Determinants of Demand for Collective Investment Scheme in Kisumu City

Abstract

Recent studies have ranked Kisumu City low on socio-economic outcomes with majority of residents living below the poverty line. However, the city provides opportunities at various levels including investment. Collective Investment Schemes encourage savings and capital formation by retail investors who may not be having enough funds for large scale investment. The objective of this study was mainly to identify the determinants of demand for collective investment schemes in Kisumu City. Several positive features of mutual funds attract investors to invest via the funds and form the basis of demand for the funds. The study therefore, set to identify these factors that allure Kisumu City investors to the schemes. The research design employed was a descriptive survey study for organizations selected. The design is a fact finding one that describes the state of affairs as it is. The researcher used this design to find out the respondents‟ attitude and opinion about factors that allure investors to CIS in Kisumu City. The respondents were originally obtained by a cluster sampling technique. Two clusters obtained were Sacco‟s and investment companies. Then a second random sampling was conducted. Each cluster had 25 organizations randomly sampled to complete the research tool. A total sample of 50 organizations was eventually obtained. The primary data collected was analyzed by capturing all the responses on a MS Excel spreadsheet and converting it into statistical data. The researcher used analysis of variance to analyze the data. Chi-square model was adopted to test the null hypothesis. The survey also found out that diversification is the leading determinant of demand for CIS together with, liquidity values for money expertise in professional management, potential superior returns, low transaction cost, safety and transparency, easy and affordable, flexible investment options. Tax efficiency was found to be the most unattractive feature. This could be attributed to other factors; some of them may include tax characteristics, investor taxation education, tax support services and so on. The researcher acknowledges the impact of the study on Collective Investment Schemes‟ policies and practice in Kisumu City and beyond.