INVESTMENT PLANNING PRACTICES AND FINANCIAL PERFORMANCE OF MICRO RETAIL ENTERPRISES IN BUNGOMA TOWN, KENYA
Kibet Erick Chepnoen - Master of Science in Finance and Accounting, Jomo Kenyatta University of Agriculture and Technology, Kenya
Dr. Kimani E. Maina - Lecturer, Jomo Kenyatta University of Agriculture and Technology, Kenya
ABSTRACT
Investment planning enables the investor to hold an optimum portfolio based on costs, benefits and risks which are fundamental in maximization of return on investment. The retail business environment in Kenya is risky and uncertain, characterized by an ever changing competitive environment and fluctuation of factors which influence retail demand such as taxation and inflation rates. This adversely affects financial performance of micro retail enterprises. This study was conducted in order to determine the relationship between investment planning practices and financial performance of micro retail enterprises in Bungoma town, Kenya. The influence of portfolio diversification on financial performance of micro retail enterprises was assessed. This study was founded on modern portfolio theory. Descriptive survey research design was used. A total of 1912 registered micro retail enterprises in Bungoma town comprised the study population. A sample of 331 micro retail enterprises was involved in the study. Simple random sampling was used to select micro retail enterprises for the actual study. A pilot study was conducted in order to test the reliability of the research questionnaire. Content validity of the research instrument was ensured by consulting the university supervisor while reliability was tested using Cronbach’s alpha coefficient. Self-administered questionnaires and secondary data sheets were used to collect data. Both descriptive and inferential statistics were used for data analysis. Descriptive statistical tools included frequencies, percentages, means, variances and standard deviations. Inferential statistics included Pearson’s Product Moment Correlation and multiple regression analysis. Findings were presented in tables, charts and graphs. This study found out that portfolio diversification positively and significantly influences financial performance of micro retail enterprises (b1 = 0.217; p < 0.05). It was concluded that if managers/owners increase the variety of asset classes in their portfolios financial performance of micro retail enterprises could be enhanced. The study recommended that investors and organizational policy makers in micro retail enterprises should diversify their portfolios in order to enhance financial performance. It was also recommended that the principles of modern portfolio should be applied in investment planning process. Also, financial advisors and consultants should prioritize strategic asset allocation and systematic portfolio construction for micro retail enterprises. The government should also organize seminars on basic investment planning skills for managers/owners of micro retail enterprises. Suggestions for further research were also made. It is expected that such initiatives will promote economic development.
