Title:
FINANCIAL LITERACY AND COLLECTIVE INVESTMENT DECISIONS AMONG INVESTMENT CLUB MEMBERS IN UGANDA

Authors:
Paddy Mugambe

Abstract:
Financial literacy among different groups of people has been a subject of research from different perspectives. The literature about financial literacy and the decision-making of a group of people in the form of an investment club requires special attention since groups are used as special vehicles to spur saving and investment in a number of countries including Uganda. In the face of these developments, it becomes important to assess the financial literacy of individuals that constitute these groups and how the level of their financial literacy affects investment decision-making by the groups to which they belong. This study examines the foregoing with a focus on investment clubs in Uganda. The study used quota sampling techniques to reach out to 66 individuals belonging to investment clubs with a view of assessing their financial literacy levels based on financial literacy knowledge as the key dimension of financial literacy. The specific objectives were to assess the effect of three identified indicators of financial literacy knowledge (Knowledge of interest rate, knowledge of inflation, and knowledge of liquidity) on the investment decision-making by the investment club members. A financial literacy assessment tool was used to assess levels of financial literacy and later on correlations and regressions were conducted to respond to the specific objectives. All the indicators of financial literacy knowledge were found to have a positive albeit low and moderate relationship with investment decision-making. Other factors outside the identified three indictors were found to contribute substantially to the investment decision-making by the investment club members and this formed part of the recommendations that require stakeholders to pay attention.

Keywords:
Financial literacy, financial literacy knowledge, Investment clubs, Uganda, Investment decision making