Contribution of pension funds in the development of capital markets in Tanzania

Kyando, Benitho William (2014) Contribution of pension funds in the development of capital markets in Tanzania. Masters thesis, The Open University of Tanzania.

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Abstract

The involvement of pension funds in capital market transactions in Tanzania is increasing in tandem with their growing financial power. A strong presence of pension funds (PFs) seems to be a precondition for the development of liquid securities markets with. Thus, the major objective of the study was to assess contribution of PFs to the development of capital market in Tanzania, Dar es Salaam stock exchange (DSE) being the centre of focus. Data was collected from PFs, the DSE, stock brokers and investment advisors. Data collected was analysed using the spreadsheet computer software to establish evidence on the contribution of PFs to the development of DSE in terms of turnover, liquidity and portfolio ratio. The results show that there is low participation of PFs in IPOs. PFs hold a small fraction of DSE’s market capitalization. PFs purchases and holds securities for longer terms. The low liquidity of the DSE is partially contributed by low participation of PFs in secondary market trading. Finally, the results show that portfolio of PFs is mainly made up by Government bonds, bank deposits and loans. Inclusively, results from the research work imply that the contribution of PFs in the development of capital markets in Tanzania, particularly the DSE is not significant. The researcher recommends that for significant contribution of PFs towards future development of capital markets in Tanzania, there should be professional fund managers, variety of products in the market (more listed companies from different sectors of economy) and adoption of the enforcement of the Social Security Regulatory Authority investment guidelines.

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