Reasons why long term loans are difficult to raise on Kenya’s financial markets/ limitations of using long-term debts.
1. This finance calls for long-term securities such as land and buildings which most businesses in Kenya may not have.
2. There are no long –term savings to back-up these loans due to low income of average Kenyans and as much most of the savings are short-term and cannot be made available on long-term basis.
3. Most business in Kenya are agro-based and these are risky and as such lenders cannot avail their finance to such businesses of long-term.
4. The central bank has tended to stimulate the development of money markets that capital markets which have not been fully developed to avail such finance to meet the development needs of industry and commercial sectors of the economy.
5. Long-term loans are not usually profitable because interest and principal repayment are eroded by the by the impact of inflation and thus banks may be reluctant to give such.
6. The size of the businesses in Kenya is small and such businesses are not going concerns so as to be able to attract this finance on long term basis.
7. A number of companies in Kenya are multinational companies which obtain long-term finances from parent companies abroad and this has limited the development of capital markets in Kenya as demand by such companies is low.
lydiajane74 answered the question on May 9, 2018 at 19:45
- Outline circumstances under which a company should use short-term debt finance(Solved)
Outline circumstances under which a company should use short-term debt finance.
Date posted: May 9, 2018. Answers (1)
- What the advantages of using debt financing(Solved)
What the advantages of using debt financing.
Date posted: May 9, 2018. Answers (1)
- Give limitations of debt finance/disadvantages of using debt finance to the company(Solved)
Give limitations of debt finance/disadvantages of using debt finance to the company.
Date posted: May 9, 2018. Answers (1)
- Outline requirements a company must meet before raising debt finance(Solved)
Outline requirements a company must meet before raising debt finance.
Date posted: May 9, 2018. Answers (1)
- What are the disadvantages of using retained earnings as a source of finance to the company?(Solved)
What are the disadvantages of using retained earnings as a source of finance to the company?
Date posted: May 9, 2018. Answers (1)
- What are the advantages of using retained earnings as a source of finance to the company?(Solved)
What are the advantages of using retained earnings as a source of finance to the company?
Date posted: May 9, 2018. Answers (1)
- Explain why SACCOS are popular among employees(Solved)
Explain why SACCOS are popular among employees.
Date posted: May 9, 2018. Answers (1)
- What are the requirements for the registration of a business name?(Solved)
What are the requirements for the registration of a business name?
Date posted: May 9, 2018. Answers (1)
- Give circumstances under which partnership is illegal (Solved)
Give circumstances under which partnership is illegal
Date posted: May 9, 2018. Answers (1)
- State four differences between power and authority(Solved)
State four differences between power and authority
Date posted: May 9, 2018. Answers (1)
- Outline five features of authority.(Solved)
Outline five features of authority.
Date posted: May 9, 2018. Answers (1)
- Outline six traits of a good leader.
•(Solved)
Outline six traits of a good leader.
Date posted: May 9, 2018. Answers (1)
- Outline nine principles of management according to Henry Fayol.(Solved)
Outline nine principles of management according to Henry Fayol.
Date posted: May 9, 2018. Answers (1)
- Describe five management styles.(Solved)
Describe five management styles.
Date posted: May 9, 2018. Answers (1)
- State five characteristics of perfect competition(Solved)
State five characteristics of perfect competition
Date posted: May 9, 2018. Answers (1)
- Outline the limitations of accounting(Solved)
Outline the limitations of accounting
Date posted: May 9, 2018. Answers (1)
- Outline the characteristics of accounting reporting.(Solved)
Outline the characteristics of accounting reporting.
Date posted: May 9, 2018. Answers (1)
- Outline four internal business environments.(Solved)
Outline four internal business environments.
Date posted: May 9, 2018. Answers (1)
- Describe five types of business activities.(Solved)
Describe five types of business activities.
Date posted: May 9, 2018. Answers (1)
- Effects of outward shift in a supply curve on equilibrium price and quantity(Solved)
Effects of outward shift in a supply curve on equilibrium price and quantity
Date posted: May 8, 2018. Answers (1)