International Journal of Economics and Finance, Issue: Vol.18, No.5

Interest Rate Capping and Commercial Banks’ Lending to Private and Public Sectors in Kenya

Tue, 31 Mar 2026 01:23:38 +0000

Kenya liberalized her financial sector in the 1990’s allowing the cost of capital to be determined by the market forces. This led to interest rates that were higher in Kenya than her peers, a general perception that commercial banks were exploiting borrowers and that credit was too expensive. The interest rate capping law was enacted in September of 2016 to correct this situation. The expectation was that the capping would ensure cost of credit remained low thus increasing financial inclusion and reducing the perceived exploitation by commercial banks. However, the capping of interest rates may have had negative unintended consequences on the level of lending to both the private and public sectors. In fact, the interest rate capping law was reversed in the year 2019. This paper set out to establish two objectives. The aims of this study were to first determine how interest rate caps affect commercial banks’ lending to the private sector and then to determine how they affect commercial banks’ lending to the government. The study used the Autoregressive Distributed Lag and Vector Error Correction Model estimation methodologies in a time series analysis before and after the rate capping in order to accomplish these goals. Lending to the public and private sectors was one of the study’s dependent variables. The Central Bank Rates, interbank rates, interest rates, inflation rates, and Treasury bill rates by the Central Bank of Kenya were the independent variables that were employed. The results of the study showed that interbank rates had a negative significant influence on private sector credit, while Treasury bills and central bank rates had a positive significant impact. The research additionally demonstrated that interest rates have a significant positive influence on the quantity of loans made by commercial banks to the private sector; hence, the rate-capping rule had an effect on this lending. Furthermore, during the post-interest rate capping law era, commercial banks’ lending to the public sector was significantly influenced by Treasury bill rates and private credit. The study’s policy recommendations said that, given the strong correlation between interest rates and private sector credit, steps should be taken to guarantee that credit from commercial banks is easily accessible in order to prevent the public sector from becoming overshadowed. Furthermore, while rate caps help the public sector borrow money, the government should implement policies that diversify borrowing sources so as to avoid hurting the private sector and promote economic growth across the board.

Impact of Household Debt on Ownership of Financial Assets

Mon, 06 Apr 2026 02:12:49 +0000

Growing household debt has resulted in increased research interest. Using a probit model estimation, we found a robust negative impact of having household debt on probability of owning financial assets. The finding corroborates results from other studies that availability of credit reduces household financial assets because it becomes a substitute for precautionary saving against income uncertainty. The result affirms the intertemporal resource constraint that the individual earns enough to cover debt repayment in-order to participate in saving. The study supports government debt relief policies to alleviate household debt.

We introduce age as a quadratic function in the probit model estimation. The positive second order derivative indicates an upward relationship between age and owning financial assets. Although not a robust finding for the quadratic function the result is significant for adding age as a first-degree variable. The study confirms other research that people save more when life expectancy is higher and that aligns with the life cycle hypothesis that the individual will save to smoothen consumption over the life time.

The study supports the need for wealth advisors to review client’s debt and age. Debt and age have impact on whether the client has any utility from acquiring financial assets or not. We expect aging individuals to derive higher utility from owning financial assets- either through consumption smoothing or bequests. Additionally, the higher the debt burden, the more the individual would prefer to settle their obligation than own financial assets.

FDI and Fixed Capital Formation Private Sector in Emerging Economies: The Case of Egypt

Mon, 06 Apr 2026 02:16:31 +0000

Emerging Economies, including Egypt, strive to increase domestic capital formation to achieve sustainable economic growth, create jobs, and achieve comprehensive development. This is accomplished by stimulating domestic savings and investment and encouraging foreign direct investment as a means of attracting new physical capital, in addition to several intangible assets such as technological capabilities, managerial skills, brands, international product marketing channels, and product design.

This study examined the long-term relationship between net flows foreign direct investment and gross fixed capital formation of the private sector in Egypt during the period 1960-2024, a significant long-term relationship is evident between the dependent variable, gross fixed capital formation of the private sector in Egypt during the period under study (1960-2024), and all explanatory variables FDI, nominal exchange rate, gross domestic savings, real interest rate, Domestic credit to private sector, General government final consumption expenditure, and Claims on central government. Using EViews 12’s vector error correction (VEC), the analysis discovered a significant long-term inverse relationship between net foreign direct investment (FDI) flows and gross fixed capital formation of the private sector in Egypt during the study period. were, a 10% increase in net FDI flows resulted in a 7.2% decrease in gross fixed capital formation of the private sector in Egypt. The study also found a significant inverse relationship in the long run between the explanatory variables the nominal exchange rate, the real interest rate, and total government final consumption expenditure and the dependent variable, gross fixed capital formation in the private sector in Egypt during the study period. A 10% increase in the nominal exchange rate (currency depreciation) resulted in a 4.9% decrease in gross fixed capital formation in the private sector in Egypt, highlighting the importance of currency value stability (the Egyptian pound) for increasing private sector gross fixed capital formation in Egypt. Similarly, a 10% increase in the real interest rate led to a 7.4% decrease in private sector gross fixed capital formation in Egypt, and a 10% increase in government final consumption expenditure resulted in a 13.8 % decrease in private sector gross fixed capital formation in Egypt.

Also, the study found a significant long-term positive relationship between the explanatory variables of gross domestic savings, Domestic credit to private sector, Domestic credit to private sector, and gross fixed capital formation of the private sector in Egypt during the period under study. An increase in gross domestic savings of 10% results in an increase in gross fixed capital formation of the private sector in Egypt of 0.3%. As for Domestic credit to private sector and Claims on central government, an increase of 10% leads to an increase of gross fixed capital formation of the private sector in Egypt 4.1% and 0.3%, respectively.

Based on the preceding findings, the study recommends the following: First, focusing on attracting foreign direct investment (FDI) flows necessary for development, which complement, rather than displace, the private sector’s role in increasing gross fixed capital formation. Second, working to stabilize the Egyptian pound’s exchange rate, which improves expectations and encourages the private sector to engage in long-term projects that will increase gross fixed capital formation. Third, encouraging gross domestic savings while increasing credit extended to the private sector and attempting to reduce real interest rates, thereby increasing the private sector’s access to necessary capital at a reasonable cost.

Fertility in Honduras

Wed, 15 Apr 2026 00:29:56 +0000

This paper investigates the determinants of fertility in Honduras, using data from the period 1991-2022. Equations are estimated to identify the role of variables from the real, monetary, and labor sectors on fertility. The results show that fertility is mainly determined by female unemployment rates, salaried employment rates, and self-employment rates, with investment and exports also playing a role. A result of particular interest is the role of the economic dynamism of other Central American countries on Honduran fertility, which highlights the existence of a regional fertility “network”.

A Systematic Literature Review on Women’s Participation in Auditing: Gender Diversity, ESG and Accountability

Fri, 17 Apr 2026 00:56:55 +0000

This paper aims to review and synthesize the existing literature on women’s participation in the auditing profession and its implications for the profession and its practices. Although the number of female auditors has increased, many studies show that women face several challenges in their career paths. Using a systematic review method and the PRISMA 2020 framework, this study selected 54 empirical papers from Scopus published between 2008 and 2025. The results show four main themes in the literature: (1) Audit Quality, Earnings Management, and Earnings Quality, (2) Women and Audit Reports, (3) Gender Diversity and Audit Fees, and (4) Gendered Barriers, Stereotypes, and Organizational Culture. These themes will provide a foundation to understand both the contributions and the challenges of women’s participation in the audit profession. This review concludes that women’s involvement in auditing has a meaningful effect on audit quality, ethics, and governance, but the profession still suffers from structural inequalities that need to be addressed. The study also outlines research gaps and suggests future directions for scholars to better understand how gender diversity can shape the auditing profession in different contexts.