Investment In Kenya Research Articles

Effect of Infrastructure Development on Domestic Private Investment and Foreign Direct Investment in Kenya

Effect of Infrastructure Development on Domestic Private Investment and Foreign Direct Investment in Kenya

Determinants of Khat Farmers' Willingness to Pay for Agricultural Insurance

Khat farming is an important source of revenue and a possible source of potential investment in Kenya. Despite the benefits, various production and marketing risks, which negatively influence productivity, profitability, economic growth and farmers' livelihood, remains a challenge. Insurance for agricultural enterprises has the ability to open up access to essential services that boost productivity and marketing. This study aimed at determining the effect of socio-economic and institutional factors on khat farmers' willingness to pay for agricultural insurance. The data used in this study was obtained from khat farmers in Meru County, Kenya, from a sample of 323 farmers. The study employed the utility maximization theory and the double-bounded dichotomous choice model. Empirical results propose that the household size, size of land owned, awareness of agricultural insurance, credit access and the amount of khat bushes possessed by the family positively and significantly affected willingness to pay. The farmer's age and income earned from khat production negatively and significantly influenced willingness to pay. This study concluded that awareness of agricultural insurance and credit access greatly influence khat farmers' willingness to pay. The study recommends improving farmers' credit facilities to allow them access more financial capability since the study showed that the willingness to pay for insurance was proportional to credit access. The study further recommends strengthening on awareness on the importance of agricultural insurance to enhance khat farmers' involvement in agricultural insurance scheme. The results of this study will equip decision-makers with evidence-based tools to excellently market and establish demand-driven insurance products to meet the demands of khat farmers.

Effect of Financial Deepening on Private Investment in Kenya

Private investment remains an important sector in the growth of the economy and sustainable development in Kenya. It is envisioned to create job opportunities, distribute income and alleviate poverty. The growth rate of private investments witnessed in the past years in Kenya is below the expected growth rate of 24%. Since 1980, the highest growth has been achieved at 15.2% in 2014. It then declined to 12.96% in 2021, 13.34% and 13.40% in 2022 and 2023 respectively, which are much below the projected growth rate. Existing studies in Kenya lack substantial inquiry on the relationship between financial deepening and private investment and have dealt with them separately without linking the two in a dynamic framework. Additionally, most of those studies tend to rely on a limited set of indicators of financial deepening, while employing different methods for analysis that may not be appropriate for unbiased results. The current study intended to determine the effect of financial deepening on private investment. A disaggregated analysis of three aspects of financial deepening was done: private sector credit, broad money and bank deposits. Data was obtained from KNBS and World Development Indicators (WDI) websites for the period between 1980-2021. STATA software was used in the analysis of the collected data. ARDL model was employed and the ECM was estimated since there was cointegration. The regression results indicated that Private sector credit, Broad money and Bank deposits were statistically significant at a 1% level in the short run. An increase in 1 percent of private sector credit, Broad money and Bank deposits cause private investment to increase by 0.32, 0.39 and 0.49 percent respectively. The findings show that financial deepening has a positive effect, while broad money and bank deposits have negative effect on private investment in the long run. The three models were good predictors of private investment as shown by R-squared values of 0.96, 0.94 and 0.94 respectively. The study concluded that financial deepening is important for growth of private investment in Kenya. Therefore, Financial intermediation theory is applicable in Kenya. The study recommends policymakers to conceptualize the policies that aim at facilitating financial access and inclusion for the marginalized groups in remote and rural areas. Further, the government needs to support financial sector through enhancing the growth of microfinance institutions. This will facilitate provision of credit and savings services to individuals earning low-income and owning small businesses.

Currency Fluctuations and Foreign Direct Investment in Kenya

Purpose: This study investigates the relationship between currency fluctuations and Foreign Direct Investment (FDI) in Kenya over the period from 2013 to 2022.
 Methodology: Employing a causal explanatory research design and time-series secondary data, the study identifies the trends and determinants of currency fluctuation and its relationship with FDI. Secondary data is collected from the CEIC website while PICOT is utilized to select the relevant studies for analysis. The correlation analysis is conducted using SPSS to determine the relationship between currency fluctuation and FDI.
 Findings: The analysis reveals mixed uptrend and downtrend in both variables, showcasing a substantial reduction in FDI in recent years. The correlation analysis establishes a statistically significant negative relationship between exchange rates and FDI, in alignment with the theory of hysteresis and option values. This underscores the impact of currency fluctuations on inducing uncertainty, resulting in reduced FDI due to high sunk costs and delayed investment decisions.
 Unique Contribution to Theory, Practice and Policy: The study fills a crucial gap in the existing literature by offering insights on the relationship between currency fluctuation and FDI in the Kenyan context. Policy implications stress on the importance of stabilizing the Kenyan Shilling, mitigating real shocks, and fostering economic diversification to enhance the attractiveness of Kenya to foreign investments. This study provides valuable guidance for policymakers, the Kenyan government, and stakeholders seeking to formulate strategies that promote a conducive environment for sustained FDI and economic growth in Kenya.

Role of Chinese Economic Diplomacy in Fostering Infrastructural Development in Kenya Since 1963

This study investigated the role of Chinese economic diplomacy in fostering infrastructural development in Kenya since 1963. The focus was on how this partnership manifests itself in infrastructure development. This study was anchored on power theory, modernization, and dependency theories, which were triangulated to inform the conceptual framework of the study. This study adopted historical, cross-cultural, and survey research designs. Questionnaires, interview guides, and focus group discussions were the data collection instruments. The study adopted multiple sources of data, ranging from primary to secondary. Both quantitative and qualitative techniques were used for data analysis and presentation. The data obtained was presented in percentages, pie charts, bar graphs, and tables. The study found that the most popular principle in China-Kenya relations was that of mutual benefit. This study further revealed that Kenya is still largely reliant on its traditional donors for funding and that its relations with China have even strengthened its ties with Western countries. The findings further revealed that Chinese investment in Kenya's development of infrastructure was significantly beneficial to Kenya's informal sector because the lower cadre of employees, who are the majority, are acquiring skills that make them start their own businesses. Kenya should further strengthen its ties with China. Kenyan traders should take advantage of the recent lowering of export tariffs by China to encourage Kenyans to export more products to China. The Kenyan government, through its relevant agencies, should also put in place regulatory measures to ensure that Chinese imports are of standard quality. China should offer more aid to Kenya to mitigate the deficit, or in certain cases, curtail Chinese exports to reduce the imbalance.

Know your rights! A field experiment on legal knowledge, property rights, and investment in Kenya

Abstract Knowledge of the laws is needed for them to have an impact. In this article, we test the effects of disseminating legal knowledge, carefully designed to the particular circumstances of small-scale farmers living with uncertain property rights on their land. We find that greater legal knowledge increases the security of property rights and investment on the land (JEL K4, O1).

Wage Spillovers from Foreign Direct Investment in Kenya’s Manufacturing Sector

The objective of this paper is to investigate the effect of foreign direct investment on average wages paid by domestic manufacturing firms in Kenya. Specifically, the paper aims at identifying the transmission channels through which wage spillovers from foreign direct investment occur as well as the impact of technology gap and firm size on the behaviour of the spillover transmission channels. Employing panel data obtained from the World Bank Enterprise Surveys covering the period 2007–2018 and using fixed effects and Two-Step System GMM, we analyzed both horizontal and vertical spillover channels for wage spillovers. Findings from estimations based on all domestic firms indicated that there were no significant wage spillovers from FDI. However, when the technology gap was considered, domestic firms with low technology gaps with foreign-owned firms showed statistically significant positive wage spillovers via backward linkage, demonstration effects, and labour mobility channels and statistically significant negative spillovers via the competition effects channel. Finally, the results showed that firm size had no impact on the behaviour of various wage spillover transmission channels examined.

The Effect of Public Investment on Private Investment in Kenya

Public investment largely influences the socio-economic development of a country despite inefficiency concerns. A strong private sector is poised to cause GDP growth due to the efficient management of the resources compared to an economy dominated by the public sector. Nevertheless, public spending pattern influences socio-economic economic activities and welfare dynamics of a country. However, high levels of government activities could crowd-out private investment due to the competition for the scarce financial resources in the economy. This paper sought to analyze the effect of public investment on private investment in Kenya using a vector error correction model. The findings showed a strong positive impact of public investment on private investment in Kenya.

Quantifying the local economic supply chain impacts of renewable energy investment in Kenya

Improved electricity access in developing countries can offer an array of economic and environmental benefits. In Kenya, much attention has been devoted to the array of end-user benefits from electrification; however, there are also potential supply-side benefits from building and operating electricity generating units (EGU). This study focuses on the latter by examining supply chain impacts of recent renewable energy construction projects in Kenya tracked by the U.S. Agency for International Development's (USAID) Power Africa program and construction projected in Kenya's Least Cost Power Development Plan (LCPDP). By combining construction cost estimates with information on expenditure shares across economic sectors combined with data on wages and jobs, this study provides an assessment of the direct and indirect wage and job benefits of past and future EGU construction and operations. On-grid electrification projects tracked by Power Africa have increased domestic spending in Kenya by $1.3 billion and increased direct and indirect wages by $344 million over the ten years from 2012 to 2021. This impact could expand to $18.9 billion in domestic spending and $5 billion in nominal wages from 2022 to 2040 if the Kenyan government's LCPDP projected capacity and operations goals are met. The direct jobs required to support new LCPDP power sector construction out to 2040 could be 177,000 jobs in an average year, or 3.5 times higher than the average over the past ten years (2012−2021). Meanwhile, direct and indirect jobs supporting new power plant operations and maintenance would be 46,000 jobs in an average year, or 7 times the average over the past ten years. These findings suggest the high potential of renewable energy projects for supporting employment in Kenya, and thus the importance of creating an enabling environment that allows these projects to succeed.

Export Spillovers from Foreign Direct Investment in Kenya's Manufacturing Sector: A Double Hurdle Approach

ABSTRACT: This paper investigates export spillovers from foreign direct investment on the exporting activities of domestic manufacturing firms in Kenya. Specifically, the paper aims at identifying the transmission channels through which foreign direct investment affects the export propensity and export intensity decisions of domestically-owned firms. The study also examines the importance of firm-level heterogeneity on the occurrence and behavior of spillover channels. The study uses a panel data set for manufacturing firms in Kenya, obtained from the World Bank Enterprise Surveys, conducted in three waves covering the period 2007–2018. Employing the Double-Hurdle model approach, and using the maximum likelihood estimation technique, we empirically demonstrate the relevance and significance of distinguishing three channels for intra-industry (horizontal) spillovers – demonstration effects, information effects and competition effects channels and one channel for vertical spillovers, that is, backward linkage channel. Findings of this study shows that domestically-owned firms in Kenya experience significant positive export spillovers on their export participation decisions through the demonstration effects channel and significant negative spillovers via the competition effects channel. The findings also show significant positive export spillover effects on the export intensity decisions of domestically-owned firms via information and competition effects channels and significant negative export spillover effects via the backward linkages channel. The results further provide evidence that firms belonging to industries with low technological levels were unable to absorb spillover benefits from foreign presence via the demonstration effects channel. The results also indicate that small and medium firms were unable to reap export spillovers benefits via information effects and backward linkage channels. The findings have important policy implications for managers of firms and policymakers in Kenya and other developing countries. To enhance export-related spillover benefits, domestic firms need to enhance their absorptive capacities by upgrading their technical capacities and improving quality standards. Governments should facilitate the exchange of information on investor needs, their capacities and skills requirements, thus bridging information gaps between domestic suppliers and foreign investors in addition to supporting domestic market linkages.

To Stay or to Go? Sources of Domestic Support for Foreign Direct Investment in Kenya

To Stay or to Go? Sources of Domestic Support for Foreign Direct Investment in Kenya

A Case Study of Market Strategy in Foreign Direct Investment in Kenya’s Construction Industry

A Case Study of Market Strategy in Foreign Direct Investment in Kenya’s Construction Industry

Human Resource Practices and Performance Contracting in the Petroleum Industry in Kenya: A Case Study of Vivo Energy Investment Mombasa

The main objective of the research was to examine the human resource practices and performance contracting in the petroleum industry in Kenya. The research was done at vivo energy investment based in Mombasa County. The study was supported by Expectancy Theory and also McGregor’s theory X and Y. The research adopted a descriptive research design for data collection and analysis. The target population of the research was 300 staff of the Vivo Energy Investment Mombasa and the investigator targeted a sample size of 90 respondents which is 30% of the total respondents. . The questionnaire was used as the research instrument for data collection in the study and analyzed through descriptive data analysis tools like tables, figures, percentages and SPSS. The research also applied the regression analysis to establish the affiliation amid the dependent as well as the independent variables. The coefficient of determination implied that the set of independent variables in this study accounts for 52% of variations in the performance contracting in the petroleum industry. The remaining percentage (48%) is accounted for by other variables outside the model. The result indicates that knowledge and information regarding the independent variables provides a great proportion of information regarding performance contracting in the petroleum industry in Kenya. The study recommended that vivo energy investment ought to include in their individual rewards a real reward administration in lieu of safeguarding efficacy as well as impartiality in their reward system. Such a system must observe the diverse areas work fairly. Consequently, the employee, cleaners and the like must be handled just like the senior fiscal administrators during the rewarding. The study findings lead to concluding that employee training at vivo energy investment in Mombasa Kenya has a positive effect on employee recital of these establishments. The correlation between the independent variables (employee’s training, employee compensation, and performance appraisal and employee promotion) and the dependent variable (performance contracting) results shows that all are positive and significant. In particular, employee’s training is positively and significantly correlated (r=.033, p<.05). Similarly, employee compensation (r=.203, p<.05), performance appraisal (r=.075, p<.05), and employee promotion (r=.230, p<.05) are positively and significantly correlated with performance contracting. The businesses design training agendas in lieu of certifying that employee training requirements are constantly met via counseling, assemblies, and support workers’ exertions in refining their flaws. Efficacy as well as competence of worker’s training amongst employees at Vivo energy investment in Kenya contributes considerably to the employee recital at individual and therefore the organizational performance.

COUNTRY REGULATORY ENVIRONMENT, MODERATING COUNTRY BRAND CHOICE FOR FOREIGN DIRECT INVESTMENT IN KENYA

Choice to locate business internationally is determined by comparison of various countries. The decision to invest may be based on market size, natural and human resources, financial, physical and technological infrastructure, country openness to foreign investment, institutional frameworks and policies such as fair trade, transparency. Countries are now competing to be a favourable destination for foreign direct investment. This has led to country making changes in policicies in order to attract investors. The Kenya investment legislation framework is anchored in Investment Promotion Act (IPA) of 2004. Kenya Investment Authority facilitates both local and foreign investors to obtain licences, permits and certificates. Despite Kenya making chnges on regulatory environment in 2014 based on on UNCTAD (2013) policy recommendations by establishing a one stop shop at Kenya Investment Authority to market and facilitate both local and foreign investors, investors chose Ethiopia over Kenya and Ethiopia remained the largest recipient of FDI in East Africa. Foreign Direct Investment (FDI) inflows in Kenya declined by 18% in the year 2019, This implied that Kenya was losing its competitiveness in attracting foreign direct investment. This study focused on the Kenya investment policy review recommendations by UNCTAD (2013). It measured the extent to which six policies (tax policy, competition policy, governance policy, environment policy, infrastructure and human capital policy) are moderating the relationship between country marketing mix and country brand choice for FDI. Findings indicated that both country marketing mix and country regulatory environment are statistically significant. The interaction term between country marketing mix and country regulatory environment is significant, with a negative B coefficient. This indicated that unfavourable regulatory environment moderates the effect of marketing negatively. An increase in unfavourable environment will result in the decrease of the likelihood that a country will be chosen of foreign direct investment. The study concluded that an increase in favourable country regulatory environment results in an increase in likelihood that an investor will choose a country for Foreign Direct Investment (FDI). Therefore, the study concluded that there is a statistically significant relationship between country regulatory environment and country brand choice, and that country regulatory environment has a significant moderating effect on the relationship between country marketing mix and country brand choice for foreign direct investment in Kenya. Unfavourable regulatory environment moderates the effect of marketing efforts negatively. An increase in unfavourable environment will result in the decrease of the likelihood that a country will be chosen of foreign direct investment.

Effects of Mortgage Interest Rate on Real Estate Investment in Kenya

As an investment and consumer good, real estate is significant. Like many developing countries, Kenya has struggled to give its citizens access to decent housing that is also affordable. More people are in need of housing due to urbanization, fast population growth, and rural-to-urban migration. Housing supply is less than demand as a result of several of macroeconomic and financial issues that affect real estate investment and, consequently, housing. This study looked into the impact of mortgage interest rates on real estate investment. The study, which covered the 11-year period from 2010 to 2020, used a causal research design and regression analytic research methods based on the Vector Error Correction Model. Data on real estate investments in Kenya The Kenya National Bureau of Statistics (KNBS) and Cytonn quarterly investments reports were obtained from the Central Bank of Kenya. The Ministry of Finance's database on national budgets (KNBS) provided information on mortgage interest rates, A pre-estimation test was run to verify the outcomes. The variables were stationary on the first difference. The VIF test result of 1.62 indicated that there was no multi-collinearity. The 1.9122 Durbin test value suggested that there was no serial correlation. Pairwise Correlation analysis showed a moderate correlation between mortgage interest rate on real estate investment (0.578). The report suggests that in order to incentivize real estate investment, the government should offer mortgage loans at reasonable rates, control property tax rates, and promote public-private partnerships in infrastructure development.

Quantifying the Local Economic Supply Chain Impacts of Renewable Energy Investment in Kenya

Quantifying the Local Economic Supply Chain Impacts of Renewable Energy Investment in Kenya

Investment Incentives as a Mediator in the Relationship between Macroeconomic Variables and Growth of Private Domestic Investment in Kenya

The objective of this study was to investigate the mediating effect of investment incentives on the growth of private domestic investment in Kenya using time series data for the period 1997 to 2018. To test for mediating effect, the study used (Baron & Kenny, 1986) approach which propose a four-step procedure in which several regression analyses were conducted and the significance of the coefficients examined. The results did not consistently support a full mediation hypothesis, given that the coefficients did not consistently change in magnitude and significance. Therefore, the study does not reject the null hypothesis that investment incentives do not meditate on the relationship between macroeconomic variables and the growth of private domestic investment in Kenya. The results of this study will benefit policy makers by providing them with data-based evidence that will guide them in making appropriate policies that encourage growth of private domestic investment in Kenya and institute proper management of private domestic investments to boost economic growth in Kenya. Keywords: Tax expenditure, Investment tax expenditure, Investment tax credit, Private domestic investment.

중국의 대 케냐 FDI와 케냐인들의 인식

아프리카인들은 자국 내에서 벌어지는 중국의 투자나 영향력 확대를 어떻게 보고 있을까? 본 연구에서는 지난 2014년 아프로바로메터(Afrobarometer)가 케냐에서 수집한 여론조사 데이터를 통해 이 물음에 대한 답을 구하고 있다. 최근 중국의 대 아프리카 대륙 진출은 속도와 규모 모두에서 괄목하게 성장하고 있다. 아프리카 대륙에서 벌어지고 있는 중국의 역할에 대한 기대도 존재하지만, 아프리카 내부와 외부로부터의 비판도 증가하고 있다. 중국의 대 아프리카 투자가 활발하게 이루어진 이래로 다수의 집합적 수준의 연구들이 수행되어 왔지만, 그 효과에 대해서는 여전히 합의에 도달하지 못하고 있다. 연구 결과 다수의 케냐인들은 자국에 대한 중국의 FDI와 경제개발원조에 대해 매우 긍정적으로 평가하고 있었다. 중국의 대 케냐 FDI에 대한 케냐인들의 긍정적 평가는 단기적 효과에 집중된 것이다. 이러한 단기적 성과가 장기적 성과로 이어질 것인가는 아직 불투명하다. 케냐와 같은 개발도상국에 대한 인프라 건설 프로젝트를 투자할 때 투자국은 장기적인 경제적 효과를 엄밀하게 평가해야 한다.

Interest Rates and Growth of Private Domestic Investment in Kenya; Vector Autoregressive Econometric Approach

This study sought to determine the relationship between short term interest rate, long term interest rate, and private domestic investment in Kenya using time series quarterly data spanning 1997 to 2018. Vector autoregressive model was used to estimate the relationship. The findings show that the central bank rate and lending rate significantly impact private domestic investment. The results emphasize the role of interest rate policy and monetary policy in driving domestic private investment in Kenya. The findings of this study will be of benefit to policy makers through provision of data-based evidence that will be used as a guide while making appropriate policies to encourage growth of private domestic investment in the country leading to economic growth.

Effect of External Debt on Real Estate Investment in Kenya.

Real estate sector immensely contributes to the economic growth of the country by upgrading the people’s living standards. Development of real estate comes along with better infrastructural facilities, social amenities and better housing. Kenya recently experienced a surge in the growth of real estate sector in the suburbs of its major towns and cities. This emanated from increasing demand for modern housing by middle- income class. In addition, there has been an upsurge in external debt. The effect of this increase in external debt to real estate investment is not known. The objective of this study was to examine the effect of external debt on real estate investment in Kenya. The study adopted analytical research design and a stochastic model using quarterly time series data. Data ranging from 2007-2017 was sourced from Kenya National Bureau of Statistics, World Bank and United Nations Conference on Trade and Development websites. Augmented Dickey Fuller test for unit root revealed the presence of unit root that was corrected by first difference. Correlation analysis revealed moderate negative relationship between external debt and real estate (r = -0.51). Variance Inflation factor test for Multicollinearity value was (1.62<10) and Durbin Watson test for serial correlation value was (1.912 < 2.5) indicating the absence of Multicollinearity and serial correlation respectively. Regression results indicated a statistically significant negative effect of external debt on real estate investment in Kenya (- 0.155869, p< 0.0500). The study recommends the government to adopt public private strategy (PPP) to attract more investors, provide incentives on building materials, reduce taxes on land and other vital resources associated with construction industry. Similarly, Interest on mortgage loans should be reduced to allow more people buy homes. The government should also reduce external borrowing by ensuring efficient revenue collection. This will lead to narrowing budget deficit and reduced external borrowing.