EFFECT OF FINANCIAL LITERACY ON STOCK MARKET PARTICIPATION BY SMALL AND MEDIUM ENTERPRISES IN RWANDA: A CASE KIMIRONKO MARKET
Journal Title: European Journal of Business and Social Sciences - Year 2017, Vol 6, Issue 2
Abstract
Financial markets especially in developing countries are dominated by commercial banks, which have not been reliable sources of long-term financing. The non-bank sources including SMEs are generally underdeveloped with few willing to participate in the stock markets. The general objective for this study was to assess the effect of financial literacy on the participation of stock market by SMEs in Rwanda. The study sought to address the following specific objectives; to determine the effect of financial Knowledge on stock market participation by SMEs in Rwanda; to evaluate the effect of financial behavior on stock market participation by SMEs in Rwanda and to assess the effect of financial attitudes on stock market participation by SMEs in Rwanda. The study adopted a descriptive research design that involved collection of qualitative and quantitative data. The target population for this study was 130 SMEs that operate within Kimironko commercial centre that are registered with private sector federation. A total of 98 SMEs operators constituted the sample size for this study. The study adopted random sampling method to select SMEs that were included in the study. The study used questionnaire as the primary data collection tools. Descriptive statistics was generated through descriptive analysis to obtain frequencies and percentage of study variables. Multiple regression analysis was done to determine the relationship between study variables. Statistical Package for Social Science was used as the appropriate tool for data analysis. Results were presented in tables, graph and pie charts. The study findings indicated that there was a significant relationship between financial knowledge, financial behavior, financial attitude and stock market participation by SMEs (P< 0.01). Regression analysis showed that 81% of the variation in the dependent variable (stock market participation by SMEs) is explained by the independent variables (Financial Knowledge, Financial behavior, financial attitudes). The study concluded that there is a positive and significant relationship between financial literacy and stock market participation by SMEs. Therefore, Rwandan SMEs can participate more in stock market through enhanced financial literacy. The study recommends that SMEs should be trained on financial literacy in order to participate in stock market.
Authors and Affiliations
Maggie Mbabazi| Jomo Kenyatta University of Agriculture and Technology, Rwanda, Dr. Twesigye Daniel| Jomo Kenyatta University of Agriculture and Technology, Rwanda
Keywords
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