Jacob M. Munene
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ASSESSMENT OF CAPITAL RATIONING PRACTICES AS DETER- MINANTS OF EFFECTIVE COMPLETION OF CDF FUNDED PRO- JECTS: A CASE OF KASARANI CONSTITUENCY By JACOB M. MUNENE DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIRE- MENTS FOR THE AWARD OF MATER OF SCIENCE (FINANCE AND AC- COUNTING) IN THE SCHOOL OF BUSINESS AND PUBLIC MANAGEMENT AT KCA UNIVERSITY NOVEMBER 2013 1 DECLARATION I declare that this dissertation is my original work and has not been previously published or submitted elsewhere presented for any award or degree. I hereby declare that this document contains no material or published by other people except where due reference is made and author duly acknowledged. Student name: JACOB M. MUNENE Student Number: 11/01858 Sign……………………..……….…. Date……………..…….……. I do hereby confirm that I have examined the masters’ dissertation of Jacob M. Munene And have certified that all revisions that the dissertation panel and examiners recommended have been adequately addressed. Sign………………………….…… Date……………….………. Name: DR. MBEWA M.O Dissertation Supervisor i ASSESSMENT OF CAPITAL RATIONING PRACTICES AS DETER- MINANTS OF EFFECTIVE COMPLETION OF CDF FUNDED PRO- JECTS: A CASE OF KASARANI CONSTITUENCY ABSTRACT Effective completion of CDF funded Project depends not only on capital availability but is greatly influenced by the capital rationing practices adopted by management in allocat- ing available funds to various projects. CDF being a government fiscal decentralization mod- el similar to federalism applied in many other parts of the world faces budgetary constraints, which require adoption of sound management capital rationing practices. Successive budget deficits are common phenomena in Africa and most governments bridge the gap through bor- rowing and grants. The introduction of CDF in 2003 triggered massive demand for projects that require financing through the exchequer hence pressurizing the already insufficient fund- ing. The study was based on 72 projects proposed and approved for implementation and fi- nancing by the Kasarani CDF between year 2003/2004 and 2011/2012 financial year from which 22 projects were samples for observation. The study focused on the estimated 1,000 employees of various CDF financed projects within Kasarani constituency from which a ran- dom sample of 280 respondents was drawn and questionnaires administered. The self- administered questionnaires were distributed and collected after a week, which provided pri- mary data, while secondary data was obtained from the CDF website. Quantitative data was analysed by descriptive analysis and in addition, multiple regression was used to explain the strength in relationship between the dependent and independent variables. The study found out that effective completion of CDF funded projects is influenced by capital rationing prac- tices. Key Words: Effective Completion, Fiscal Decentralization, Constituency, Devolution ii ACKNOWLEDGEMENT All the glory and honour be to God the almighty for his wonders forever; without whose grace this research project would not become a reality; by his grace, it has come to be. A number of people have significantly contributed to the successful completion of this project; although it is impossible to quantify their contribution, it is necessary in appreciation to mention a few who have been instrumental in the preparation of this research project. My sincere gratitude goes to Dr. Mbewa; my project supervisor who spared his precious time to guide me throughout the research and assisted in making it better by proposing necessary changes. Dr. Muchiri of KCA University whose contribution in research methodology cannot overlooked since this prepared me to be able to undertake this project proposal and above all the KCA University for providing me with an opportunity to take up my studies locally while carrying on my other responsibilities. Forgetting to acknowledge my family would be detrimental as a lot of family time and resources have been utilised during this course. My exceptional gratitude goes to my wife Caroline who has taken up extra responsibilities during my studies. Without her, there would have been a disastrous vacuum in my studies. I thank my children for sitting with me many times as I did my assignments which is a sign of endurance and readiness to emulate me in my studies. iii TABLE OF CONTENTS Abstract……………………………………………………………………….……….….…...ii Acknowledgements ………………………………………………………….………...….….iii Declaration ………………………………………………………………………………….…i Dedication ……….…………………………………...……………………...…..……….…..iv List of Tables and Figures ...………………….…………………..………………….…..……v Acronym And Abbreviations ………...…………………..…………....….…..…..……....... vi Definition of Terms ………………………………………..………...…………..….….……vii Chapter One: INTRODUCTION 1.0 Introduction …………………………….……...………………………...……...…...……1 1.1 Background of the study………………………………...……………………..………..... 1 1.1.1Kasarani Constituency ………….….……………..….……….………….……….… 3 1.1.2 Statement of the Problem ………..……….…………………….……..….………....4 1.2 Objectives Of the Study .………..………..………………….………….….…….....…….4 1.2.1General objective…..……………...………………………………….…………..4 1.2.2 Specific Objectives.….……..…..…………..…………………..…………..........4 1.3 Research Questions .………………..…………………….….………...……...…………..4 1.4 Justification of the Study…………...……………………..………………….....……...….5 1.5 Significance of the Study.…………………..……………….…………………………...5 1.6 Scope of the Study..……………………………….……...………………….………….....6 1.7 Limitations of the study ……………………………....………………………...…………6 1.8 Ethical Issues in Research ………………………….…….…...…………………………..6 Chapter Two: LITERATURE REVIEW 2.0 Introduction .……………...……..………………..….…………….………...……………7 2.1 Theoretical Review ……………………………………………………….…………….…7 2.2 Empirical Review ……………….…….…..…...………………………………………….8 2.3 Capital Rationing theory and practice …………………………………...……………......8 2.3.1 Capital Rationing in CDF ………………....…………...………………………11 2.3.2 CDF Management Practices ….……………………………………………..…12 2.3.3 Capital Rationing Limitations ………………………...……………………….13 2.3.4 Effective Project Completion ………………………………………………….15 2.4 CDF Framework………………………..…..……………………………...……………..15 2.5 Challenges in Implementation of CDF ……………..……..…….……..…….….……....18 2.6 Conceptual Framework ……………………..…..……………...…...……...….….….….21 2.6.1 Interpretation of Variables……………………..…………………………….....21 2.6.2 Project Regression Model …………………………….……...…….……….....22 2.7 Research Gap …………………………………………………………………...………..22 Chapter Three: RESEARCH METHODOLOGY 3.0 Introduction ………………………………………..…………….....…....…..…...…….23 3.1 Research Design …………………………………………………..…..…..……...….…..23 3.2 Target Population and Sample Frame ……………………………….……..……………23 3.2.1 Sample Frame ………………………………………..……………………….……..…23 3.3 Samples and Sampling Procedure………………………....………..……….......…...…..23 3.4 Instrumentation……………………………….…….…………….…..............…......…....24 3.5 Data Analysis Technique………….……….…………………….……..………..……….24 3.6 Bias Response …………………………….….………….…………………………….…25 ii Chapter Four: DATA ANALYSIS AND PRESENTATION 4.0 Introduction ……………………………….…………...……….………………………. 26 4.1 Response Rate………………………………………....….……………...…………….. 26 4.2 Respondent Demographics …….………………………..……………………………… 26 4.2.1 Respondents age …….………………….…………….………………….….…26 4.2.2 Respondents Gender ……………….…………………..………………………27 4.2.3 Respondent Management Level ………………………..…………….……….27 4.3 Project Information ………….…….………….…………………………..……………. 28 4.3.1 Capital rationing practices ………..……………………………………………28 4.3.2 CDF Management practices ………………………………………….………..28 4.3.3 CDF Capital Rationing limitations …….………….……….…………………..30 4.4 Effective completion of CD funded projects…………………………………......34 4.5 Regression Analysis ……………………………….………….……….………...34 4.5.1 Model Summary ………………………………..……….………………….….36 4.5.2 Anova Analysis….….………………………………………………………….37 4.5.3 Regression Coefficients ………………………………………………………..37 4.5.4 Factor Analysis …………………………………………………………..….…38 4.5.5 Correlation Matrix ……………………………………………………………..38 4.5.6 Total Variance Explanation…………………………………………………….39 4.6 Discussion of Findings ………………………….………….……….…………...41 Chapter Five: CONCLUSION AND RECOMMENDATIONS 5.1 Conclusion …………………………………………………………………………….…42 5.2 Recommendations …………………………………………………………………….…42 5.2.1Recommendation on Policy …………………………………….………..…….43 5.2.2 Recommendation on academia ………………………………………..….…...43 References ……………………………………………………………….……………….…45 Appendices …………………………………………………………………………………50 iii DEDICATION I dedicate this work to my wife: Caroline and children Lynn Ndinda, Ivy Mbengi and Beryl Nzyula for being beside me during my study. I sincerely appreciate them for their pa- tience and understanding. iv LIST OF TABLES Table 3.2 Target population …………………………………….…………………………...23 Table 4.3.1 Response on capital Rationing practices…………………….....…………….….30 Table 4.3.2 Response on CDF management practices …………………….…………....…...32 Table 4.3.3 Response on capital rationing limitations …………….…..…..….......................34 Table 4.4.1 Response on Effective Completion ……..………..……………………..………34 Table 4.5.1 Regression summary ………………………………………………………....…37 Table 4.5.2 Anova Model…….…..……………………………………………………..……37 Table 4.5.3 Coefficients table….………………………………..…….…………………...…37 Table 4.5.4 Factor Analysis table….………………………………..…….……………….…38 Table 4.5.5 Correlation Matrix Table …………………………………….………………….39 Table 4.5.6 Total Variance Table ……………………………………………,……,,……….39 Table 4.5.7 Regression Data …….………………..…………………………….……………40 LIST OF FIGURES Conceptual framework figure (2.6) …………….……….…………………………………...21