Factors constraining local investors’ participation in the capital market in Tanzania: the case of Dar es Salaam Stock Exchange

Capital market is one of the important tools in boosting the economy of the country. In any country, performance of capital market highly depends on the number of participants whom will trigger the depth and width of the market. Unfortunately, in emerging markets, participation of local investors is relatively low compared to the workforce available in the country. Most of the emerging markets are dominated by foreign investors. This makes most of the emerging market to experience financial meltdown during financial global crisis. The main aim of this study was to assess the factors constraining local investors’ participation in the capital market. This study was undertaken in Dar es Salaam region whereby convenience sampling and stratified random sampling were used to obtain responses from the business persons, employees from both private and public sectors. Primary and secondary data were collected and analyzed by using SPSS. Chi square was used to test developed hypotheses and the analysis was made by using statistical test. Furthermore descriptive analysis was employed to assess the collected data. The findings of the study show that the main factors which constrain local investors’ participation in the capital market are lack of information, low saving and low return offered in the market. Regardless of the low savings most of the Tanzanians prefer to invest in business, banks, and real estates. From the findings several recommendations are made which may motivate Tanzanians to participate in the capital market. These include conducting aggressive advertisements so as to create awareness, increasing incentive to different investors who own securities, providing training to security brokers, decentralization of DSE and licensed members.