Contribution of Unit Trusts Funds in the Growth of Capital Market in Kenya

Abstract

Unit trust funds have contributed to the growth of financial markets in Kenya and unquestionably globally. This has been demonstrated by the upsurge in the number of unit trust funds in the capital market. The specific contribution of unit trust in the growth of capital market is not clear despite the growth of this market. Hypothetically it is expected that as unit trust funds grow, capital markets also must grow but empirically there is some substantial growth in capital market though not in equal measure in unit trusts. The study sought to determine the contribution of unit trusts funds in the growth of capital market through mobilizing domestic savings, mobilizing foreign direct investment, capital allocation and risk management. The study was undertaken using explanatory non-experimental research design and analysis were carried out within a panel data estimation framework. A census study for all twenty-three (23) unit trust schemes was carried out on all money market, equity and balanced funds managed by the schemes for the annual period from year 2009 to year 2017. The research utilized secondary data because of the small number of unit trusts companies in the NSE. The secondary data was captured through secondary data collection sheet designed to record all information necessary on unit trust funds from annual reports, surveys and CMA publications for the period 2009 and 2017. The data were also analyzed using descriptive statistics, correlation analysis, and panel multiple regression analysis using SPSS Version 21. Both dependent and independent variables were analyzed using panel data to determine the relationships of the variables. These findings were presented in the forms of descriptive statistics and regression model. The study established that all the four independent variables were statistically significant at five percent level of significance. The study revealed that the joint effect of domestic savings, foreign direct investment, Capital allocation, and Risk management contributed to the growth of capital market in Kenya. Grounded on the findings, the study recommends that the government of Kenya should improve positively the measures to promote investment in unit trust since it positively contributes to the growth of capital market and by extension support the economic pillar in Kenya vision 2030.