BBSA Research Projects (2017)

Permanent URI for this collection

http://hdl.handle.net/11071/5316

Browse

Now showing 1 - 20 of 39

Board composition and enterprise risk management in the banking industry in Kenya
(Strathmore University, 2017) Kahenya, Nancy Njeri
The Kenyan banking sector has experienced a myriad of changes, both negative and positive. Being a developing economy, the sector’s efficiency and sustenance is vital to the country’s economy. Enterprise Risk Management and Board of Directors’ composition are both significant issues ensuring stable economies and avoiding corporate mishaps such as those witnessed in the Eron and Worldcom cases. ERM is measured in terms of financial performance. It is in this light that this study seeks to find the relationship between ERM and board composition in terms of gender, education, and board size. Based on the Shannon’s diversity test, the study establishes that the boards of Kenyan listed banks are not diversified in terms of gender and educational backgrounds in boards is quite minimal. The study also finds out that there exists a relationship between board composition and ERM.
Chronic disease management programs on health insurance profitability in Kenya
(Strathmore University, 2017) Bongi, Nimatoi Mwanamwinyi
Chronic diseases have been a real problem in Kenya and in the entire world. Most of these diseases are non-communicable and affect the population towards old age. This chronic diseases if not well managed may lead to acute illnesses that are costly to cure and may lead to costly admission care. In the modern world where insurance is becoming popular, a lot of these costs are transferred to the health insurance providers. For the population that is receiving pension benefits. These costs end up reducing the expected utility for these funds received. This paper has been written in this light and is aimed at showing the significance of chronic disease management in increasing profitability for health insurance providers and improving pension's utility for beneficiaries. This has been done through predicting expected costs for chronic disease management programs for the expected population at risk by use of a predictive model. This hence enables health insurance providers and pension sponsors to load for justifiable risk amount in the premiums charged for the respective benefits. This is alongside helping pensioners appreciate their pension benefits more as they derive more utility from them.
A comparative event study on mergers and acquisitions vs corporate bond issuance on the value of banks in Kenya
(Strathmore University, 2017) Odawa, Janet Consolata Akinyi
Banks play a crucial role in propelling the entire economy of a nation. African bond markets have been steadily growing in recent years as the numbers of mergers and acquisitions also rise. This study takes on an event study methodology with the use of the market model to determine the impact of events such as M & A’s and corporate bonds issued by listed banks in Kenya. It was found that in comparison mergers and acquisitions have a greater impact on firm value than bond issuance. However both bear the same results in terms of how they impact firm value. They can impact firm value, positively, negatively or not at all.
A comparison of deterministic IBNR reserving to stochastic IBNR reserving in Kenya
(Strathmore University, 2017) Otambo, Washington Misiko
Different methods of reserving for claim liabilities of an insurer and in particular IBNR have been advanced throughout time. These methods strive to provide an estimate enough to cater for the future liabilities. Therefore it is important that the methods developed be as accurate as possible since an under reserving will mean more risk exposer to the insured’s while holding too much reserve is not maximizing the shareholders commitment of funds. A balance should be made to set aside a just enough amount of reserve, hence need for a good reserving technique.
Determining the most suitable method of IBNR reserve estimation in the event of varying development patterns.
(Strathmore University, 2017) Murimi, Tedd Miano
In general insurance reserving, it is assumed in many cases that the losses in each accident year develop the same way. This makes the chain ladder method in general a good method to estimate general insurance claims liabilities. But what if the runoff patterns in each accident year were different? Which method is best to use to calculate general insurance reserves in such a case? This research paper seeks to answer the question of which method is best suited to estimate general insurance reserves when the runoff pattern in each accident year is different. Claims data was simulated using various constraints that restricted the claims to various distributions. Future claims development was also simulated. The claims reserve estimates using various methods of reserve estimation were then calculated. The results were then obtained as to which method is best suited to calculate claims reserves for a general insurer in different scenarios of varying development pattems. The results of this paper will hopefully provide a new insight of how to calculate claims reserves for a general insurer in the event that development pattems differ in each accident year.
The effect of climate change on the pricing of weather index-based crop insurance in Kenya
(Strathmore University, 2017) Wamai, Diana Wanjiku
The Agricultural sector is a pillar of the economies of many developing countries around the world. In Kenya, the sector contributes an average of 24% to the GDP directly and 27% indirectly through connection to other sectors e.g. manufacturing and distribution and accounts for about 60% of the total employment in the country. The agricultural sector also accounts for 70% of export earnings. Small-holder farmers are the main producers of agricultural output in Kenya constituting of 80% of all the farmers. (Ministry of Agriculture, 2009) The Government therefore places a high priority on Agriculture as an important tool for development.
Effect of compliance of prudent financial regulation to Kenya's Commercial banks' stability
(Strathmore University, 2017) Ukiru, Ivy Cherop
The purpose of the study was to assess the effect of compliance of prudent financial regulation to Kenya's commercial banks' stability. The study sought to address the following research question: Is there any link between the compliance to prudent financial guidelines and domestic bank stability and will the link be stable over time. The populations for this research are the 43 listed Commercial Banks in Kenya analyzed for a period from 2011-2015. The study found that commercial banks risk weighted assets had increased by 24.12% over the years indicating a similar growth in bank's assets. To meet the asset growth, core capital also increased by 14.761% with bank's undertaking rights issue in 2011 in order to meet the new capital requirements (CBK, 2015). The CAMEL rating also showed continuous growth in all the key ratios over the years as shown in the previous chapter. Capital structure is also seen to remain stable over the years. The study concludes that the financial statutory requirements have a clear impact on banks' stability
The Effectiveness of profit warnings in predicting decline in share prices in theNSE: an event study approach.
(Strathmore University, 2017) Wainaina, Martin Ngunu
Profit warnings are issued by companies to inform shareholders that the current year’s profit will be significantly lower than the profit of the previous year or the anticipated profit for the current year (Jensen, 2005). The aim of this paper is to determine whether investors can rely on profit warnings as lead indicators of falling share prices. An event study is carried out to determine when the decline of share prices occurs with reference to issuance of profit warnings. A hypothesis test is then carried out to determine if the decline prior to the issuance of a profit warning is of material significance. The data used is of Kenya’s NSE, between the years 2002 and 2016.
Empirical analysis on the impact of monetary policy on the growth of Kenya’s manufacturing sector
(Strathmore University, 2017) Mburu, Byron Gichuhi
The purpose of this study was to find out the impact of monetary policy in boosting manufacturing sector growth in Kenya. This paper uses the Vector Autoregression (VAR) Model to measure the impact of monetary policy on the growth of Kenya's manufacturing sector through analysis of four variables; interest rates which are used as the proxy for monetary policy, exchange rates, real GDP and manufacturing sector GDP. Quarterly time series data was used was for the period 1980-2015. The study finds a significant positive relationship between monetary policy and growth of Kenya's manufacturing sector in the short-run and long-run. Analysis shows that Kenyan exchange rates and lending rates are insignificant as they do not cause a major difference in the manufacturing sector mainly due to fiscal dominance and also due to deregulation in Kenya's financial sector and this is evidenced by figures obtained after running the VAR model. On the other hand, real GDP has significant and positive effect on the growth of Kenya's manufacturing sector. However, when an impulse response function is carried out on the variables, exchange rates are observed to have a positive impact on the growth of the manufacturing sector while interest rates have a negative effect on the growth of the manufacturing sector. In conclusion, stringent policies and information asymmetry need to be put in place when accessing credit facility in favour of firms in the manufacturing sector.
Estimating the cost of traffic congestion in Nairobi (Langata) to the Kenyan economy
(Strathmore University, 2017) Attri, Navjot
This paper tells us what traffic congestion is, its severity in Kenya, specifically Nairobi, and its cost to the Kenyan economy. Traffic congestion affects many sectors in many different ways, and also imposes a cost on all of these sectors either directly or indirectly. In this paper, we are specifically focusing on the economic costs that traffic congestion imposes. It highlights the different ways in which statistics and mathematical computations can be used to estimate the cost of traffic and the factors that affect it. It also tells us the causes of this traffic congestion and how these can be reduced, and the advantages of reduced traffic congestion. In 2014, it was estimated that traffic in Nairobi costs $570,000 per day. This is a significant amount and can be used productively elsewhere. One of the main reasons of this congestion is seen to be the ever expanding population and hence the increase in the number of vehicles growing at a higher rate than the road capacity. The population in Nairobi has grown from 350,000 in 1963 to about 3.3 million. The number of vehicles in Nairobi was estimated at over 300,000 in 2008. In the same period, there has been limited increase in the existing road infrastructure capacity. (LIVINGINNAIROBI, 2011) This shows us that the problem is one that cannot be ignored and therefore, this problem needs to be tackled as soon as possible. In this paper we will look at the current method used to calculate these traffic costs and the limitations of the current method, and a proposed method that is used to calculate traffic congestion in countries like Pakistan and Netherlands and which has not yet been used in Nairobi.
Evolution of risk attitudes for different demographic characteristics with variant circumstances
(Strathmore University, 2017) Lwanga, Truphena Khalayi
This study endeavors to determine how risk attitudes in the context of personal business decisions and financial investing of persons from different age groups, gender and of different initially ascribed risk attitudes evolve with variant circumstances by undertaking an experimental Sports betting questionnaire technique on the local University population. Furthermore, the study seeks to provide an inkling on how the shape of the utility curve of individuals morphs over time with variant circumstances inferring information on how decisions regarding asset allocation for individuals’ portfolios (IPS) based on risk preferences are to be approached by investment managers given certain circumstances.
An Exploration of the possible impact of commodity futures trading for tea farmers in Limuru to mitigate the price volatility of tea
(Strathmore University, 2017) Waireri, Catherine Nyokabi
The research project aimed to show how the volatility of tea prices experienced by the farmer could be mitigated through the introduction of a tea commodity futures. The researched aimed at determining the significance of the volatility of the tea prices in Kenya and ho the tea futures would smooth out the volatility of the tea prices for farmers in Kenya. This involved determining the feasibility of the futures market in the Kenyan economy. The feasibility of tea as a commodity tradable in the futures market was also investigated with the help of different literatures. A mix of descriptive and quantitative research design was used in this research project. The Risk Premium Model was used to formulate the future price of the fuures contract. The population under investigation was Kenyan tea farmers and the sample under investigation were small scale farmers in the Kambaa Area of Limuru. This is because small scale farmers have the experienced highest growth over the past 10 years and have similar characteristics of small scale farmers throughout the country. The local and primary data was obtained from the farmers in Kambaa region and secondary data from the Index Mundi website for international market prices for auctioned Kenyan tea. The results and analysis show that the volatility of prices in the international market would not be reduced by introducing the future, in the short term. However, the future would reduce the effect of volatility of the prices on the farmer. Further studies showed that the volatility will be reduced with increased activity in the futures market. The analysis also shows that the farmer and the investor have a high probability of getting higher returns by trading through the futures market than the actual market. The effect of volatility will be transferred from the farmer to eh investor who sold the contract to the farmer. From the discussions, the volatility of tea prices is observed to influence the extent of gains or losses the investor experiences from the sale of the futures contract to the farmer. Information asymmetry will also be reduced between the farmer and the intermediary company that sells the tea. This is because the farmer will be able to monitor the returns the intermediary receives from the sale of tea and therefore encourage transparency in the formulation of the final bonus rate announced at the end of the financial year. It is recommended that the government should educate the farmers on the futures market and its advantages and disadvantages as this has a direct effect on the performance of the futures contract. It is recommended that further research be done on the effect the introduction of tea commodity futures in other countries will have on the volatility of the international tea prices.
Factors affecting the low demand and the penetration of life insurance in Burundi
(2017) Bettina, Nina Uwiteka
There are different factors that affect the demand and the penetration of life insurance. The Republic of Burundi is the Country with the lowest penetration of insurance, both life and nonlife. The study aims at identifying the factors that cause this low penetration by assessing the demand for life insurance which is done by asking random Burundians who are working and live in Bujumbura about their income and knowledge about life insurance to be able to identify their needs so that insurance companies are able to satisfy their needs. The main findings about the research are that a big part of the population of Burundi agrees to the need of life insurance for security and also for the future and is willing to buy a policy if they can afford it. Therefore the need for micro insurance is imminent as well as the need for attractive products like ones which combine death and survival benefits.
Finding appropriate loss distributions to insurance data Case study of Kenya (2010-2014)
(Strathmore University, 2017) Nduwayezu, Florent
Obtaining the total amount of claims for a specific period is a vital part of the daily work of insurance companies. This will help in various ways the management in running the company (Jouravlev, 2009). For instance, the insurance company will be able to calculate the premium for a type of policy by the use of the claim experience. Moreover, it will be able to reserve a certain amount of money to cover the cost of future claims. Premium computation and Reserving are not the only reasons for which loss distributions are needed. Loss distributions are also utilised in reviewing reinsurance arrangements and also in testing for solvency. This explicitly highlights the importance of loss distribution in the insurance industry. This paper therefore aims to determine the most suitable loss distributions for various sort of insurance contracts being general or life insurance in the Kenyan market industry. The following distributions will be compared: the exponential distribution, the Pareto distribution, the Generalised Pareto distribution, the lognormal distribution, the Weibull distribution & the Burr distribution. We will see how these distributions can be tailored in order to suit the observed data. Afterwards, a test of goodness-of-fit will be used to determine the level of robustness of the distribution in fitting the given data. The loss distributions will also be used in order the probabilities of future events happening.
Globalization and equity returns in African frontier markets
(Strathmore University, 2017) Ng’ang’a, Josephine Wairimu
Globalization has significant implications for risk sharing and diversification, cost of capital, market efficiency, financial decisions and macro-economic policy. This study investigates globalization which is measured in three different ways in 8 African frontier markets, from 1997 to 2013. The investigation is conducted using a Panel regression model and it explores whether integration affects equity returns. The factors used in this study are orthogonal to each other and the important fundamentals are inflation and money supply. The researcher finds evidence that the extent of African market globalization has a significant impact to their equity markets. The findings support partially integrated African market. The evidence is generally sensitive to the period of investigation suggesting changing integration through time.
Globalization and equity returns in African frontier markets
(2017) Ngang'a, Josephine Wairimu;
Globalization has significant implications for risk sharing and diversification, cost of capital, market efficiency, financial decisions and macro-economic policy. This study investigates globalization which is measured in three different ways in 8 African frontier markets, from 1997 to 2013. The investigation is conducted using a Panel regression model and it explores whether integration affects equity returns. The factors used in this study are orthogonal to each other and the important fundamentals are inflation and money supply. The researcher finds evidence that the extent of African market globalization has a significant impact to their equity markets. The findings support partially integrated African market. The evidence is generally sensitive to the period of investigation suggesting changing integration through time.
Growing Role of Bancassurance in the Banking Sector: A Case of Kenya Tier 1 Local Banks
(Strathmore University, 2017) Ng'etich, Sheila Chepkorir
The Kenyan market need to mitigate their risks as the levels of insurance penetration is low. Bancassurance which is the integration of banking and insurance has been adopted as a distribution channel of insurance products. This paper analyses the contribution of bancassurance to the insurance sector and the recent trends of bancassurance on the performance of banks. The target population was all commercial banks in Kenya. A sample was done for tier 1 local banks in Kenya. The study uses a descriptive research design. Data is represented in tables and charts. The methodology used was an analysis using the CAMEL parameters. The findings are: Capital adequacy analysis shows that the banks' level of solvency is good. Asset Quality analysis shows that the financial position of the banks is strong. Earnings and profitability analysis tend to be contradicting the hypothesis since the investment in the insurance agency was still quite low. The banks however managed to balance their liquidity and profitability. The insurance agency can introduce services such as pricing and reserving in order to maximize their profitability.
Growing role of Bancassurance in the banking sector: a case of Kenya tier 1 local banks
(Strathmore University, 2017) Otambo, Washington Misiko
Different methods of reserving for claim liabilities of an insurer and in particular IBNR have been advanced throughout time. These methods strive to provide an estimate enough to cater for the future liabilities. Therefore it is important that the methods developed be as accurate as possible since an under reserving will mean more risk exposer to the insured’s while holding too much reserve is not maximizing the shareholders commitment of funds. A balance should be made to set aside a just enough amount of reserve, hence need for a good reserving technique.
Impact of bank deposit interest rates on consumer expenditure in the East African community
(Strathmore University, 2017) Tony, Kiprotich Koskei
Bank deposit rates are a critical factor in determining consumer expenditure. This study tries to understand the effect that changes of bank deposit rates have over different periods of time in the East African Community countries that is Kenya, Uganda, Rwanda and Tanzania. This study will be effective in informing policy making by various governments as they keep in mind the welfare of the citizens while setting the benchmark of Bank Deposit rates.
The impact of delinquent loans on the performance of microfinance banks in east Africa
(Strathmore University, 2017) Kavili, Janet Kali
Financial institutions all over the world are faced with the challenge of loan delinquency which has necessitated the need for reviewing lending policies to mitigate the delinquency risk as well as putting in place mechanisms that monitor the behavior of borrowers. Irena (2014) notes that loan default was one of the major causes of the financial crises of 2008 and consequently, after the Global Financial Crisis, credit management increased, especially with the purpose of improving the resiliency of the banking sector by requiring more and higher quality capital and more balanced liquidity. Per a study by Alawiye (2013) credit administration and the incidence of bad loans, increase in the loses ofNigerian Banks result from problem loans and the effects of such loans in the form of bad debt provisions can be minimized through effective monitoring and evaluation to avoid the diversion of facilities for unapproved purposes. Similarly, Arko, (2012), in a study on the causes and impact ofnonperforming loans on the operations of microfinance institutions in Ghana, states that some of the loans advanced to beneficiaries underperform and do not earn the projected returns resulting into the reduced quality of the loan portfolio which constitutes a considerable percentage of the assets of the MFIs. In regards to these studies, the importance of credit risk management cannot be taken for granted and this explains why the practice has increased for both borrowers and lenders.

Browse

Browsing BBSA Research Projects (2017) by Title

Results Per Page

Sort Options