Concept Paper

Submitted to Zanzibar University (ZU)

Faculty of the School of Business and Management

in Partial Fulfillment of the

Requirements for the Degree of

MASTERS OF BUSINESS ADMINISTRATION (MBA)

by

Khadija Kheir Juma

Zanzibar, United Republic of Tanzania

December 2022
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THE CONCEPT NOTE ON THE IMPACT OF FINANCIAL LITERACY ON
INVESTMENT BEHAVIOR IN ZANZIBAR.

02nd /12/2022

Background

Financial literacy is considered as an important skill to be possessed by the individuals in order

to enrich their financial well-being. Lack of financial literacy results in improper financial
decisions that are eventually destructive for the individuals as well as for the society (Tustin,
2010). The vital idea of information processing and decision-making is ‘Product Knowledge’
(Brucks, 1985; Raju et al., 1995). In the ambit of financial products, the product knowledge is
depicted by financial literacy (Huhmann and McQuitty, 2009). Various authors and researchers
have given different meaning for financial literacy. In the words of Mandell (2006), Financial
Literacy is what the individuals are supposed to be aware of to make vital financial decisions at
its best. According to Lusardi et al. (2011), financial literacy can be said as the knowledge
related to fundamentals of financial investments, concepts of inflation and risk diversification
and the ability of performing the interest rates calculations. According to Atkinson and Messy
(2011), financial literacy is the integration of attitude, awareness, skills, knowledge and behavior
needed to make efficient financial decisions and eventually make individuals achieve their
financial well-being.

Financial literacy is very highly related to the individuals as well as a country’s overall
development; it brings success aiming to bring overall well-being, socio-economic development
by means of informed decision making related to financial matters. Moreover, through financial
literacy the financial services’ quality will also be increased (The World Bank, 2009). The
significance and expediency of financial literacy spreads beyond generating the stronger
household balance sheets to making an effective financial system which ultimately makes the
optimal and effective resource allocation in a real economy. The 85% of Zanzibaris adults are
unaware of the basic financial concepts like compound interest, risk diversification and inflation.
Moreover, there is a huge gap between men and women in all countries in terms of financial
literacy (Standard & Poor study (2015). Financial literacy is positively correlated with various
investment decisions like savings, wealth accumulation and retirement planning (Lusardi and
Mitchell 2007, Hastings and Mitchell 2011, Van Rooij et al. 2012). Though there are studies in
the area of financial literacy, no study has been conducted exclusively in understanding the
results of various studies conducted on financial literacy around the world in a systematic way.
This research study will do a systematic literature review in order to understand the impacts of
financial literacy on investment behavior in Zanzibar.
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Needs for this Study

An analysis of the impacts of financial literacy on investment behavior will be useful to the
governments, policymakers, banking sector, and donors, since it will provide sufficient evidence
on whether financial literacy is increasing investment behavior in the country. This will influence
policy and decision making that is focused on reducing financial exclusion especially to those
with low financial literacy segment of the population. The study will reveal other factors that
affect households’ decision in choosing a financial strand and provide suggestions on what can
be done to ensure many people access formal financial services.

Objectives of the project

The study aimed at investigating the impacts of financial literacy on investment behavior of the
working population in Zanzibar, United Republic of Tanzania.

Research Questions

i. What is the impact of financial literacy on Investment Behavior in Zanzibar?

Methodology

This research uses quantitative methods with descriptive and verification approaches. The
method of collecting data in this study is using a survey method in which the sample and
population are taken through a questionnaire to collect data. This research is to identify, explore,
and analyze financial literacy in determining investment behavior. The data used in this study are
primary data obtained from the results of distributing questionnaires, as well as secondary data as
support in the form of documents, previous research, journals and books relevant to this research.

Specification of the Model will be used

The model specification is as follows:-
Y=α+β1X1+β2X2+β3X3+ε.
Where;
Y = Investment Behavior
α = Constant Term
β1= Beta Coefficients
X1= Financial Literacy
X2= Income
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Participants and sample

An approximate number of respondents required in the study are 300 people. This number is
obtained from formula given by Cochran(1963) using a confidence level of 95% , a precision
rate of ±5%, and variability of 50% (maximum variability in the population). The projects will
not consider the gender of the respondents. Both males and female respondents have an equal
chance of being chosen as respondents. Also, these 300 respondents will be chosen randomly
from a target population by using simple random sampling.

Intervention and research design

The study used descriptive research design in collecting the data from the respondent, Bhalta
Chargy (2003) defines descriptive research as a fact finding approach generating across sectional
study of the present situation. It ascertains and describes these characteristics of the variables of
interest in a situation. It is restricted to a fact finding and may result in the formation of
important principle of knowledge and solutions to significant problems. It goes beyond data
collection and involves, measures, classification, analysis and interpretation Kothari (2004).

The research project will be longitudinal study where the 300 respondents shall be followed for 2
months and 3 weeks’ time, during that period of time the financial literacy data will be collected.

Data Collection

The dataset will be collected by using semi-structured questionnaires will be taken for successive
period of 2 months and 3 weeks. Secondary data will also be used in this study. Secondary data
will be obtained from internet, journals, articles and newspapers

Data Analysis

The data will be analyzed by using several imputation techniques. After all primary data being
collected; will be classified in accordance with variables. Statistical package for social science
(SPSS) data analysis program will utilize to generate inferential and descriptive statistics; charts
and percentages from the respondents to establish the relative importance and weight for each
variable. MS excel spread sheet tools will utilize in presenting the quantitative data. The Simple
Regression Model will be used, whereby the variables of the interest here are financial literacy
which is the independent variable and investment behavior the dependent variable. Thus the
tentative hypothesis is that the higher the level of financial literacy results in better investment
behavior other things held constant.
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Research Timeline

The project is expected to be completed in 10 weeks with the following indicated as the activities
durations for every section of the research project:

Research Section Duration

The project is expected to be completed in 10 weeks with the following indicated as the activities
durations for every section of the research project:

1. Title 1 week
2. Introduction 1 week
3. Need for these Study 1 weeks
4. Background 1 weeks
5. Objectives 1 week
6. Research Questions and or Hypothesis 1 week
7. Research Methodology 1 weeks
8. Data analysis interpretations and discussions 1 weeks
9. Summary conclusion and recommendations 1 weeks
10. Reviewing work for final submission 1 weeks

Budget

Direct Cost Amount in (Tsh)

 Travel 150,000
 Printing 100,000
 Internet 20,000
 OCGS fee 50,000
 Food & Water 210,000

Total Project Cost 530,000

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