Exploring the supply-side determinants of retail investment in the Nairobi Securities Exchange, Kenya

Abstract

The evidence from the stock market shows that retail investment in Kenya remains low despite significant efforts to promote this form of investments. The existing research on low retail investment has often taken a demand-side approach and largely ignored the supply-side approach. Therefore, this research explored the supply-side determinants of retail investment in the NSE, Kenya. Its specific objectives were to: assess influence of regulatory framework on retail investment in the NSE; examine the effects of technological factors on retail investment in in the NSE; determine the influence of information factors on retail investment in the NSE; and assess the influence of product factors on retail investments in the NSE. The research was underpinned on Public Interest Theory, Unified Theory of Acceptance and Use of Technology, Information Asymmetry, and Expected Utility Theory. The positivist research philosophy was adopted and a descriptive correlational research design implemented. The target population of the study were 143 NSE intermediaries as the units of analysis from which 105 respondents was selected as the sample size. A structured questionnaire confirmed for its reliability and validity was administered online via Google forms. The STATA software was used to perform descriptive, correlational, and multiple regression analysis. The findings showed positive and significant association between regulatory framework, information, and product factors with retail investment. However, a positive but insignificant association was observed between technological factors and retail investment. The regression analysis indicated positive and significant effect of regulatory framework and product factors on retail investment while no effect of technology and information factors on retail investment. The study recommends for policy on know your customer (KYC) protocols for NSE intermediaries so as to allow them to better serve their retail investors by matching them with products that meet their level of sophistication. This policy can also provide for mandatory risk assessments of products before making recommendations to their retail investors. For practice, NSE intermediaries should match their clients with products offered in the capital markets by ensuring that products are compatible with clients, products are not complex for their clients to understand and provide products that clients can try before committing themselves to investing in them.

Key words: Supply-side determinants, retail investment, regulatory framework, technological factors, information factors, and product factors