior among Sacco members in Kericho county and financial self-efficacy has a positive significant moderating effect on the relationship between fmancial attitudes and saving behavior. The results showed that 7.64% of saving behavior is explained by fmancial attitudes and 12.90% is explained by financial self-efficacy. The findings justifY the relevance of financial attitude and financial self-efficacy in the explication of saving behavior as it opens further discussions on the intricacies of financial behavior which helps individuals check their financial management effectively and intellectually.
What is the impact of airline alliances? A case study of Qatar airways investment in Rwanda
(Strathmore University, 2021) Babra, Muthini Kimuli-
The study aimed to establish the impact of airline alliances with a case study of Qatar Airways investment in Rwanda. In precision, was to detennine the impact of Qatar airways venture in Rwanda on passenger traffic through Bugesera international airport and the impact of Qatar airways venture in Rwanda on passenger traffic through Jomo Kenyatta International Airport and Addis Ababa Bole International Airport. The study was guided by the event study methodology, dummy variable approach, in its analysis. The data in consideration is air passenger numbers for four hubs from the years 2010 to 2018. A dummy variable was introduced for the year post the venture to analyse the effects. The results showed that the venture did have an impact on passenger number traffic in Bugesera, Jomo Kenyatta, and Bole International Airports. The airports registered increases in air passenger traffic of 444,639, 841,767 and 4,468,258 annually respectively. Increases in passenger traffic for the hubs led to the conclusion that the hubs are complementary as opposed to being competitive. The r-squared from the regression analysis were 57.15, 61.8% and 73.7% respectively which led to the implication that impact of the dummy explained the variations in passenger traffic in Bugesera, Jomo Kenyatta and Bole International Airport's respectively. Policy implications from the study concluded that smaller airlines benefit from fanning an alliance with already established airlines and that leading hubs also benefit from alliances. The study therefore met the objectives. Key words: Airline alliances, Qatar venture, Impact of alliances
Effect of external debt on inflation: the case of Kenya, Tanzania and Uganda
(Strathmore University, 2021) Gathendu, Jane Joy Wairima
High inflation is considered to be a threat to growth of emerging countries. However, most of these countries need to borrow in order to cater for budget deficits and sustain economic growth. The aim of this study is to empirically investigate the effect of external debt on inflation in Kenya, Uganda and Tanzania for the period 1988-2018. Other independent variable is included, broad money growth rate, and analysed if it helps in explaining the relationship between external debt and inflation. The study uses a balanced annual panel data obtained from World Bank International Financial Statistics and Data Files. The variables are tested for stationarity to establish their order of integration and select a suitable model. Two tests are done for robustness, Engle and Granger, and Johansen's Cointegration to test for availability of co-integration relationship among the variables. A Vector Error Correction Model {VECM) is employed to estimate long run dynamics and Granger Causality to test if the co-integrated variables can help in predicting each other. The results show that external debt has a positive long-term effect on inflation and that money growth helped in explaining this relationship. Moreover, it was found that there is a unidirectional causality between external debt and inflation. This causality was found to be homogeneous. It is therefore necessary for governments to effectively manage external debt so as to avoid negative economic circumstances which may affects other countries in the region .
Effect of corruption on social welfare issues in the Kenyan economy
(Strathmore University, 2021) Kinyanjui, Lucy Wanjiku
Corruption has become widespread especially in developing countries and has affected their economies and growth. Due to high corruption rates in Kenya, it has put off foreign investors as well as foreign aid. Corruption in Kenya has become an epidemic that is slowly killing the country's economy and its biggest consequence is the cost. This article tries to address an important question whether there is a relationship between corruption and social welfare issues. After running diagnostic checks like test for autocorrelation and test for heteroskedasticity then a regression analysis it was concluded that life expectancy, education, and income per capita have a negative relationship with corruption but education variable substantially affected by corruption and there is no significant effect of Corruption Perception Index (CPI) on Human Development Index
Firm investment, stock prices and information asymmetry in Kenya
(Strathmore University, 2021) Farah, Abdi
Financial markets play an important role in the production and aggregation of information. An undisputed view in economics is that asset prices incorporate information from various sources including tra~ing itself (Grossman and Stiglitz, 1980). This information, including private information, acts as a signal to market participants which significantly influences individual and corporate investment decisions (Roll, 1986 and Dow & Gorton,
The effect of technological innovation on economic growth: Empirical evidence from Kenya
(Strathmore University, 2021) Mohammed, Leila Haroon
Kenya's recent classification as a Lower- middle-income country (LMIC) is proof that the economy of Kenya is growing as per the Vis on 2030 Plan set in 2008. As technological innovation development is a known factor for increasing the growth of a nation's economy, Kenya's objective to transition into a knowledge-based economy requires a proper understanding of the relationship between technological innovation, that produces technological knowledge, and economic growth. This study puts technological innovation into perspective and aims to empirically examine its relationship to economic growth. It employs the use of Patent registered, Number of trademarks registered in Kenya, and Scientific and Teclmical Journal articles in Kenya as measures of technological innovation as well as Labour productivity Growth rate as a proxy for economic growth. It establishes whether there exists a long-run relationship between technological innovation and economic growth from 1981 to 2018 with data sourced from The World Bank database. This study also seeks to examine whether there exists bidirectional causality between technological innovation and economic growth. The Autoregressive distributed Lag model and pairwise Granger causality test technique are used for estimation. There is a short run relationship between total number of patent applications and Labour productivity growth rate although the impact is quite small. There is no presence of a significant long run relationship between technological innovation and economic growth. The study also concludes that, there exists no bidirectional granger causality between technological innovation and economic growth.
ICT development and economic growth: Are southeast African countries doing enough to leverage on ICT?
(Strathmore University, 2021) Amusudzu, Luvindi Mwingisi
ICT is fast growing across continents and has brought about aspects of economic growth within countries, particularly developed countries. Over the years, productivity has noticeably increased with businesses and governments having easy access to global markets, hence improved trade openness. In this study, we analyze the state of ICT in Southeast African countries to understand whether ICT has been underutilized or to whether they are leveraging the use of it. From literature, Solow (1956) and Swan (1956) have argued that absence of technology innovation leads to economic stagnation that leads to high unemployment. In this study, we analyze ICT and its impact on unemployment as well as human capital in Southeast Africa. Also, the study analyzes consumption expenditure, trade and inflation and their relationship with ICT while alluding that they could be potential growth enhancing factors ofiCT. The study proposes to use a two-step system generalized method of moments (GMM) estimation technique while drawing its theoretical underpinnings from the neo-classical growth model.
Influence of financial regulation on financial inclusion: A case study of the fintech industry in Kenya
(Strathmore University, 2021) Murgor, Eileen Chepkirui;
This study investigates the relationship between financial regulation and financial inclusion in the Kenyan fin tech sector. The possibility of either variable influencing the other is put into consideration using secondary data from a survey over the period 2018 to 2019. By employing the use of a binomial logistic regression model, the findings indicate that there is a positive relationship between financial inclusion and financial regulation. More specifically, the usage of digital loan apps and mobile money has a significant positive correlation with financial regulation. Thus, greater financial inclusion leads to increased financial regulation, which positively impacts financial stability. The practical implications of this paper are that one of the ways policymakers and the government can increase financial inclusion is through creating favourable regulatory measures that create an enabling environment but not at the expense of consumer protection.
Effect of teacher- student gender matching on narrowing test scores gender gap in Kenyan primary schools: A quantile regression approach
(Strathmore University, 2021) Koki, Edel
In Kenya, boys outperform girls in mathematics and science while girls outperform boys in english. The gender gap in academic performance may persist and affect performance in higher learning and career choices. Research has investigated various factors that affect gender gap in academic performance. These include the effect of resources and introduction of free primary education on gender gap in academic performance. However, the effect of teacher- student gender matching on academic performance has not been studied in Kenya. This study uses Uwezo data from Twaweza, a survey done across Kenya in 2015 to analyze the effect of teacher student gender matching on academic performance. The study analyzes this relationship using the quantile regressions approach. Findings show that teacher student gender matching has no significant effect on both average test scores andacross test score distribution in both mathematics and english.
Validity of the multiple discriminate analysis failure prediction model on corporate financial distress: An analysis of the Kenyan market
(Strathmore University, 2021) Lagat, Nicole Jerop
The core objective of the study was to test the applicability of the multiple discriminate analysis model in predicting corporate failure of financially distressed companies in different industries in Kenya based on a 3 part criteria. These companies should have been listed in the Nairobi Securities Exchange as listed companies greatly affect investment and the economy as a whole. Second, the companies should have previously experienced financial distress to the point that it was on the verge of failure. Finally, the companies should have sought assistance from the I,<.enyan Government as a final resort before complete failure. Thus the author was able to pick out 4 companies out of the 62 listed. This will assist various stakeholders in the Kenyan financial industry to react to corporate distress signals early enough to avoid financial failure. Descriptive analysis research design was adopted in this study which was carried out on a total of21 companies classified as either distressed or non-distressed to allow for proper discrimination. The period of study was 20 years ranging from 2000-2019. The audited financial accounts of the chosen companies provided secondary financial data. This data was used to extract liquidity, profitability, efficiency, activity and leverage ratios which were then summed up to anive at the Z-Score. Data analysis was conducted through the use of MS Excel where correlation and regression tests were tabulated. The research findings indicate that the MDA model both for manufacturing(l968) and of non-manufacturing(2006) are reliable in predicting financial distress of companies in Kenya as it predicted accurately 71% of non-distressed corporations and 64% of distressed firms. Furthermore, the findings provide evidence that liquidity (WC/T A), profitability (RE/T A), Efficiency(EBIT/TA) and leverage (MVE/TL) ratios had a major influence on financial distress prediction. However, the activity ratio (Sales/TA) did not have much influence. The outcome of this study suggests that stakeholders in a firm can predict failure before it occurs by paying close attention to liquidity, profitability, efficiency and leverage ratios. This will enable them avoid the losses associated with failures by taking appropriate actions in advance.

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