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Financial soundness and operational efficiency of Islamic banks in Sub-Saharan Africa: evidence from a bias-corrected DEA and panel regression framework
(Emerald Publishing., 2026) Njogo, Michael Njoroge.; Dallu, Abdallah Mambo.; Korir, Fiona Jepkosgei.
Purpose This study examined the effect of financial soundness on the operational efficiency of Islamic banks operating in Sub-Saharan Africa (SSA), a region characterized by emerging Islamic banking systems and constraints. It focused on how capital adequacy, asset quality, earnings quality and liquidity management influence efficiency outcomes. Design/methodology/approach The study applies a Simar–Wilson two-stage data envelopment analysis framework to a balanced panel of 35 fully-fledged Islamic banks in SSA from 2010 to 2024. Bias-corrected efficiency scores are estimated under variable returns to scale and subsequently analyzed using a panel regression framework with two-way fixed effects and robust standard errors to control for unobserved heterogeneity across banks and time. Findings The findings revealed a heterogeneous relationship between financial soundness and operational efficiency: asset quality was positively and significantly associated with efficiency, whereas earnings quality exhibited a negative relationship, indicating a profitability–efficiency trade-off. Capital adequacy showed no direct effect, while liquidity management demonstrated a weak and context-dependent influence. Practical implications The analysis is limited to fully-fledged Islamic banks with complete data. The findings suggest that regulators and managers should prioritize asset quality improvement and efficiency-oriented strategies over balance-sheet expansion. Originality/value The study provides one of the first ever comprehensive, bias-corrected DEA empirical assessments of operational efficiency in Sub-Saharan Africa in Islamic banking. By distinguishing operational efficiency from traditional profitability measures, it challenges the assumption that improved financial soundness inherently enhances efficiency in emerging Islamic banking markets.
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Bank size as a mediating mechanism between financial soundness and operational efficiency: evidence from Islamic banks in sub-Saharan Africa
(Emerald Publishing., 2026) Njogo, Michael Njoroge.; Dallu, Abdallah Mambo.; Korir, Fiona Jepkosgei.
Purpose This study examines whether bank size mediates the relationship between financial soundness and operational efficiency of Islamic banks in sub-Saharan Africa (SSA), where the sector remains small despite growing policy relevance. Design/methodology/approach Panel data from 35 Islamic banks (2010–2024) were analysed using bias-corrected Variable Returns to Scale scores from the Simar–Wilson two-stage Data Envelopment Analysis. A panel-based mediation model with two-way fixed effects was employed, with bank size (log of deposits) as the mediator. Findings Financial soundness significantly improves operational efficiency, with asset quality exerting a negative effect and earnings stability a positive effect. However, financial soundness does not significantly influence bank size, and bank size does not significantly affect efficiency once soundness is controlled for. Consequently, the mediation hypothesis is not supported, indicating that scale does not function as a transmission mechanism in SSA Islamic banking. Research limitations/implications The findings caution against consolidation-led efficiency strategies and support policy emphasis on governance, regulatory infrastructure and operational capacity building to enhance inclusive and sustainable Islamic banking development. Originality/value This study provides one of the first empirical assessments from SSA that explicitly tests the mediating role of bank size in the soundness–efficiency relationship. The findings show that scale expansion does not operate as a transmission mechanism, suggesting that scale-driven efficiency strategies may have limited applicability.
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Debt recovery practices and loan performance of deposit-taking microfinance banks in Kenya
(IJSSME, 2024) Ondabu, Ibrahim Tirimba.; Kamanda, Cynicah Nyaboke.; Teimet, Paul.; Matanda, Joshua.
This study explored the relationship between debt recovery practices and loan performance for deposit-taking microfinance banks in Kenya. The study is guided by agency theory and risk shifting theory. The objectives of this study include determine the effect of third-party credit and analyze the effect of collection agencies on loan performance. This research adopted a descriptive approach, the research meticulously captured numerical data for rigorous statistical analysis, aligning with the study’s objective. This study used census survey, all 14 microfinance banks licensed and operational by the Central Bank of Kenya were included. This study used self-administered questionnaires. In this study diagnostic tests were performed to validated the robustness of statistical analysis using SPSS. Validity and reliability were ensured through content validity guidelines and expert assessments where reliability has shown an average Cronbach alpha of 0.7 for all the variables. The study conducted a detailed analysis of the relationships between various elements related to loan performance surveyed microfinance banks. In this study the correlation matrix revealed strong positive correlations between third-party credit guarantees, and collection agencies. Regression analysis showed a significant impact of these factors on loan performance, with an R Square of 0.416. The study’s hypotheses regarding the influence of third-party credit guarantees, and collection agencies on loan performance were tested and supported. This study concluded that effective debt recovery practices significantly enhance loan performance in MFBs. Recommendations included reassessing debt policies, focusing on equity policies, and streamlining policy implementation concerning loan defaulters. The study also identified areas for further research to deepen understanding of loan performance dynamics in the microfinance sector. The study highlighted the importance of proactive debt recovery strategies and risk mitigation measures in enhancing the financial sustainability of MFBs in Kenya.
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Key drivers of public sector audit effectiveness in Kenya and lessons for developing economies.
(IISTE, 2024) Ondabu, Ibrahim Tirimba.; Kanini, Joyce Mueni.; Njuguna, Peter.; Kithuka, Geoffrey.
This study explores the key factors influencing the effectiveness of public sector audits (PSA) within Kenya's national government and affiliated entities. Focusing on the role of institutional corporate governance, professional and technical competence, resource availability, and internal control processes, this research analyzes data from the Office of the Auditor General's 2021/2022 audit reports. Using a descriptive design and content analysis, 43 financial statements were examined to assess how these determinants impact audit outcomes. Findings indicate that professional and technical competence has the most significant positive impact on PSA effectiveness, followed by strong corporate governance and robust internal controls. Interestingly, resource availability showed a negative correlation, suggesting that merely increasing resources without strategic allocation may not enhance audit performance. These insights highlight the need for targeted training and improved governance structures to strengthen Kenya's audit capabilities and enhance public accountability.
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Government funding, institutional size, and student enrolment in public TVET institutions: evidence from Nairobi Metropolitan, Kenya
(African Development Finance Journal, 2025) Ondabu, Ibrahim Tirimba.; Macharia, Alice N.
This article examines the influence of government funding, specifically Higher Education Loans Board (HELB) loans and capitation, on student enrolment in public Technical and Vocational Education and Training (TVET) institutions in Nairobi Metropolitan, Kenya. Using longitudinal panel data from 2019–2023 across 12 institutions, the study analyzes how institutional size moderates the relationship between funding and enrolment. Results show that HELB, capitation, and institutional size jointly explain 66.9% of the variance in enrolment rates, with all predictors exerting significant positive effects. Larger institutions benefit disproportionately due to economies of scale and stronger absorptive capacity. The findings highlight the centrality of coordinated demand- and supply-side financing models in promoting equitable access to technical education. Policy recommendations include strengthening funding frameworks, expanding capacity in smaller TVETs, and improving administrative efficiency to maximize the impact of public financing.