Determinants of Growth in Wealth of Investment Groups in Kenya

Abstract

In the Vision 2030 under the financial services sector of the economic pillar, capital mobilization to raise funds for investment is expected to play a critical role in the anticipated economic growth. Investment groups are formed with the aim of growing and maximising wealth for the members. However, some have failed making it difficult for them to be sustainable. It is against this background that this study assessed the determinants of growth in wealth of investment groups in Kenya. The study had five objectives which were: To determine the influence of financial literacy on the growth of investment groups‟ wealth, to establish the influence of portfolio diversification on growth in wealth of investment groups; to establish the influence of capital structure on growth in wealth of investment groups, to examine the influence of group governance on growth of investment groups‟ wealth and to establish the moderating effect of group size on the relationship between determinants of growth and the growth in wealth of investment groups in Kenya. The study used cross sectional survey research design. The population of interest was 4020 investment groups registered by Kenya association of Investment groups. Stratified random sampling method was used and 364 investment groups were selected proportionate to the size of the strata. The survey instrument was a questionnaire administered to the group members and their officials. Pilot test was done using 36 respondents who were drawn from target population but not be included in the main study sample. Cronbach alpha was used to test reliability of the instrument, factor analysis was used in the testing of construct validity. Descriptive statistics were used which involved computations measures of central tendency and presented in frequency tables, pie charts and graphical charts. Inferential statistics was done using the multiple regression. Inferential analysis involved fitting of regression models which were obtained from the study to show that all the determinants of growth that is financial literacy, Portfolio diversification, capital structure and group governance had significant influence on growth in wealth. A moderated multiple regression was fitted to test the moderating effect of size on the relationship between determinants of growth and growth in wealth. The results showed that size has a significant influence on the relationship between determinants of growth and growth in wealth. The findings and conclusions of this study are of significance to the investment groups. Based on the findings the management can be able to understand the strategies to be taken in order to improve the growth of their investment groups. The agencies who use group model to provide funding like the managers of the Uwezo Fund, Youth Enterprise Fund and Women Enterprise Fund will find the study useful as they will get to know how the growth in wealth is influenced by the study variables. The study therefore recommended that that the groups should apply all the determinants of growth to create the investment groups wealth. This study will empower investment groups with knowledge to ensure their sustainability from within, hence support vision 2030 by widening financial inclusion.