Factors limiting the demand for stocks on the Uganda securities exchange: A case study of banking employees in Kampala District.

Abstract

The benefits of a well- functioning stock market to economies in spurring economic growth are undisputed. In Uganda, the Uganda Securities Exchange can be an avenue to mobilize domestic savings thereby bringing about reallocation of financial services from dormant to active agents, making long-term investments liquid as transfer of securities between shareholders is facilitated, and give opportunity to Ugandans to invest in Shares and earn dividends. However, those with the financial ability to do so are yet reluctant to make full use of this facility. The study was set out to identify factors that limit the individual demand for stocks on the Uganda Securities Exchange.

To achieve this objective, the study took on a cross-sectional field survey of 259 banking employees of major banking institutions in Kampala District. The study used mainly primary data, which was collected through questionnaires that were administered face-to-face and others mailed. A descriptive design was used in the analysis. The findings of the study indicate that the major limitations of demand for stocks are awareness (lack of information) and returns to stocks. Others include; Income levels, Preference for other investments, Preference for shorter term returns, Perceived rigidity of the buying process, perceived entry costs, education levels, lack of sufficient number of products to attract the public, and inadequate marketing for the products.

Basing on the findings, the study proposes some improvements and policies to increase the individual demand for stocks. These include increasing awareness campaigns about the activities, prices, returns, some forecasts on stock returns, and the stocks available at the stock market. In addition the USE should increase on marketing of its products plus adoption of intensive advertising in order to attract the public.