Determinants of illicit financial flows in Kenya
Date
2022
Authors
Kasimu, Faith Nzilani
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
Illicit financial flows remain a key obstacle to Africa’s attainment of the 2030 Agenda and Agenda 2063. Given the multidimensional and transnational nature of IFFs, IFFs have attracted attention globally and are now at the forefront of the international development agenda. Agenda 2030 of sustainable development identifies reduction of IFFs as a top priority in building peaceful societies all around the world. As reflected in Target 16.4 of the SDGs, combating illicit financial flows is a critical element in the global effort in promoting peace, justice and strong institutions. The target aims to significantly reduce IFFs and arm flows, strengthen the recovery and return of stolen assets and combat all forms of organized crime by 2030. The ability to attain the SDGs remains fragile when undermined by IFFs. In light of this, the study sought to examine the determinants of illicit financial flows in Kenya. The independent variables were corruption, political risks, external debt and exchange rate. Inflation and interest rate were used as control variables. Illicit financial flows was the dependent variable which was the core focus of the study. Secondary data was collected for 19 years (January 2003 to December 2020) on a quarterly basis. A descriptive correlational design was used in the study. A time series model was used in analyzing the variables. VECM findings established that corruption lagged for quarter one, two and four had a positive and significant effect on illicit financial flows in Kenya. Political risks had no effect on illicit financial flows in Kenya. External debt lagged in the second, third and fourth quarter had negative and significant effect on illicit financial flows. Lagged exchange rate for quarter one, two and four had a positive and significant effect on illicit financial flows. The study recommends that government should enforce management practices that would deter corrupt practices and prudent financial management guidelines that would enhance management of external debt to curtail odds of illicit financial flows.
Description
A Research dissertation submitted to the Strathmore University Business School in partial fulfillment for the Master of Science in Development Finance of Strathmore University
Keywords
Illicit financial flows, Corruption, Political risks, External debt, Exchange rate