AN INVESTIGATION OF THE SAVINGS AND INVESTMENT PATTERN OF
SALARIED PEOPLE WITH SPECIFIC FOCUS ON LILONGWE CITY
By
A DISSERTATION SUBMITTED TO UNIVERSITY OF …….. IN PARTIAL
FULFILLMENT OF THE REQUIREMENT FOR A DEGREE OF MASTER OF
BUSINESS ADMINISTRATION
JANUARY, 2023.
1
DECLARATION
I confirm that this research paper is a product of my own work and has not been submitted to any
other institution for the award of an educational qualification. Where other people’s work has
been used this has been duly acknowledged.
Name:………………………………………….
Signature:…………………………………….
Date:…………………………………………..
ii
DEDICATION
This project is dedicated to my mum who has never stopped encouraging and advising me to aim
high since I was a little girl and most of all to the God almighty whom I trust, to him be the Glory.
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ACKNOWLEDGEMENTS
First and foremost praises and thanks to God, the Almighty, without his blessings of good health,
strength and wisdom this project wouldn't have been done successfully.
A debt of gratitude is also owed to my parents Mr and Mrs Singo for their love, prayers, care and
sacrifices for educating me and preparing me for my future. Without you none of this would
have been possible.
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LIST OF TABLES
Table 3.1: Breakdown of the sample of the study .................................................................... 16
Table 4.1:- Results of the Chi-square tests ............................................................................... 19
Table 4.2: Relationship between income and the level of savings and investment awareness
....................................................................................................................................................... 21
Table 4.3: Percentage of monthly savings of salaried class people studied ........................... 23
Table 4.4: Factors influencing the choice of savings and investment vehicles ...................... 24
Table 4.5: Objectives of savings and investment...................................................................... 25
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LIST OF FIGURES
Figure 4.1: Most Preferable Investment Options .......................................................................... 22
Figure 4.2: Level of Risk Involved in the Investment Schemes ................................................... 26
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ACCRONYMES AND ABBREVIATIONS
DSS
Decision Support Systems
EIS
Executive Support System
ERP
Enterprise Resource Planning Systems
ES
Expert Systems
ESS
Executive Support Systems
IT
Information Technology
MLTF
Money laundering and Terrorism Financing
MRA
Malawi Regulatory Authority
RI
Risk Index
SACCO
Savings and Credit Corporations
USA
United States of America
vii
ABSTRACT
Investment is any type of activity that is engaged in by the people who would like to save and grow
their funds. Investments can be made from their savings, loan or through equity. A variety of
different investment options are available among salaried people who are employed in various
sectors in the public and private spaces. Such investments include savings and fixed deposit
accounts with banks, mutual funds, real estate and equity. Investors are always investing their
money with different reasons and for different purposes and objectives. The aim of this study was
to analyze the savings and investment patterns of salaried people in Lilongwe City in Malawi. The
target population was 1000 salaried people in the civil service in the Ministry of Finance
headquarters, National Bank, Good Shepherd International School workers, and University staff
of one private University in Lilongwe. A sample of 200 respondents was drawn from this
population representing 10% in which a survey was conducted through the use of a questionnaire.
The analysis was done using Statistical Packages for Social Scientists (SPSS) in which descriptive
analysis was done using mean, standard deviation as well as graphs, charts and contingency tables.
The analysis found that salaried employees invest in banking services such as savings and fixed
deposit accounts, mutual funds, shares, life insurance, equity and real estate. Reasons why they
invest in those avenues include the need to gain. The respondents seem to be more aware about
the different investment avenues available in Malawi with Males having more awareness than
females.
The paper therefore recommends that the government of Malawi should intervene to make access
to loan facilities easier such as bank interest rates, and flex strict regulator measures. The reserve
bank and companies should engage in more financial literacy awareness to enable more of their
employees know about various options that are out there for potential investment as an additional
income stream of their salaries.
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TABLE OF CONTENTS
DECLARATION......................................................................................................................................... ii
DEDICATION............................................................................................................................................ iii
ACKNOWLEDGEMENTS ...................................................................................................................... iv
LIST OF TABLES ...................................................................................................................................... v
LIST OF FIGURES ................................................................................................................................... vi
ACCRONYMES AND ABBREVIATIONS ........................................................................................... vii
ABSTRACT .............................................................................................................................................. viii
TABLE OF CONTENTS .......................................................................................................................... ix
CHAPTER ONE ......................................................................................................................................... 2
INTRODUCTION....................................................................................................................................... 2
1.1
Introduction ................................................................................................................................. 2
1.2
Background to the study............................................................................................................. 2
1.3
Problem Statement...................................................................................................................... 3
1.4
The purpose of the study ............................................................................................................ 4
1.4.1. Main aim .................................................................................................................................... 4
1.4.2 Specific objectives ...................................................................................................................... 4
1.5
Significance of the study ............................................................................................................. 4
1.6
Key words used in the study....................................................................................................... 5
1.7 Chapter summary ............................................................................................................................. 5
CHAPTER TWO ........................................................................................................................................ 6
LITERATURE REVIEW .......................................................................................................................... 6
2.1
Introduction ................................................................................................................................. 6
2.2
Key concepts in savings and investments .................................................................................. 6
2.2.1
Key Differences between Savings and Investment ........................................................... 6
2.2.3 Forms of investments ................................................................................................................. 7
2.2 Saving Institutes ................................................................................................................................ 8
2.3
Theoretical Review....................................................................................................................... 8
2.3.1 The Life-Cycle Hypothesis (LCH) .......................................................................................... 8
2.2.3
Relative Income Hypothesis (RIH) .......................................................................................... 10
2.2.4 The Permanent Income Hypothesis (PIH) ........................................................................... 11
2.4 Empirical Review .......................................................................................................................... 11
2.4.1 Age and saving behaviour ....................................................................................................... 11
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2.4.2 Gender and saving and investment behaviour .................................................................... 12
2.4.3 Education level and saving and investment behaviour ....................................................... 12
2.3.4 Marital status and saving behaviour .................................................................................... 12
2.3.5 Income level and saving behaviour....................................................................................... 12
2.3.6 Work Experience and saving behaviour ................................................................................ 13
2.4 Conceptual framework ................................................................................................................. 13
CHAPTER THREE .................................................................................................................................. 15
METHODOLOGY ................................................................................................................................... 15
3.0
Introduction ............................................................................................................................... 15
3.1
Research Design ........................................................................................................................ 15
3.2
Area of study ............................................................................................................................. 15
3.3
Target Population ..................................................................................................................... 15
3.4 Sample Size and Sampling Procedures ......................................................................................... 16
Data collection ........................................................................................................................... 16
3.5
3.5.1
Research Instruments ....................................................................................................... 16
3.5.2
Data Collection Procedures .............................................................................................. 17
3.6 validity and reliability of the research instruments ..................................................................... 17
3.6.1 Reliability .................................................................................................................................. 17
3.6.2
3.7
Validity ............................................................................................................................... 17
Data Analysis and presentation ............................................................................................... 17
3.8 Ethical Considerations.................................................................................................................... 18
3.8 Chapter summary ........................................................................................................................... 18
CHAPTER FOUR..................................................................................................................................... 19
FINDINGS AND DISCUSSION .............................................................................................................. 19
4.1 Introduction ................................................................................................................................... 19
4.2 Demographic characteristics of respondents ................................................................................ 19
4.7 Challenges faced by salaried employees regarding savings and investments ............................ 25
4.8 Chapter summary ........................................................................................................................... 27
CHAPTER FIVE ...................................................................................................................................... 28
CONCLUSIONS AND RECOMMENDATIONS .................................................................................. 28
5.0 introduction ..................................................................................................................................... 28
5.1 Conclusions ...................................................................................................................................... 28
5.2 Recommendations ........................................................................................................................... 30
5.3 Areas for further study ................................................................................................................... 30
5.5 Chapter summary ........................................................................................................................... 31
x
REFERENCES ...................................................................................................................................... 32
xi
1
CHAPTER ONE
INTRODUCTION
1.1
Introduction
This chapter focuses on the preliminary issues of the research project. It discusses the problem has
necessitated the study, the background, the main and specific objectives of the study. The research
project is titled ‘an investigation of the savings and investment pattern of salaried people with
special focus on Lilongwe City in Malawi’. Specifically, the study would like to identify factors
that influence saving and investment decisions among salaried people in Lilongwe City, identify
the main saving and investment vehicles chosen by salaried people in Lilongwe City, establish the
pattern of saving and investment among salaried people in Lilongwe City and finally challenges
regarding saving and investing among salaried people in Lilongwe City. The chapter concludes
with a discussion of the significance of the study and the key terms that have been used in this
study.
1.2
Background to the study
Malawi is among the poorest countries in the world with a per capita income of the GDP of USD
210.00. The country is small in size (118,484 sq Kms) but has a large population of 14 Million
people which grows at the rate of between 2.8 to 3.2 % per annum. Though poor, the nation has
abundant natural resources including human resources and rich in agriculture. Nevertheless, for
over four decades since it became an independent state, Malawi has not developed as 60% of its
population lives below poverty line defined by the World Bank to mean those surviving on less
than USD1.00 per day Kusek et al (2004, p16).
There are several causes for Malawi’s underdevelopment but pertinent to this research study is the
country’s non-investment culture. Malawians lack frugality and have demonstrated the inability to
sustain savings so that up until now the banking sector laments the population’s low participation
in operating savings accounts. Government and private sector salaries are low. The private sector
is still struggling to assume its role as the engine for economic development and is unfortunately
known for mass retrenchments.
It is also noteworthy that Malawi like most developing countries has not established social security
scheme to help retirees and the unemployed as is the case in developed countries such as the UK,
where the jobless receive unemployment benefit. In this context it is a common occurrence that
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most Malawians live a miserable life after retiring even from a decent employment. For example
a high profile government official living a luxurious life, provided with all necessities such as a
car, a comfortable house with all bills taken care of are in most cases are unable to sustain their
standard of living once they retire.
Households struggle especially in cities and rural areas alike with the ever-increasing high cost of
living. Frequently the media pinpointed that low incomes constitute a major cause for non-saving
and investment culture in Malawi. Alex Nkosi quoted in the Daily Times of Thursday, September
20, 2012, argues that the cost of living is hitting unattainable heights. He unveils, the unwritten
jungle rule of ‘the survival of the fittest’ is slowly creeping to town as more statistics, this time
from the Centre for Social Concern (CfSC), clearly indicate that it will only be these with money
who will sustain living in the country’s four cities of Mzuzu, Zomba, Lilongwe and Blantyre,” He
discloses that the Centre’s basic needs basket survey results for August 2012 showed that Blantyre
became the most expensive city as a family of six required K81,363 to survive seconded by
Lilongwe at K79,286, Mzuzu at K71,798 and Zomba at K66, 787, all against the average of K53,
453 cost of living recorded during the same period last year.
Several policies have been framed by Government to help Malawians embrace a saving and
investment culture such as the MGDs (2017-2022) which has been renewed for another five years
to 2027, Malawi vision 2063. Other development policies (DEVPOL) such as Poverty Alleviation
Strategy Paper (PASP), Vision 2020, and Malawi Economic Growth Strategies (MEGS), have
come and gone making minimal, if not negligible, economic impact and totally failing to turnaround the non-investment culture among Malawians.
1.3
Problem Statement
Malawi’s underdevelopment can be attributed to many factors among which is the lack of savings
and investment from those that are in businesses and in employment. This trend is largely due to
lack of financial literacy among the populace. The Reserve Bank of Malawi observed that Malawi
has low score on financial literacy particulary among the youths as a result, wealth creation is only
left to a few people who are older and connot do much to improve the socio-economic outlook of
the country. Results of a 2017 survey on financial capability, for instance, show that, by age, the
highest literacy level was among those aged between 25 and 45 (10 percent) compared to 10 to 14
(2.2 percent), 15 to 19 (3.1 percent) and 20 to 24 (4.1 percent). Literature suggest that financial
literacy increases with age, education and experience; hence, the need for intensifying efforts
towards reaching out to the youths. Malawi Stock Exchange (MSE) indicates that the stock market,
3
as a provider of investment avenue, has also intensified efforts to bring the youth on board. It is
evident that the youths who constitute the largest population of the country and are in employment
are ignorant of the many streams of income, savings and investment avenues which can a vehicle
for financial growth and wealth creation.
1.4
The purpose of the study
In view of the foregoing, this study intends to evaluate the savings and investment patterns of those
in employment and receive salaries in the city of Lilongwe. It is anticipated that the study will
unearth the main saving and investment portfolios that most people working on a salary utilize,
the factors that influence the choice to save or/and invest and the challenges that these employees
face in the process
1.4.1. Main aim
The aim of the study is to investigate the saving and investment patterns of salaried people in
Lilongwe City in Malawi.
1.4.2 Specific objectives
i. Identify the main saving and investment vehicles chosen by salaried people in Lilongwe City.
ii.Identify factors that influence saving and investment decisions among salaried people in
Lilongwe City
iii. Determine challenges regarding saving and investing among salaried people in Lilongwe City.
1.5
Significance of the study
It is envisaged that the findings of the study will bring out the saving and investment mentality
among employees in various industries in Lilongwe city. The study will further establish different
avenues that employees use to save and invest and the reasons behind the choice of such investment
places. It is acknowledged that many factors come into play when it comes to decision making as
to where to save or, and invest by individuals. In view of that, this study will also help to bring the
understanding of some of these factors which motivate and drive people to save and invest or not.
These findings will enable key stakeholders such as the government through statutory cooperations such as The Malawi Research Bank, and other commercial banks and financial
institutions to come up with tailor made financial products that will meet the needs of the potential
clients who are people in various jobs. Furthermore, these financial institutions will be able to
understand some barriers that exist making it difficult for the workers to save or invest with them.
In so doing, they will come up with products that will circumvent such barriers.
4
1.6
Key words used in the study
Savings: Savings refers to the money that a person has left over after they subtract out their
consumer spending from their disposable income over a given time period
Investment: An investment is an asset or item accrued with the goal of generating income or
recognition
Salaried Employee: The respondents of this study were people who earn their money as salary,
popularly referred as salaried employees.
Salary: A regular payment by an employer to an employee for employment that is expressed either
monthly or annually, but is paid most commonly on a monthly basis, especially to white collar
workers, managers, directors and professionals.
Formal Organization: For the purpose of the study formal organizations are operationally defined
as government organizations, large private business and Non-Governmental Organizations
(NGOs). NGOs are organizations which are operated not-for-profit.
1.7 Chapter summary
The chapter has presented the introduction to the study in which the problem statement, main and
specific objectives have been discussed. Further the chapter has discussed the significance of the
research to underscore the relevance of the subject under investigation. The next chapter will focus
on the literature review.
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CHAPTER TWO
LITERATURE REVIEW
2.1
Introduction
This chapter presents the literature that has been reviewed for the study. The local and international
literature presented in this chapter focus on the savings and investment patterns utilized by salaried
workers in Lilongwe City in Malawi. Specifically, the study intends to identify the main saving
and investment vehicles chosen by salaried people in Lilongwe City, identify factors that influence
saving and investment decisions among salaried people in Lilongwe City and determine challenges
regarding saving and investing among salaried people in Lilongwe City.
2.2
Key concepts in savings and investments
The developing countries in world, like India face as seen the enormous task of finding sufficient
capital to utilize in their development efforts. Most of countries find it difficult at at stage to get
out of the vicious circle of poverty that is prevailing of low income, low saving, low investment,
low employment etc and the list goes on. With high capital output ratio, that is observed India
needs very high rates of investments that would take and make leap forward in her efforts continues
of attaining high levels of growth.
The major features that is seen in an investment are safety of principal amount, liquidity, income
and its stability, appreciation and lastly easy transferability. A different variety of investment
avenues in abundance and types are available such as shares, bank, companies, gold and silver,
real estate, life insurance, postal savings. All the investors invest who wish to invest, invest their
surplus money in the above mentioned avenues that are available based on their risk taking attitude
and capacity bearing.
2.2.1 Key Differences between Savings and Investment
The differences between savings and investment are explained in the following points:
1. Savings means to set keep aside a part of your earned income for future use. Investment is often
defined as the act of putting funds into a productive machinery or system that will grow the
investment, i.e. investing in such investment vehicles such as shares, which can reap money over
a period of time.
2. People often save money, to fulfil their unexpected and sudden expenses or urgent money
requirements. Conversely, investments are made or done to generate returns over the period so that
it can help in capital formation of an individual.
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3. With an investment, there is follows always a risk of losing money. Unlike savings, there are
comparatively fewer chances of the losing the hard-earned money.
4. Investment provides higher returns than savings, as there is a assured and nominal rate of interest
on savings. However, the investments in turn can earn money more than the invested amount, if
invested wisely.
5. You can have easily have access to your savings, anytime because they are highly liquid and
flexible, but in the case of investment you cannot have easy access to money as compared, because
the process of selling the investments and making liquid takes some time.
2.2.3 Forms of investments
There are a large number of investment instruments available today. The people have to choose
proper avenues among those available, depending upon their specific need, risk preference, and
return that are expected. Different Investment avenues can be broadly categories under the
following heads.
1.
Equity
2.
Debt
3.
Mutual Funds
4.
Corporate
5.
Debentures
6.
Company Fixed Deposits
7.
Fixed Deposits
8.
Post office Savings
9.
Public Provident Fund
10.
Real Estate
11.
Life Insurance
12.
Gold/Silver/Others
7
2.2 Saving Institutes
At this time, there are different types of saving system in the world. This is categorized into three
ways, and these are formal saving sector (saving and credit co-operatives(SACCOS), bank and
insurance companies), semi-formal saving sector (microfinance institutions (MFI)) and informal
saving sector (save at home, save at clubs, deposit collector, reciprocal lending, rotating savings
and credit association (ROSCA),accumulation savings and credit association (ASCAS) etc)
(Ziorklui and Barbee, 2003).Informal savings have different names in different countries.In
Ethiopia, the effective financial structure has 95% of the productive asset which is composed of
70-80% loan and 10-20% liquid investment and the remaining 5% is unproductive assets
composed of land, buildings and equipment.
On the other hand, 70-80% of credit union liability should be composed of members’ savings to
achieve financial independence. In order to finance non-performing assets, improve earnings and
absorb losses, members share capital and institutional capital should be greater or equal to 20%
and to 10% of total asset respectively. Rate of return and costs operating expense to total assets
ratio is set to be less than 10% and other return and costs to be greater or equal to market rate.
However, administrative cost should not be greater than 5% of the average total assets (Gebeyaw,
2008). In our country, there are different traditional financial systems which have long history and
paramount contribution to economic betterment and social wellbeing of the society. Traditional
institutions organized with a sense of cooperation and risk sharing has enabled Ethiopians to
experience saving and financial management within its cultural context."Eqqub", "Eddir",
"Mahiber" etc are some of the informal financial institutions that shaped the social bond and
interaction (Gebeyaw, 2008).
2.3
Theoretical Review
The problem of savings behaviour can be studied both at the micro and macro level and it has short
run and long run impact on the economy and well-being of the households. To explain the saving
and investment habits of salaried people, the following three theories are established. These are:
the Life Cycle Hypothesis by Ando and Modigliani (1963), the Relative Income Hypothesis by
Duesenberry (1949), and the Permanent Income Hypothesis by Friedman (1957).
2.3.1 The Life-Cycle Hypothesis (LCH)
The LCH is an economic theory that was developed by Franco Modigliani and his student Richard
Brumberg. The theory pertains to the investment and saving habits of people over the course of a
lifetime. LCH presumes that individuals base consumption on a constant percentage of their
8
anticipated life income. An example supporting the hypothesis is that when people earn a regular
income they save and invest for retirement rather than spending it all. This theory leads to
important and non-obvious predictions about the economy as a whole, that national saving depends
on the rate of growth of national income, not its level.
The level of wealth in the economy allows a simple relation to the length of the retirement span.
The life-cycle hypothesis remains an essential part of economists’ thinking. With population
growth, there are more young people than old, saving and investing people increase than nonsavers and non-investors, so that the total non-saver/investor of the old will be less than the total
saver/investor of the young, and there will be net positive saving/investment. If incomes are
growing, the young will be saving/investing on a larger scale than the old so that economic growth
causes positive saving, and the faster the growth, the higher the saving/investing rate.
So, saving/investing is much influenced by the rate of growth of total income. It is not much
influenced by population growth or growth in per capita incomes. Currently the topic of debate
shifted to the relationship between investment and saving and the age-structure of the population.
Cross-country regressions result regularly show that aggregate investment and saving rates are
lower if the elderly and children population is high. Predictions that are in accord with the lifecycle theory if saving takes place in middle-age when earnings are high, after the child-rearing
ages, but prior to retirement.
The life-cycle hypothesis provides a direct theoretical relationship between aging and
saving/investment behaviour (Modigliani & Brumberg 1954). The life-cycle hypothesis is agerelated consumer heterogeneity and the prediction that saving follows a hump-shaped pattern (that
is, high at middle age and low at young and old ages). The saving and investment profile across
age groups for different countries shows the obvious increase in savings for middle-age groups
compared to younger age people. The life-cycle pattern is not nearly so clear when it comes to the
middle-age and older age. Even now, almost all countries people age of sixty or older do save at a
lower interest rate than those in the immediately younger age groups. Research has shown that this
hypothesis is not problem-free when it comes to interpreting actual saving and investment habits.
Life-cycle investment and saving is not sufficient to account for the high level of aggregate wealth
in industrial economies (Kotlikoff & Summers, 1981). Elderly people invest and save or at least
do not save as much as predicted by the life-cycle hypothesis (Deaton & Paxson, 1994 & Poterba,
1995), and consumers appear to value( bequests)( (Menchik) and David, 1983).
9
2.2.3 Relative Income Hypothesis (RIH)
RIH is economic theory that is attributed to James Duesenberry, who investigated the implications
of this idea for consumption behavior in his book (1949) titled Income, Saving and the Theory of
Consumer Behavior. The theory states that the satisfaction (or utility) an individual derives from
a given consumption level depends on its relative magnitude in the society (e.g., relative to the
average consumption) rather than its absolute level. It is based on a postulate that has long been
acknowledged by psychologists and sociologists, namely that individuals care about status.
At the time when Duesenberry wrote his book the dominant theory of consumption was the one
developed by the English economist John Maynard Keynes, which was based on the hypothesis
that individuals consume a decreasing, and invest/save an increasing, percentage of their income
as their income increases. This was indeed the pattern observed in cross-sectional consumption
data, at a given point in time the rich in the population saved a higher fraction of their income than
the poor did. However, Keynesian theory was contradicted by another empirical regularity:
Aggregate saving and investment rate did not grow over time as aggregate income grew.
Keynes (1936) developed the absolute income hypothesis. The theory explains positive
relationship between absolute income and saving. Such proposition is supported by much
empirical evidence. This finding is consistent with the view that investment and saving rise after
income exceeds subsistence consumption. This finding challenges the recent revolution of
microfinance institutions to mobilize micro-saving from the poor. The implication of this finding
is for Financial Institutions to target the middle and high income groups for saving mobilization
and reduce the pressure to mobilize micro saving from the poor. Duessenberry argued that relative
income hypothesis could account for both the cross-sectional and time series evidence.
Duessenberry claimed that an individual’s utility index depended on the ratio of his or her
consumption to a weighted average of the consumption of the others. From this he drew two
conclusions: (1) aggregate investment and saving rate is independent of aggregate income, which
is consistent with the time series evidence; and (2) the propensity to save of an individual is an
increasing function of his or her percentile position in the income distribution, which is consistent
with the cross sectional evidence. Relative income hypothesis has also found some corroboration
from indirect macroeconomic evidence. One of these is the observation that higher growth rates
lead to higher investment and saving rates, which is inconsistent with the lifecycle/permanent income theory since the lifetime resources of an individual increases as growth rate increases.
10
2.2.4 The Permanent Income Hypothesis (PIH)
The PIH was formulated by the Nobel Prize winning economist Milton Friedman in 1957. The
hypothesis implies that changes in consumption behaviour are not predictable, because they are
based on individual expectations. This has broad implications concerning economic policy. Under
this theory, even if economic policies are successful in increasing income in the economy, the
policies may not kick off a multiplier effect from increased consumer spending. Rather, the theory
predicts there will not be an uptick in consumer spending until workers reform expectations about
their future incomes. A theory of consumer spending which states that people will spend money at
a level consistent with their expected long term average income. The level of expected long term
income then becomes thought of as the level of “permanent” income that can be safely spent. A
worker will save and invest only if his or her current income is higher than the anticipated level of
permanent income, in order to guard against future declines in income. PIH divides income into
permanent income and transitory income.
2.4 Empirical Review
There are recent studies that have been done on a large number of countries to identify the
determinants of savings and investment behaviour in pooled time series and cross-sectional data
(for example see Loayza, Schmidt-Hebbel & Serven, 2000; Elbadawi & Mwega, 2000; Aryeetey
& Udry, 2000; Sinha, 1998; Schmidt-Hebbel, Serven, & Solomano, 1996; Collins, 1991).
However, saving behaviour shows considerable variation across countries depending on their
socio-economic structure. In this section the variables that can affect saving behavior are
discussed.
2.4.1 Age and saving behaviour
Some research studies states that the higher the old aged population in the nation the lower is the
saving and investment rate in the economy (Bovenberg & Evant, 1990). Ashok, Kumar, and
Jagadeshwara (1985) found that savings was low for younger and old groups and high for middle
age groups. Aron et al. (2013) in their study found age as a significant and negative factor for the
saving behavior of households that the higher the age of households, the lower is the saving of the
households. However, a study by Rehman, Chaudry, Faridi and Bashir (2011) found insignificant
relationship between lower income group age and saving levels. Odoemenem, Ezihe, & Akerele
(2013) study also revealed that age composition did not have significant influence on saving.
11
2.4.2 Gender and saving and investment behaviour
There are some empirical studies in Netherlands by kalwij (2003), Canada by Gagnon, Gagnon,
and Khoury (2006), Uganda by Kiiza and Pederson (2002) and Ethiopia by Aron et al. (2013)
which revealed that female individuals had better saving and investment behaviour than males
because of the life developed style by the community and they are expected to cover the principal
household consumption and costs in any social interaction. Whereas empirical study in Philippines
by Bersales & Mapa (2006) showed that male individuals were better saver because female had
no power to control income even for their own income. According to study of Odoemenem et al.
(2013), sex had significant influence on saving whereas, Rehman, et al. (2011) found that female
to male ratio was insignificantly affect saving levels.
2.4.3 Education level and saving and investment behaviour
Education has been included as a proxy for human development which increases the human
productivity and capabilities, thereby increasing personal income as well as savings (Zhang,
Zhang, & Lee, 2003). This is the indirect positive effect of education on saving through increased
income. Aron et al. (2013) found a positive relationship between educational level and
saving/investment behaviour of salaried people. On the other hand, Kulikov, Paabut, and Staehr
(2007) found that education as a human wealth ensures employability and stability of income and,
hence, it can have negative impact on saving. Odoemenem et al. (2013) found that education level
did not have significant influence on saving.
2.3.4 Marital status and saving behaviour
Marriage is proxy for saving and investing performance since marriage is morally and socially
responsible for collective interest, it is important factor for financial planning. There are some
empirical studies done by Collins (1991) and Sinha (1998), Aron et al. (2013), which showed the
family value plays an important role in the saving behaviour of individuals and economic
development. The married households save more than singles due to their multiple source of
income. However, a study by Rehman, Bashir and Faridi (2011) found that marital status
insignificantly affect saving and investment levels.
2.3.5 Income level and saving behaviour
Aron et al., (2013) study showed that income level is a significant factor for the saving and
investment behavior of households. The study revealed that when the income level of households
increase the saving rate also increase by some percent. Similarly, Modngliani (1995) noted that for
12
poor and developing countries the investment ratio tends to raise with income, while in developed
countries there is no significant, systematic relationship between income and saving.
2.3.6 Work Experience and saving behaviour
The number of years of work experience is positively related to saving and investment pattern of
salaried people, because through their career people have dealt with numerous financial decisions,
and they can assumed to have greater realization of the importance of savings and investment. The
longer life expectancy can change life cycle behavior which leads to the longer working life and
possible higher saving for retirement (Sinha, 1998 and Mosk, 2010). Some empirical studies such
as Sinha (1998), Muradoglu and Taskin (1996) shows that employed people have consistent saving
because they have fear of work uncertainty in the future whereas other studies such as Mosk (2010)
show that the employed people have consistent investment and savings habits because of their
constant income. Therefore, work experience is directly affected by saving and investment
behaviour in terms of income certainty.
2.4 Conceptual framework
The conceptual framework below illustrates three main variables that the researcher assumes will
be interrelated in with the literature above. The first variables of the conceptual frame are
independent variable which includes; main investment and savings vehicles, challenges on
investment and savings and factors influencing investment and savings of salaried people in
Lilongwe City in Malawi. On the intervening variables the following have been involved
Government policies, Environmental factors and Change in technology policies and the dependent
variable is risk management. The dependent variable in this study is the savings and investment
patterns of salaried people in Lilongwe City. Figure 3.2 illustrates the conceptual framework below
13
Independent variable
Dependent variable s
Savings and investment
Investment vehicles
Savings and investment
patterns of salaried
employees
Factors influencing
investment and savings
Environmental factors
Change in technology
policies
Challenges to investment
and savings
Intervening Variables
Figure 2.1 Conceptual framework
This study focused on the savings and investment patterns of salaried people in Lilongwe City.
Figure 2.1 indicates relationship between the variables; investment vehicles/facilities, factors
influencing investments and savings as well as the challenges to investment and savings of salaried
employees in Lilongwe City. There are other factors called intervening variables indicated by
change in policies and environmental factors as well.
The researcher hypothesized that the independent variables would have a direct impact on the
investment patterns of the employees. Depending on the nature of the independent variables'
behavior, this might have a positive or negative impact. Because the employees do not operate in
isolation but in a global setting, it is assumed that other variable would also influence their savings
and investment patters as well. i.e. technological advancements as well as environmental factors
such as climate change and natural disasters.
2.5 Chapter summary
In summary, this chapter highlighted the conceptual and theoretical framework of the study. The
next chapter presents the research methods; which include research strategy, approach, philosophy
and population.
14
CHAPTER THREE
METHODOLOGY
3.0
Introduction
The chapter outlines the methodology that was used to collect and analyze data for the study. The
section indicates the research design, study population, sample size and sampling procedure, data
collection and analysis methods, validity of the instruments used, as well as reliability techniques.
3.1
Research Design
The study adopted a descriptive survey design in order to establish the savings and investment
preferences of salaried workers in Lilongwe City. A descriptive survey design is essential in the
preliminary and exploratory studies because it allowed the researcher to gather information,
summarize, present and interpret the results for the purpose of classification (Orodho, 2004). This
descriptive survey research study was intended to provide statistical information about the
recruitment methods and challenges encountered and the available viable information with regard
to . According to Best and Kahn (1992), descriptive research is designed to obtain information
concerning the current information or phenomenon to draw valid conclusion. This is because
descriptive research is detailed and suite the study since the practice covers a wider area and plays
a major role in performance according to the employees.
3.2
Area of study
The location of the study was Lilongwe City in Lilongwe District which is a capital city of Malawi.
This location was chosen because of a high number of employees who are in both the public and
the private labour sectors.
3.3
Target Population
The research study targeted the staff of the ministry of finance, representing the public sector and
the private sector consisted of workers from National Bank of Malawi, Good Shepherd
International School staff, Unicaf University and Telecoms Networks of Malawi, a
telecommunications company with a national coverage. The targeted population for the study was
200 employees as depicted in table 3.1 below.
15
Table 3.1: Breakdown of the sample of the study
Name of company
Ministry of Finance
TNM
UNICAF University
National Bank of Malawi
Good Shepherd
International School
Frequency
49
71
20
40
20
Percent (5)
24.5%
35.5%%
10%
20%
10%
200
100%
3.4 Sample Size and Sampling Procedures
In this study, sampling was done through simple random sampling implying that the sample was
selected basing on some preset reason. Simple random sampling was adopted for this study by use
of random numbers. To enable the researcher, generalize findings to the whole population, a total
of 200 employees were used. Statistically, in order for generalization to take place, a sample of at
least 10% to 30% must exist (Mugenda and Mugenda, 2003). This study targeted 10% of the
population in each category hence a sample of 200 employees of CRWB.
3.5
Data collection
3.5.1 Research Instruments
According to Johnson (2009) data collection is the process of gathering and measuring information
on variables of interest, in an established systematic fashion that enables one to answer stated
research questions, test hypotheses, and evaluate outcomes. The data collection component of
research is common to all fields of study including physical and social sciences, humanities,
business, etc. While methods vary by discipline, the emphasis on ensuring accurate and honest
collection remains the same.
The study collected primary and secondary data. Primary data was collected from respondents
using an anonymously filled questionnaire distributed to respondents whereby they were given
16
out to individuals who filled the forms and returned. The questionnaire was semi-structured
containing both closed and open-ended questions.
3.5.2 Data Collection Procedures
For the purpose of this research, and in order to achieve the objectives, both primary and secondary
data were used. The secondary data contributed towards background information, while primary
data was collected by administering the questionnaire. The researcher assured the respondents of
confidentiality of the information given. The researcher administered the questionnaire to the
sampled participants. The researcher gave adequate time to participants to respond to the
questionnaire.
3.6 validity and reliability of the research instruments
3.6.1 Reliability
This is the degree to which a particular measuring procedure gives similar results over a number
of repeated trials. To test reliability, test-retest method was used. This involved administering of
the same instrument twice to the same group of respondents. The second was administered after a
two-week period.
3.6.2 Validity
Validity is a degree to which a test measures what it purports to be measuring. The validity of
these instruments was achieved through submission of the draft to the experts/authority/ lecturers
to check its clarity and relevance. The validity of the research in this case was declared by the
research supervisor.
3.7
Data Analysis and presentation
The data collected was presented in both quantitative and qualitative form. The data was organized
according to objectives and research questions. Closed ended questions were assigned to each
category whereas for open ended question, the responses were listed and marks used to note those
which were identical. Counting was done to determine the frequency of each response and
percentage calculated. The findings were discussed based on objectives and research questions.
The collected data was first classified, and then tabulated. Descriptive statistics methods of mean
and averages was used to analyze the data.
17
The report was presented by use of tables, percentages. Charts for treatment of sample population were
for interpretation. Interpretation of the analysed data was on percentages by classification and
responses towards a particular aim of investigation.
3.8 Ethical Considerations
In this study, issues relating to the ethical conduct of research such as informed consent,
confidentiality, privacy and anonymity were upheld. The researcher made sure that, participants and
respondents were given full information on the purpose and objectives of the study in order for them
to make informed decisions as to whether to partake or not. Moreover, all information concerning the
identity and personality of respondents were treated with utmost confidentiality. Additionally, all
information gathered was used for the sole purpose of this research study.
3.8 Chapter summary
This chapter presented a research methodology that enabled the study to answer the research questions
regarding the savings and investment patterns of salaried people in Lilongwe City. The chapter further
discussed the choice and justification of the research design, sampling design and procedures, data
collection and analysis methods that were used in the study.
18
CHAPTER FOUR
FINDINGS AND DISCUSSION
4.1 Introduction
This chapter presents the findings and discussion of the results of the research titled ‘The savings and
investments pattern of salaried workers in Lilongwe City in Malawi.’ The findings illustrate the
dispositions of the respondents and relate them to the study, as well as the actual analysis of the
research objectives from the respondents’ answers to the questionnaire. The findings are presented
using descriptive statistics such as measures of central tendency, spread and summary visual
representations such as graphs and tables.
4.2 Demographic characteristics of respondents
Table 4.1 illustrates findings pertaining to demographics characteristics of the respondents and how
they influence the saving and investment culture among the respondents in Lilongwe city.
Table 4.1:- Results of the Chi-square tests
Explanatory
Category
Monthly Saving Rate
1–5
6–10
Female
29.2
37.5
Male
25.9
18–25
16–30
> 30
6.2
16.7
10.4
17.0
20.5
26.8
9.8
48.7
28.2
10.3
10.3
2.6
26 35
18.5
20.7
20.7
27.2
13.0
36–45
17.4
26.1
13.0
30.4
13.0
Over 45
50.0
16.7
0.0
33.3
0.0
Educational
1–12
50.0
25.0
25.0
0.0
0.0
Level
College Diploma
33.3
16.7
25.0
16.7
8.3
1st Degree
30.6
24.1
13.9
24.1
7.4
2nd Degree &
26.9
23.1
16.2
23.8
10.0
23.0
24.3
12.2
33.3
6.8
Variable
Gender
Age
11–15
Chi Squire
df
P-value
4
0.018*
12
0.026*
Value
11.942
23.185
12.308
12
0.421
4
0.048*
above
Field Study
Non-Business &
Economics
19
9.566
Business &
30.2
22.1
19.8
15.1
12.8
Single
29.3
18.3
17.1
55.3
50.0
Married
23.4
28.6
46.2
22.1
10.4
Below 1
55.6
16.7
5.6
22.2
0.0
1–5
30.0
30.0
16.0
14.0
10.0
6–10
20.0
21.7
20.0
26.7
11.7
11–15
0.0
22.2
27.8
27.8
22.2
Above 15
42.9
14.3
0.0
42.9
0.0
600 & below
80.0
20.0
0.0
0.0
0.0
601 – 3200
56.7
23.3
16.7
3.3
0.0
3201 – 7800
6.9
24.1
13.8
36.2
19.0
Above 7800
26.9
23.1
16.2
23.8
10.0
Economics
Marital Status
Experience
Income Level
5.344
8
0.720
16
0.014*
16
0.000
*
30.895
48.964
*Significant at 5%
level
Source: SPSS output from survey data
To analyses the relationship of demographic factors with saving and investment pattern among salaried
people, chi-square test was used. Results of the study revealed that there is strong evidence of a
relationship between gender and saving rate (chi-square = 11.942, df = 4, p = 0.018), between age and
saving rate (chi-square = 23.185, df = 12, p = 0.026), between field study and saving rate (chi-square
= 9.566, df = 4, p = 0.048), between working experience and saving rate (chi-square = 30.895, df = 16,
p = 0.014), and income level and saving rate of the respondents (chi-square = 48.964, df = 16, p =
0.000). Therefore, the researchers concluded that there are significant impacts of gender, age, field
study, working experiences as well as income level on saving and investment rate of the respondents.
However, there is no evidence of the relationship between educational level and saving rate (chi-square
= 12.308, df = 12, p = 0.421) and between marital status and saving rate (chi-square = 5.344, df = 8, p
= 0.720).
These results of the analyses show that majority of the salaried employees in Lilongwe City save and
invest money but at a lower rate. Low level of income and lack of incentives and encouragement from
financial institutions affects salaried employees not to save money from their gross monthly income.
The results are in line with Aron et al. (2013) that the cause of the poor saving and investment culture
identified in their study includes lack of appropriate saving and investment products, lack of incentives
to save, low income level, high level of debt, low interest rate, high inflation and others.
20
Logistic Regression model and chi-square test were used to determine the factors that affect investment
and saving decision and saving rate. Results of the study conclude that there is a significant impact of
field study as well as income level on saving decision of the salaried employees but the remaining
variables do not have impact on saving decisions. So, it is concluded that gender, age, field study,
experience and income have a strong relationship with saving rate of the respondents but educational
level as well as marital status do not have a strong relationship with saving rate of the respondents.
Table 4.2: Relationship between income and the level of savings and investment awareness
No.
Income Group
Awareness Unawareness Total
1.
Less Than Mk. 100000
1
2
3
2.
Mk. 100000 to Mk. 300000
4
7
11
3.
Mk. 300000 to Mk. 600000
24
5
29
4.
Mk. 600000 to Mk. 1000000
14
2
16
5.
Above Mk. 1000000
1
0
1
Total
44
16
60
The study analyzed the relationship between the level of income and savings and investment
awareness. Table 4.0 illustrates the findings. It can be concluded that there is a relation between the
level of income and the level of awareness of savings and investment vehicles. Those individuals with
higher salaries tend to be more aware of the savings and investment vehicles than those with lower
income. The study further established that this is due to the fact that those with higher income tend to
explore more on the opportunities for investment because they have the financial muscle to invest.
Those who receive lower pay, do not bother to explore because they look at themselves as not capable
of saving or invest.
21
4.3: Research objective 1: The main saving and investment vehicles preferred by salaried people
in Lilongwe City
Figure 4.1: Most Preferable Investment Options
70
60
50
40
30
20
10
0
49
13
22
33
40
36
05
8
14
2
Most Preferable Investment Options
(Source: Primary Data, 2022)
From figure 1 above, the respondents indicated various savings and investments vehicle they prefer.
The savings and investments include buying of shares (13%), Bank deposits (49%), Real estate (22%),
mutual funds (33%), metals (05%), insurance (36%), commodities (8%), tax-savings (14%), Debt
Market (40%) and others (2%). Following these findings, it can be seen that Bank deposits top the list,
indicating that the majority of the salaried workers prefer saving the money with banks than any other
type of savings and investments. The second type of investment mostly preferred by the workers is the
debt market. These include Savings and loans financial organizations such as SACCOs. Many
employees are part of different SACCOs established within the organizations both private and
government entities. These deposits are made as savings and in turn used as collateral for borrowing
funds (loans) which they can either pay back or utilize their savings to write off the loans when they
mature. Apart from depositing the money with the banks, are insurance especial life insurance. There
is a huge awareness of insurance since it is mandatory for citizens no wonder there is a huge uptake of
insurance products as a form of savings among the employees.
22
Table 4.3: Percentage of monthly savings of salaried class people studied
Saving Range
No. of Respondents
Percentage
10% to 20%
43
37%
21% to 30%
26
22%
31% to 40%
13
22%
41% to 50%
19
15%
Above 50%
3
5%
Total
100
100%
(Source: Primary Data, 2022)
Table 4.1. Illustrates the level of savings done by the workers that participated in the survey. As already
underscored in figure 4.1 above, majority of the majority of the employees save their funds either
through the banks or through the debt market the majority being the Savings and Loans Corporations
known as SACCOs, to that end, the table shows how much of the employees income is allocated to
such savings. It can be seen that the majority of the employees do not save a lot from their income.
43% of the employees save only 10-20% of their income. Those who save up to 40% of their income
are fewer not to mention those within 50% and above cohort which stands at 5%. This goes a long way
to show that the savings done by salaried workers is not substantive enough to help improve the socioeconomic status of the employees. As a matter of fact, the respondents further commented that they
have the desire to invest more but due to high inflation and the general high cost of living, they are
forced to save very little so as to allocate the other part of income to the daily household needs.
4.4. Objective 2: Factors influencing the selection of investment avenues
The study further wanted to find out more pertaining to factors that influence the choice of an
investment vehicle and the objective of the chosen investment by the respondents. The results are
presented in the subsequent tables 4.4 and 4.5 respectively
23
Table 4.4: Factors influencing the choice of savings and investment vehicles
Sr. No
Factors
No. of Respondents
Percentage
1.
Safety
45
26.34%
2.
Liquidity
30
14.63%
3.
Tax Saving
33
16.10%
4.
Diversification
23
11.22%
5.
Affordability
35
17.07%
6.
Simplicity
30
14.63%
Total
205
100%
(Source: Primary data, 2022)
From table 4.1, safety is the most motivating factor when it comes to choice of an investment by the
respondents. Safety in this context refers to protection of the funds from potential loss. 26.34% of the
respondents indicated that upon conducting due diligence on which investment to take, they consider
how safe their funds are going to be so as not to lose them. This decision is informed by the level of
risks any investment has. No wonder the majority opt to save with commercial banks first because they
are deemed highly secure despite being the poorest in terms of returns in form of interest. Secondly,
Liquidity is the second consideration when one wants to save or invest. This entails that once an
individual puts their money in the investment vehicle, the facility should enable the investor access
funds as soon as possible or as easy as possible. If a facility or an investment delivers on this aspect,
many people would opt to put their money in that investment or facility. Other factors include,
affordability, simplicity and tax-saving.
In addition to the factors, the respondents further indicated reasons for taking up and investment or a
financial facility either as a saving or as an investment. Among the objectives and goals individuals
save and invest, table 4.6 gives a snap-shot to that effect.
24
4.6 Objectives of the Investment
Table 4.5: Objectives of savings and investment
Sr. No
Factors
No. of Respondents
Percentage
1.
Future Security
54
26.38%
2.
Good Returns
49
24.87%
3.
Liquidity
22
10.95%
4.
Capital Appreciation
22
10.95%
5.
Tax Savings
29
14.43%
6.
Children Career
19
9.45%
7.
Other
6
2.99%
Total
201
100%
Figure 4.7, illustrates objectives indicated by the respondents as to the reason why they undertook
either a saving or investment facility. The most outstanding objective was to do with future security
(49%), seconded by good returns (49%) and then followed by liquidity, capital appreciation at (10.95%
and 10.95%) respectively. The majority of the respondents are driven by the need to secure their future
when they grow up, not only that but also their investments in particular are meant to generate
additional income to supplement their salaries. Most employees receive very little salaries which do
not carter for all the needs until the next salary and a good return on investment is a blessing. Once it
is established that an investment can accrue some income to top-up the monthly salary employees are
ready to explore the opportunity.
4.7 Challenges faced by salaried employees regarding savings and investments
In order to have an in-depth understanding of the topic under discussion, a further question on the
challenges faced by the respondents (salaried employees) when it comes to savings and investments,
the level of risk an investment facility carried was identified as a common challenge that affects savings
and investment patterns among the workers. Figure 4.2 summarizes the level of risk challenge.
25
Figure 4.2: Level of Risk Involved in the Investment Schemes
60
50
40
30
Very High
20
High
10
Moderate
Low
0
Very Low
Investment Options
Very High
High
Moderate
Low
Stock Market
81.67%
-
-
Bank Deposit
-
-
28.33%
-
-
Real Estate
-
-
38.33%
-
-
Mutual Fund
-
41.33%
-
-
-
Metals
-
-
40%
-
-
Insurance
-
-
55%
-
-
Commodity Market
60.33%
-
-
-
-
Tax-Saving Schemes
-
-
43.33%
-
-
Debt Market
-
35%
-
-
-
-
Very Low
-
With regard to risk, the stock market was deemed as an investment vehicle with a high level of risk
(81.6%), followed by Commodity Market at 60.33%. Other investments with high but not very high
according to respondents were mutual funds (45.33%), Debt market (35%). Bank deposits, real estates,
metals, insurance and tax- savings were regarded as investments with moderate to low risk. The
respondents went further to identify other challenges that affect their savings and investment decisions.
These include Low level of income and lack of incentives and encouragement from financial
institutions affects salaried employees not to save money from their gross monthly income. The results
are in line with Aron et al. (2013) that the cause of the poor saving and investment culture identified
in their study includes lack of appropriate saving and investment products, lack of incentives to save,
low income level, high level of debt, low interest rate, high inflation and others.
26
4.8 Chapter summary
The chapter has presented the findings of the study based on the three objectives highlighted in chapter
one. The chapter went further to discuss the findings in comparison to previous literature that was
reviewed in chapter three. The next chapter presents the conclusion of the study by discussing the main
conclusions of the study and the recommendations as well as areas for future research.
27
CHAPTER FIVE
CONCLUSIONS AND RECOMMENDATIONS
5.0 introduction
This chapter presents the conclusions and recommendations from the findings discussed and analyzed
in chapter four. These conclusions and recommendations are based on the responses from the
respondents that were involved in this research.
5.1 Conclusions
The study findings have come to several conclusions in relation to the research objectives and questions
of the study. First and foremost, there is strong evidence of a relationship between gender and saving
and investment rate, between age and saving and investment rate, between one’s field of education and
investment saving rate, between working experience and investment and saving rate, as well as income
level and saving and investment patterns of the salaried employees in Lilongwe City. Therefore, the
study concludes that there are significant impacts of gender, age, field of study, working experiences
as well as income level on saving and investment rate of the respondents. However, there is no evidence
of the relationship between educational level and saving rate.
These results of the analyses show that majority of the salaried employees in Lilongwe City save and
invest money but at a lower rate. Low level of income and lack of incentives and encouragement from
financial institutions affects salaried employees not to save money from their gross monthly income.
The results are in line with Aron et al. (2013) that the cause of the poor saving and investment culture
identified in their study includes lack of appropriate saving and investment products, lack of incentives
to save, low income level, high level of debt, low interest rate, high inflation and others.
Results of the study conclude that there is a significant impact of field of study as well as income level
on saving decision of the salaried employees but the remaining variables do not have impact on saving
decisions. So, it is concluded that gender, age, field study, experience and income have a strong
relationship with saving rate of the respondents but educational level as well as marital status do not
have a strong relationship with saving rate of the respondents.
With regard to factors that influence investment and savings decisions among salaried people in
Lilongwe City, safety is the most motivating factor when it comes to choice of an investment by the
respondents. Safety in this context refers to protection of the funds from potential loss. Majority of the
respondents indicated that upon conducting due diligence on which investment to take, they consider
how safe their funds are going to be so as not to lose them. This decision is informed by the level of
28
risks any investment has. No wonder the majority opt to save with commercial banks first because they
are deemed highly secure despite being the poorest in terms of returns in form of interest. Secondly,
Liquidity is the second consideration when one wants to save or invest. This entails that once an
individual puts their money in the investment vehicle, the facility should enable the investor access
funds as soon as possible or as easy as possible. If a facility or an investment delivers on this aspect,
many people would opt to put their money in that investment or facility. Other factors include,
affordability, simplicity and tax-saving.
In addition to the factors, the respondents further indicated reasons or objectives for taking up and
investment or a financial facility either as a saving or as an investment. The most outstanding objective
was to do with future security, seconded by good returns in investment and then followed by liquidity,
capital appreciation at respectively. The majority of the respondents are driven by the need to secure
their future when they grow up, not only that but also their investments in particular are meant to
generate additional income to supplement their salaries. Most employees receive very little salaries
which do not carter for all the needs until the next salary and a good return on investment is a blessing.
Once it is established that an investment can accrue some income to top-up the monthly salary
employees are ready to explore the opportunity.
The study has also established a number of investment and saving vehicles commonly preferred by the
respondents. These include buying of shares, Bank deposits, real estate, mutual funds, metals,
insurance, commodities tax-savings, Debt Market and others. Following these findings, it can be
concluded that Bank deposits top the list, indicating that the majority of the salaried workers prefer
saving the money with banks than any other type of savings and investments. The second type of
investment mostly preferred by the workers is the debt market. These include Savings and loans
financial organizations such as SACCOs. Many employees are part of different SACCOs established
within the organizations both private and government entities. These deposits are made as savings and
in turn used as collateral for borrowing funds (loans) which they can either pay back or utilize their
savings to write off the loans when they mature. Apart from depositing the money with the banks, are
insurance especial life insurance. There is a huge awareness of insurance since it is mandatory for
citizens no wonder there is a huge uptake of insurance products as a form of savings among the
employees.
Lastly, the study has also concluded that the respondents face a number of challenges when it comes
to saving and investing. These challenges include lower levels of income and lack of incentives and
encouragement from financial institutions affects salaried employees not to save or invest money from
29
their gross monthly income. Lack of appropriate saving and investment products, lack of incentives to
save, low income level, high level of debt, low interest rate, high inflation and others. The perceived
risk associated with a particular investment or saving vehicle or facility also poses a challenge for
potential investors and contributes to low investment uptake by the employees understudy.
5.2 Recommendations
To increase the saving and investment habits of the salaried employees in Lilongwe City, the following
recommendations should be implemented by the concerned bodies:
1. Since the field of study of the respondents has been identified in this study as a factor that affect
saving and investment decision and saving rate, government and financial institutions should promote
the culture of saving and investment through financial literacy. Because, there is a growing recognition
of the importance of financial education as it relates to saving (Greenwald, Grinstein-Weiss, Zhan, &
Sherraden, 2001; Gill, 2004). Therefore, the responsible bodies such as the reserve bank of Malawi
should have to create a wide range of awareness in urban and rural areas by providing financial
education and training relating to investing, saving and finance. These programs can increase the
attitude of the societies towards investing and saving culture.
2. Responsible bodies should implement forced saving and stabilize the regular income of the society
and reduce inflation to have real saving rate among employees.
3. Banks should encourage and increase the saving incentives and introduce financial products that
are able to mobilize funds. In addition to the newly introduced saving instrument such as the selling of
Government Bonds, the regulatory body such as the Reserve Bank of Malawi and other private
commercial banks and public financial institutions should introduce additional new savings and
investment instruments that are able to stimulate the investment and saving habits of individuals.
4. It is also required to further strengthening and expanding financial institutions like banks,
strengthening government and private employees’ social security scheme, strengthening saving for
housing program and saving for investment equipment schemes.
5.3 Areas for further study
 A similar studies can be done by involving more companies in order to compare the findings
with the findings of this study. The survey would shed more light than just a case of selected
companies in the industry within Lilongwe City.
30
 Since the target population was Lilongwe City further studies can potentially extend the target
population to carter for either the whole country or merely a larger scope such as the Southern
Region of Malawi.
 Finally, a similar study could be carried out focusing on the savings and investment patterns of
households in the City which would accommodate households that have other forms of income
on top or without a salary. In this way, a holistic view of the investment and savings culture
would be achieved.
5.5 Chapter summary
In summary, the chapter has presented a brief conclusion on the research findings presented in line
with the research objectives. Recommendations and areas for further research have been made in the
same regard.
31
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36
APPENDICES
Appendix 1
Title: Investment pattern of salaried people.
Dear Respondent,
Sub: Request to fill the Questionnaire regarding research study.
I am final year student currently pursuing MBA at JDBIMS.I am conducting a research study on
“Investment pattern of salaried people”. This research is taken as a partial requirement for the
completion of my MBA.I seek your kind assistance in completing the attached questionnaire
which would take approximately 10 minutes of your valuable time. Your response will be treated
as “strictly confidential”
From which source you come to know about various investment options?
Broker
Bank Friend / relative
T.V./Newspaper other……………..(specify)
What is your saving objective?
Children’s education Retirement Home purchase children’s marriage
Healthcare
Income and capital preservation
Long term growth
Growth and income short term growth other In which sector
do you prefer to invest your money?
Private sector Government sector Public sector foreign sector Do you have a
formal budget for family expenditure?
Yes
No
37
Usually do you consult your friends and / or relatives before making an investment choice?
Every time
Often
Sometime
Never
Do you invest your money in share market?
Yes
No
What % of your income do you invest?
0 to 15 % 15 to 30% 30 to 50% What is the time period you
prefer to invest?
Short term (0 to 1years)
Midterm (1 to 5 years)
Long term (> 5 years)
Are you aware about different tax benefit of investing into mutual funds?
Yes
No
Have you ever invested in mutual funds of any company?
Yes
No
Do you know about different option of investment in mutual fund?
Yes
No
What is the most important criterion for you for selecting a particular investment option?
Past performance
Service
Promoters background
38
Any other
Are you aware of the following investment avenues?
Safe and low risk investment avenues
Saving account
YES
NO
YES
NO
Public provident fund
YES
NO
National saving certificate
YES
NO
Post office saving
YES
NO
YES
NO
Mutual funds
YES
NO
Life insurance
YES
NO
Debentures
YES
NO
Bonds
YES
NO
Equity share market
YES
NO
Commodity share market
YES
NO
FOREX market\
YES
NO
Real estate (Property)
YES
NO
Gold/ silver
YES
NO
Chit funds
YES
NO
YES
NO
YES
NO
Bank fixes deposits
Government securities
Moderate risk investment avenues
High risk investment avenues
Traditional investment avenues
Emerging invest avenues:
Virtual real state
Hedge funds
39
Private equity investments
YES
NO
YES
NO
Art and passion
Which of the of following factors which you consider before investing?
Safe and
Moderate
High Risk Traditional Emerging
low risk
investment
avenues
risk
investment
investment
investment
avenues
avenues
avenues
investment
avenues
Saving account
Bank fixes deposits
Public provident fund
National saving
certificate
Post office saving
Government securities
Mutual funds
Life insurance
Debentures
Bonds
Equity share market
Commodity share
market
FOREX market
40
Real estate (Property)
Gold/ silver
Chit funds
Virtual real state
Hedge funds
Private equity
investments
Art and passion
General information
Gender
: Male
Age
: 20-30
Female
31-40
41-50
50 above
Occupation: student Business service Profession other (specify)
Annual income of family: Below 1 L 2-3L 3-4 L 5 to 10 10 & above
Total family member: 2-5 6-8 8 and above Educational
qualification
Undergraduate Graduate
post graduate
other
41