Articles: Department of Business

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Browsing Articles: Department of Business by Author "Gachora, Susan"

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    The Effect of Credit Information Sharing on Loan Performance in Commercial Banks in Nairobi County
    (2015) Gachora, Susan
    Information remains a crucial input in the banking industry. Banks are confronted with asymmetric information problems because of borrowers' informational opacity. Banks overcome this problem by accumulating information about their borrowers' creditworthiness, using their superior ability to collect and process information. Obtaining useful unique information about their borrowers can be costly for banks, but it provides a competitive advantage and a source of rents over the lifetime of the relationship. Commercial banks play a pivotal role in the economy in the intermediation process by mobilizing deposits from surplus units to deficit units. The surplus is channeled to deficit units through lending. Lending is the main activity of commercial banks in Kenya. The Kenyan banking sector was in the 80’s and 90’s saddled with a momentous Non-Performing Loans (NPLs) portfolio. This invariably led to the collapse of some banks. One of the catalysts in this scenario was “Serial defaulters”, who borrowed from various banks with no intention of repaying the loans. Undoubtedly these defaulters thrived in the “information asymmetry” environment that prevailed due to lack of a credit information sharing mechanism. Credit Reference Bureaus complement the central role played by banks and other financial institutions in extending financial services within an economy. CRBs help lenders make faster and more accurate credit decisions. They collect, manage and disseminate customer information to lenders within a provided regulatory framework – in Kenya, the Banking (Credit Reference Bureau) Regulations, 2008 was operationalized on 2nd February, 2009. The Regulations govern licensing, operation and supervision of CRBs by the Central Bank of Kenya. The development of a sustainable information sharing industry is therefore recognized as a key component of financial sector reforms in almost all developing and emerging economies. It is on this background that this study was carried out to establish the effects of Credit Information Sharing (CIS) on performance of loans in Commercial Banks in Nairobi County in Kenya. Specifically, the study aimed to investigate the effects of Credit Information Sharing (CIS) on loan uptake, interest rates, default rates and the use of collaterals as security to loans. The study was carried out on 35 commercial banks in Nairobi County. The results indicate that improved screening effects from the CIS system caused the level of loan portfolio arrears to decline after it was implemented in most banks. The Researcher also observed an even more substantial and significant effect of the information system in reducing late payments that occur during the loan cycle.The researcher also found out that when information is shared by an information exchange institution, such as credit bureaus and public credit registers, the higher competition drives down interest rates and reduces benefits derived from otherwise monopolistic information. Credit Information Sharing allows banks to better distinguish between good and bad borrowers and over time, potential borrowers with a "Good Credit Report" or "Good Credit History" are able to access loans more cheaply and easily than high risk defaulters.
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    The Effect of Credit Information Sharing on Loan Performance in Commercial Banks in Nairobi County.
    (2015) Gachora, Susan
    Information remains a crucial input in the banking industry. Banks are confronted with asymmetric information problems because of borrowers' informational opacity. Banks overcome this problem by accumulating information about their borrowers' creditworthiness, using their superior ability to collect and process information. Obtaining useful unique information about their borrowers can be costly for banks, but it provides a competitive advantage and a source of rents over the lifetime of the relationship. Commercial banks play a pivotal role in the economy in the intermediation process by mobilizing deposits from surplus units to deficit units. The surplus is channeled to deficit units through lending. Lending is the main activity of commercial banks in Kenya. The Kenyan banking sector was in the 80’s and 90’s saddled with a momentous Non-Performing Loans (NPLs) portfolio. This invariably led to the collapse of some banks. One of the catalysts in this scenario was “Serial defaulters”, who borrowed from various banks with no intention of repaying the loans. Undoubtedly these defaulters thrived in the “information asymmetry” environment that prevailed due to lack of a credit information sharing mechanism. Credit Reference Bureaus complement the central role played by banks and other financial institutions in extending financial services within an economy. CRBs help lenders make faster and more accurate credit decisions. They collect, manage and disseminate customer information to lenders within a provided regulatory framework – in Kenya, the Banking (Credit Reference Bureau) Regulations, 2008 was operationalized on 2nd February, 2009. The Regulations govern licensing, operation and supervision of CRBs by the Central Bank of Kenya. The development of a sustainable information sharing industry is therefore recognized as a key component of financial sector reforms in almost all developing and emerging economies. It is on this background that this study was carried out to establish the effects of Credit Information Sharing (CIS) on performance of loans in Commercial Banks in Nairobi County in Kenya. Specifically, the study aimed to investigate the effects of Credit Information Sharing (CIS) on loan uptake, interest rates, default rates and the use of collaterals as security to loans. The study was carried out on 35 commercial banks in Nairobi County. The results indicate that improved screening effects from the CIS system caused the level of loan portfolio arrears to decline after it was implemented in most banks. The Researcher also observed an even more substantial and significant effect of the information system in reducing late payments that occur during the loan cycle.The researcher also found out that when information is shared by an information exchange institution, such as credit bureaus and public credit registers, the higher competition drives down interest rates and reduces benefits derived from otherwise monopolistic information. Credit Information Sharing allows banks to better distinguish between good and bad borrowers and over time, potential borrowers with a "Good Credit Report" or "Good Credit History" are able to access loans more cheaply and easily than high risk defaulters.
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    Effect of liquidity management on liquidity of savings and credit co-operative societies in Kirinyaga County, Kenya
    (2017-05) Githaka, John M.; Maina, Kimani E.; Gachora, Susan
    Savings and Credit Co-operative Societies (SACCOs) are quasi financial institutions that mobilize savings, provide loans as well as other products to their members. Liquidity is considered as one of the serious concern and challenge for the modern era SACCOs. A SACCO having good asset quality, strong earnings and sufficient capital may fail if it is not maintaining adequate liquidity. The objective of the study was to assess the effect of liquidity management on liquidity of Savings and Credit Co-operatives Societies in Kirinyaga County, Kenya. Descriptive survey research design was used in this study. The target population consisted of all the 60 registered SACCOs in Kirinyaga County from which a sample size of 18 SACCOs was drawn. The study employed stratified random sampling technique. Primary data was collected by use of self-administered semi-structured questionnaires while secondary data was collected using audited financial statements of the SACCOs and regulator (SASRA). A pilot test was conducted to ascertain the validity and reliability of questionnaire. The Cronbach’s alpha coefficient was used for reliability test while the content validity technique was used in validating the research instruments. The data was analyzed using SPSS with the help of descriptive statistics tools such as percentages, mean, standard deviation, mode and variances. Inferential statistics was done by use of Pearson’s product moment of correlation. Multiple regression analysis was performed to assess the relationship between study variables. R2 was used to assess the contribution of independent variable on dependent variable. Data was presented using frequency tables, charts and graphs. The F-test was used to evaluate the significance of the obtained results. The study findings will be of great importance to the SACCO management, academicians and future scholars, regulator and the government. The study indicated that the effect of liquidity management, net cash flows, credit lending and investment in non-core business on liquidity of SACCOs was positive and significant. The study concluded that SACCOs in Kirinyaga County mostly capitalized on liquidity management and as such it affected the SACCOs’ liquidity. In addition, the study concluded that it was critical for SACCOs to have adequate liquidity in order to ensure that they meet short term maturing obligations. The SACCO management must put in place financial strategies to ensure that liquidity is effectively managed on a regular and timely basis and that appropriate policies and procedures are established to limit and control material sources of liquidity risk.
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    Effects of Liquidity Management on Liquidity of Savings and Credit Co-operative Societies in Kirinyaga County,Kenya
    (2017) Githaka, John; Maina, Kimani; Gachora, Susan
    Savings and Credit Co-operative Societies (SACCOs) are quasi financial institutions that mobilize savings, provide loans as well as other products to their members. Liquidity is considered as one of the serious concern and challenge for the modern era SACCOs. A SACCO having good asset quality, strong earnings and sufficient capital may fail if it is not maintaining adequate liquidity. The objective of the study was to assess the effect of liquidity management on liquidity of Savings and Credit Co-operatives Societies in Kirinyaga County, Kenya. Descriptive survey research design was used in this study. The target population consisted of all the 60 registered SACCOs in Kirinyaga County from which a sample size of 18 SACCOs was drawn. The study employed stratified random sampling technique. Primary data was collected by use of self-administered semi-structured questionnaires while secondary data was collected using audited financial statements of the SACCOs and regulator (SASRA). A pilot test was conducted to ascertain the validity and reliability of questionnaire. The Cronbach’s alpha coefficient was used for reliability test while the content validity technique was used in validating the research instruments. The data was analyzed using SPSS with the help of descriptive statistics tools such as percentages, mean, standard deviation, mode and variances. Inferential INTRODUCTION statistics was done by use of Pearson’s product moment of correlation. Multiple regression analysis was performed to assess the relationship between study variables. R2 was used to assess the contribution of independent variable on dependent variable. Data was presented using frequency tables, charts and graphs. The F-test was used to evaluate the significance of the obtained results. The study findings will be of great importance to the SACCO management, academicians and future scholars, regulator and the government. The study indicated that the effect of liquidity management, net cash flows, credit lending and investment in non-core business on liquidity of SACCOs was positive and significant. The study concluded that SACCOs in Kirinyaga County mostly capitalized on liquidity management and as such it affected the SACCOs’ liquidity. In addition, the study concluded that it was critical for SACCOs to have adequate liquidity in order to ensure that they meet short term maturing obligations. The SACCO management must put in place financial strategies to ensure that liquidity is effectively managed on a regular and timely basis and that appropriate policies and procedures are established to limit and control material sources of liquidity risk.
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    The Influence of Value Innovation Strategy on the Financial Performance of Manufacturing Firms in Kenya
    (Academic Research Publishing Group, 2020) Maina, Kinyua; Mburugu, Kirema; Gachora, Susan
    Value innovation is the cornerstone of blue ocean strategy. Value innovation strategy aims at making competition irrelevant. The concept of value innovation strategy is founded on the belief that a business can make its competitors irrelevant in its decision making while at the same time emerging an industry leader. The purpose of this study is to establish the influence of Value Innovation Strategy on the financial performance of manufacturing firms in Kenya. The target population was 488 manufacturing firms drawn from the 12 categories of the sector in Kenya. Descriptive and inferential statistics were used in this study. The descriptive results indicate that the manufacturing firms in Kenya have implemented value innovation strategies which positively contribute to the financial performance of the firms. The inferential results also affirm that value innovation strategy significantly affect the performance of manufacturing firms in Kenya attributing up to 14.9% of its variation in performance. The study concludes that value innovation strategies boost financial performance of a firm. Managers of manufacturing firms should therefore implement value innovation strategies in order to improve financial performance
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    The Influence of Value Innovation Strategy on the Financial Performance of Manufacturing Firms in Kenya
    (Academic Research Publishing Group, 2020-12) Gachora, Susan; Kinyua, Jesse; Mburugu, Kirema N.
    Value innovation is the cornerstone of blue ocean strategy. Value innovation strategy aims at making competition irrelevant. The concept of value innovation strategy is founded on the belief that a business can make its competitors irrelevant in its decision making while at the same time emerging an industry leader. The purpose of this study is to establish the influence of Value Innovation Strategy on the financial performance of manufacturing firms in Kenya. The target population was 488 manufacturing firms drawn from the 12 categories of the sector in Kenya. Descriptive and inferential statistics were used in this study. The descriptive results indicate that the manufacturing firms in Kenya have implemented value innovation strategies which positively contribute to the financial performance of the firms. The inferential results also affirm that value innovation strategy significantly affect the performance of manufacturing firms in Kenya attributing up to 14.9% of its variation in performance. The study concludes that value innovation strategies boost financial performance of a firm. Managers of manufacturing firms should therefore implement value innovation strategies in order to improve financial performance.