Académique Documents
Professionnel Documents
Culture Documents
BY
CIAMC/PEQP/J09/003
JULY, 2010
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DECLARATION
I hereby declare with academic honesty that this is an original piece of work that I
undertook. I further affirm that this work has never been submitted to any University or
Institution of learning in part or whole for the award of any academic or professional
qualification.
RAYMOND BUAMAH
(Student)
(Supervisor)
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ACKNOWLEDGEMENTS
I would like to express my heartfelt thanks first and foremost to the Almighty God for his
guidance and protection throughout the programme. I also want to acknowledge the
My wife Mrs. Grace Dzifa Buamah, my lovely daughter Miss Seyram Buamah and my
brother Mr. Stanley Buamah for the love, encouragement, support and understanding they
have for me throughout the period of the Study. Thank you very much.
Mr. Dodji M. Attiogbe, my supervisor and the Assistant Director, (ITS) Community Water
and Sanitation Agency, Volta for his knowledge contribution and guidance. I am so
grateful.
Mr. Harrison Afeku – District Manager, Gold Coast Securities Ghana Ltd. Hohoe, thank
you very much for supplying me with relevant data on the performance of Collective
Investment Schemes.
May God richly bless you and restore all that you have lost.
Thank you.
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LIST OF ABBREVIATIONS
Export Economy
Consultants
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CISCA - Collective Investment Schemes Control Act
MA - Municipal Assembly
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ABSTRACT OF THE STUDY
Collective Investment Schemes are becoming very popular investment vehicles in Ghana
because they are, among other things, transparent, liquid and easily accessible. The
growing investor knowledge, good market returns and its suitability for diversification which
minimises risk, also contributes to its popularity. The industry which consist of Mutual
Funds and Unit Trust Funds represent one of the fastest growing segments of the financial
industry in Ghana, as it allows for small and flexible investments by ordinary Ghanaians.
The research was conducted in the Ho Municipality where 200 respondents were sampled
ascertain the financial literacy status of Ghanaians with regards to the viability of Collective
Investment Schemes.
Various existing written materials on Collective Investment in Ghana, South Africa, and
Nigeria were critically reviewed to ascertain among other things, the contributions made to
The empirical study revealed that between January, 2005 and December, 2008, Collective
them made as much as 250.19 percent gain on investor’s capital. However, majority of
Ghanaians were not aware of the viability of the industry due to inadequate information on
the industry.
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TABLE OF CONTENT
PAGE
DECLARATION i
ACKNOWLEDGEMENTS ii
TABLE OF CONTENT vi
LIST OF TABLES x
LIST OF FIGURES xi
2.1 INTRODUCTION 27
3.0 INTRODUCTION 55
3.0.3 Assumption 64
4.1 INTRODUCTION 66
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CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION
5.2 CONCLUSION 99
BIBLIOGRAPHY 101
LIST OF TABLES
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each in Four (4) CIS over Four (4) Years (2005-2008) 76
LIST OF FIGURES
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Figure 4-7 Awareness of the Benefits of CIS 78
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CHAPTER ONE
INTRODUCTION
“Financial literacy is the ability to read, analyze, manage and communicate personal
financial conditions that affect material well being. It includes the ability to discern financial
choices, discuss money and financial issues without (or despite) discomfort, plan for the
future and respond competently to life events that affect everyday financial decisions,
including events in the general economy”. This is a portion of an address read to the
media at the launch of the 2008 Financial Literacy Week in Accra in September, 2008 by
Dr Sam Mensah, Technical Director at the Ministry of Finance and Economic Planning.
A survey conducted by the Ministry of Finance and Economic Planning (MoFEP) has
shown that about 80 per cent of Ghanaian adults do not have any form of financial
services such as savings, loans and insurance investment. The survey further indicated
that even in situations where consumers were aware of such financial services and
products, the knowledge often did not translate into positive investment practice. This may
be because those who heard the information may not have understood the importance of
investment. Was it because the financial jargons were too much for them to assimilate or
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was it because their income levels were too low? Alternatively, could there be other
reasons? These are some of the questions the research study will attempt to answers.
Investment as defined by Reilly and Brown (2003, p.5) is “the commitment of funds for a
period of time in order to derive future payments that will compensate the investor for (1)
the time the funds are committed, (2) the expected rate of inflation, and (3) the uncertainty
“… Then another servant came and said, ‘Sir, here is your mina; I have kept it laid away in
a piece of cloth. I was afraid of you because you are a hard man. …” His master replied,
‘Why then didn’t you put my money on deposit, so that when I came back, I could have
Andries Blake Walters (Master of Commerce, 2008) stated that in order to satisfy the
needs of the investor as enumerated by Reilly and Brown, the investor depends on an
investment vehicle that should amongst other things be able to maximize the investor’s
vehicle.
It is important to note that mutual funds/unit trusts like any other investments have varying
levels of risks associated with them. While certain types of funds are low-risk (such as
money market or T-bill funds), others (such as equity and bond funds) can change
significantly in price in response to the ups and downs of the economy, interest rates,
foreign exchange rates, and other economic variables. These fluctuations can cause the
value of your investment to decline. This is known as market risk, and no regulator can
protect you from this. By definition, market risk is any risk that influences a large number of
assets. It is also known as common, systematic, or undiversifiable risk. On the other hand,
any risk or uncertainty that affects at most a small number of assets is referred to as
formula for total risk of an investment as measured by the standard deviation of its return
Figure 1-1 below demonstrates an important point that there is a minimum level of risk that
“nondiversifiable risk”. The other part of the risk that can be eliminated by diversification is
Figure 1-1
Risk Diversification
Average annual
standard deviation
(%)
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Diversifiable
risk
Nondiversifiable
risk
Number of
stocks in
Source: Essentials of Corporate Finance Sixth portfolio
Edition, Stephen A Rose 2008
Katrina Lamb in her article “Measuring and Managing Investment Risk” defined
state that one of the most commonly used absolute risk metrics is standard
divided by the cost of the investment; the result is expressed as a percentage or a ratio.
Return on investment is a very popular metric because of its versatility and simplicity. That
is, if an investment does not have a positive ROI, or if there are other opportunities with a
higher ROI, then the investment should not be undertaken. www.investopedia.com (March
25, 2010)
The Risk-Return Trade-off principle states that; low levels of uncertainty (low risk) are
associated with low potential returns, whereas high levels of uncertainty (high risk) are
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associated with high potential returns. This simply means that money can render higher
profits only if it is subject to the possibility of being lost. The lesson from the Risk-Return
Trade-off principle is that investment decisions should not be made haphazardly without
The first collective investment scheme was formed in 1822 by King William the 1st of the
by another investment trust in Scotland in 1880. This blew over to the United States in the
In Ghana, the Security and Exchange Commission (SEC), a member of the International
Law 1993 (PNDCL 333) as a statutory body corporate with primary mission to protect
investors and maintain the integrity of the securities market. As part of its mandate, SEC
formalized the licenses of three (3) collective investment schemes, which had been
operating before the passage of the Unit Trusts and Mutual Funds Regulations, LI1695 in
2001. The three operating schemes were Epack, managed by Data Bank Assets
Management Services; HFC Unit Trust and HFC Real Estate Investment Trust , both
By the end of 2003, a total of six (6) collective investment schemes were licensed to
operate, out of these, only the initial three (3) were operational in 2003 with the rest
gearing up to begin operation in 2004. Total value of funds under the management of
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Epack grew by 613% from GH¢10,510.00 in 2002 to GH¢74,990.00 in 2003. Similarly, that
representing an increase of 64%. The fund value of the HFC Real Estate Investment Trust
also increased by 6%, from GH¢14,400.00 to ¢15,390.00 over the same period. These
bring the total net asset value of funds under the management of the three collective
increase of 134.2% (Security and Exchange Commission of Ghana, 2003 Annual Report).
2004 saw all the eight (8) collective investment schemes licensed in 2003 up and running.
The total amount of funds mobilized as at the end of 2004 was GH¢386,790.00 and total
net asset value under management grew from GH¢164,920.00 in 2003 to GH¢569,640.00
by the end of 2004, representing a percentage growth of 251.4%. (Security and Exchange
In 2006, the total net asset value under the management of nine (9) of the licensed
increase of 23.0% over that of 2005 (GH¢526,050.00). 51.0%of the outstanding total net
assets recorded for the year were invested in capital market instruments with the
remaining 49% in money market instruments. Total amount of funds mobilized in 2006
was GH¢275,230.00. This represents 40.67% of total net assets of the Collective
Investment Scheme industry as at December, 2006. The total number of share and unit
holders in the Collective Investment industry at the end of 2006 was 71,960 which
included both institutions and individuals. (Security and Exchange Commission of Ghana,
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By the end of 2008, there were seven (7) Mutual Funds and Four (4) Unit Trust Schemes
operating in the Collective Investment Scheme industry with a total net asset value of GH
for investors, compared to 21.30% industry average return in 2007. Table 1-1 below
outlines the performance of the various Collective Investment Schemes in Ghana in 2008:
Table 1-1
Scheme
Performan
Manager of Net Asset No. of ce
Scheme
MUTUAL FUNDS Value Sharehol (Annualiz
ders ed Yield
(GH¢)
/return
(%)
UNIT TRUSTS
The industry has since then provided vast opportunities for small investors to pool
resources to collectively participate in the capital market that hitherto was perceived as the
preserve of the rich and the elites in society. This has been attributed to the continuous
public education campaign mounted by the Security and Exchange Commission (SEC)
which is gradually breaking cultural and psychological barriers to savings and investment
in the country. As at the end of March 2010, there were nine (9) Mutual Funds, and six (6)
Table 1-2
A publication by the Security and Exchange Commission of Ghana on their web site
www.secghana.org/publications (March 25, 2010) titled “Getting started with Unit Trusts
& Mutual Funds, what you should know” described Collective Investment Schemes as
“pools of funds that are managed on behalf of investors by a professional money manager.
The manager uses the money to buy stocks, bonds, or other securities according to
specific investment objectives that have been established for the scheme. In return for
putting money into these funds, the investor receives shares or units that represent his/her
pro-rata share of the pool of fund assets. In return for administering the fund and
managing its investment portfolio, the fund manager charges a fee based on the value of
the fund’s assets”. Collective Investment Scheme can either be an Open-ended fund or a
Close-ended fund.
Open-ended fund: Funds which stand ready to repurchase the shares from the holders in
any quantity whenever the holder should desire to sell their shares. In addition, they sell
shares in any quantity to prospective investors at whatever time the investors determine.
In other words, open-ended funds stand ready to issue new shares or redeem outstanding
shares on a continuous basis. The number of shares of the fund therefore fluctuates as
determined by the net asset value per share of the fund, where net asset value per share
refers to the total value of the assets in the fund's portfolio, less any fund liabilities, divided
repurchase their shares from their shareholders when they decide to sell them. The
organized exchange in order to provide liquidity to the shareholders. These shares are
Mutual Funds and Unit Trusts are generally categorized according to their investment
objectives and their investment policies. Some funds focus on stocks, others on bonds,
and money market instruments. On the international scene, some funds invest primarily in
their countries, others invest internationally, and some specialize in specific countries.
4. Balanced Funds,
6. Specialty Funds,
7. Index Funds.
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These funds invest in short-term (less than one year to maturity) corporate and
government debt securities such as treasury bills, and corporate notes. Some money
market funds specialize in or invest only in Treasury Bills. These are generally very low
These funds invest in debt securities like bonds, debentures, and mortgages that pay
regular interest, or in corporate preferred shares that pay regular dividends. The goal,
These are funds which invest primarily in common shares (equities) of local or foreign
companies (if allowed), but may hold other assets as well. The goal is typically long-term
growth through capital appreciation of the assets held. Some growth funds focus on large
affected by the success or failure of specific investments and by the performance of the
stock markets.
Balanced Funds
These are funds that invest in a balanced portfolio of equities, long-term debt securities
and money market instruments with the objective of providing reasonable returns with
moderate risk.
These are funds that may be fixed income, growth, or balanced funds that invest in foreign
securities. These funds can offer investors international diversification and exposure to
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foreign companies, but are subject to risk associated with investing in foreign countries
Specialty Funds
These funds invest primarily in a specific geographical area (e.g. Africa) or in a specific
certain risk-level related to the market in which it specializes. Types of risks specialty
funds face include foreign exchange, political, geographical or sectorial (industry) risk.
Index Funds
These are funds that invest in a portfolio of securities selected to represent a specified
target index or benchmark, such as the GSE All-Share Index and Databank Stock Index.
The associated risk is directly related to the risk of the market that the index is measuring,
Collective Investment Schemes generally invest on the Stock Exchange. Due to this, they
are affected by major market influences such as global market conditions like price of
crude oil, political environment, macro economic variables, international economics, and
news about companies listed on the Stock Exchange. The figure below buttresses this
point.
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Figure 1-2
Major Market Influences
Unsystematic Influences
Systematic Influences
Major Market Influences
In Ghana, Collective Investment Schemes are categorized into four (4) main groups
namely; Money Market Fund, growth or Equity Funds, Balance Funds and Specialty Fund.
Table 1-3
1. Databank
1. Gold Fund 1. Compus 1. HFC Reit
Mutual Fund
2. SAS Furture Mutual Fund
2. HFC Unit Trusts
Fund 2. Databank
3. First Fund
3. Horizon Fund Balance Fund
4. Anidaso Fund 3. HFC Future
5. Epack Plan
6. HFC Equity 4. iFund
Fund
7. Capital Growth
Source: Self Developed (March,
Fund2010)
Law 1993 (PNDC Law 333) was amended. The new law, the Securities Industry
(Amendment) Act, 2000 Act 590 was passed to make fuller provisions for the operation
and regulation of unit trust and mutual fund; to provide for the settlement of disputes
arising under the Law; to revise penalties in the Law; to provide for consequential
amendments arising from the Constitution and to provide for related purposes. (The
Security Industry (Amendment) Act, 2000 Act 590 assented on 19th December, 2000)
The Act provides that, a company seeking to establish a fund shall appoint a manager of
the fund and the manager must be a company incorporated in Ghana and independent of
the fund company. The manager shall appoint a custodian or a trustee for the fund but the
manager and the custodian or the trustee shall be independent of each other. The
custodian or the trustee must be independent of the fund company and be a bank, an
All securities in Ghana are subject to the provisions of the Securities Industry
(Amendment) Act, 2000 Act 590 that is administered and enforced by the Securities and
Exchange Commission (SEC). The Act regulates Collective Investment Schemes in four
basic ways:
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Through Registration Requirements
Every person who establishes a scheme or manages the investment portfolio of a scheme
must be licensed by the Commission. Those who sell the shares/units are registered as
dealers. Those who make investment decisions for Collective Investment Schemes are
that each operator, dealer, or adviser has the basic qualifications required to act on behalf
Every scheme that intends to sell securities to the public must first file a prospectus with
the Commission and must give a summary disclosure document to each purchaser. The
information contained in these documents is intended to allow investors and their financial
advisers to make prudent and informed investment decisions. The mutual fund company
or the unit trust manager is accountable under the law for the statements made in the
prospectus. Once a fund has filed a prospectus it is also obliged to provide investors with
The Securities and Exchange Commission has also established regulations that govern
investment and marketing practices, the way in which fund assets must be held and the
types of incentives that can be paid to those who manage or sell the funds. Many dealers
who will sell shares/units of funds will also be members of the Ghana Stock Exchange
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(GSE) which is the industry's Self-Regulatory Organization (SRO) and both they and their
employees are subject to the rules, by-laws and policies that are established by the GSE.
Investment Schemes with a view of ensuring that they maintain proper standards of
conduct and acceptable practices. Licensed operators are obliged to submit financial and
operational reports periodically to the Commission. These reports are reviewed alongside
set standards and criteria to ensure that licensed operators continue to remain compliant
over the period of operation and not only at the time of first application of
Monitoring.
• Diversification
Investing in a number of different securities helps reduce the risk of investing. When
dozens of different securities, giving him/her instant diversification, at least within the
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type of securities held by the fund. A portfolio made up of shares from various
• Affordability
With many funds, the investor can begin buying shares/units with a relatively small
amount of money (e.g. about GH¢2.00 for the initial purchase). Some funds allow
investors to buy more shares on a regular basis with even smaller monthly
installments.
• Professional Management
investing money and who have the skills and resources to research many different
• Liquidity
Shares of open-end funds can be redeemed at any time at the Net Asset Value Per
• Flexibility
Many fund management companies administer several different funds. (e.g. money
market, fixed-income, growth, balanced and international funds) and allow the
investor to switch between funds within their ‘fund family’ at little or no charge.
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• Performance Monitoring
The Net Asset Value Per Share (NAVPS) or the bid and offer prices of open ended
funds are reported in the press and on many internet sites as pertains in many
his/her investment.
Schemes:
• Costs
The fund manager’s remuneration is often taken directly from the fund assets as a fixed
• Lack of Choice
The investor can choose the type of fund to invest in but have no control over the choice of
Shareholders' perks and the right to attend the annual general meetings of companies in
which their funds had been invested by the fund managers and vote on important matters
the Regulatory Agencies such as the Security and Exchange Commission (SEC) and the
with industry associations and financial institutions to raise the awareness of the range of
products and services available to consumers to help them better understand and manage
their finances. At the launch of the first Financial Literacy Week celebration in Accra in
September 2008, Dr Sam Mensah, Technical Director at the Ministry of Finance and
Economic Planning said “as Ghana’s financial system becomes increasingly complex,
there is a mounting concern that the burden of understanding and managing the details of
financial products and services will be too much for most Ghanaians, especially the low-
Dr Mensah further noted that, even in more financially developed markets, research has
shown that a large percentage of people of all ages, incomes and education levels lack the
basic financial knowledge and skills to ensure long-term stability for themselves and their
The Collective Investment Scheme industry in Ghana is gaining recognition due to the
remarkable value they had added to investor’s capital as discussed earlier. However, most
2. The investment information available are full of financial jargons that are beyond the
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3. The investment information are limited to very few category of people living in the
4. Low income levels of most Ghanaians leading to low marginal propensity to save.
Despite the effort of Government to increase the financial literacy level of Ghanaians by
instituting the celebration of the Financial Literacy Week, it has been realised that in
Ghana, less than 20% of households benefit from access to formal financial services such
as savings, loans, insurance, and investment. A survey conducted in 2009 by the United
States Agency for International Development (USAID), Trade and Investment Programme
for a Competitive Export Economy (TIPCEE), and the Ministry of Finance and Economic
Planning (MoFEP) has revealed that the level of knowledge about financial institutions,
their services, and products among urban and rural Ghanaian adults is low and that even
when consumers are knowledgeable, knowledge often does not translate into behavioural
change. This was contained in a speech delivered by Hon. Seth Terkper, Deputy Minister
of Finance and Economic Planning at the pre-conference of “Making Finance Work for
The keynote address delivered by His Excellency John Mahama, Vice President of the
Republic of Ghana at the opening of the 2009 Financial Literacy Week celebration on
September 28, 2009 supported this assertion. The address stated that in 2006 and 2009,
the Ministry of Finance and Economic Planning sponsored two nationwide surveys to
confirm the status of financial literacy among urban and rural adults. The main aims were
to:
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1. Determine the extent to which personal financial literacy diverges among urban and
rural adults;
2. Determine why some adults in these two groups are more knowledgeable than
others; and
The address noted further that “while the financial sector at home keeps expanding, the
surveys revealed several gaps in knowledge of financial issues, institutions and products
among Ghanaians. One particular element is the poor awareness among young people in
the 18 to 30 age-bracket”.
The purpose of the study was to conduct a performance comparative analysis between
Collective Investment Schemes in Ghana to determine the value that had been added to
investor’s capital, determine the financial literacy status of Ghanaians, exposed a lot of
Ghanaians.
I. How did the following Collective Investment Schemes that were fully operational
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Mfund operated by Databank Assets Management Ltd.
II. What is the financial literacy status of Ghanaians both in the urban and rural areas
Schemes?
VI. What are the factors militating against regular investment in Collective Investment
Schemes (CIS)?
i. To conduct a performance comparative analysis for four (4) CIS that were licensed
by the SEC to operate between January, 2005 and December, 2008 (4 years) to
determine the veracity of the success stories of these CIS. This is because most of
ii. To research into the level of financial literacy of Ghanaians with reference to CIS.
iv. To contribute towards government’s efforts in increasing the financial literacy level
of Ghanaians.
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1.3 RATIONALE OF THE STUDY
The study had been necessitated by the realization that apart from Ghana’s Financial
Sector Strategic Plan (FINSSP) which has given recognition to the need to improve the
financial literacy of Ghanaians in order to accelerate savings and investment culture in the
country, the Government of Ghana and her development partners have also identified
financial literacy as an area that can help strengthen individuals, households and nations.
It is expected that this research material would serve as a resourceful literature for the
to the benefit of the investing public and also, contributed towards the achievement of the
The research reviewed relevant existing literature on the nature, concept, and regulations
are projected. The chapter further stated the problem statement, purpose of the study,
rationale of the study, research methodology, scope of the study and anticipated research
limitations.
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Chapter two had been dedicated to a critical review of relevant existing literature on
financial literacy, Collective Investment Schemes, their nature, concept, and regulations
Chapter three described how the research had been undertaken, including the theoretical
and philosophical assumptions upon which the research is based and the implications of
these for the methods adopted in sample selection and size, data collection and
instrumentation. Issues on quality control and ethical requirements had also been
Chapter four analyzed with tables, diagrams and statistical analytical tools all data
Chapter five drew conclusion on the findings and summarized the results.
Recommendations for prudent investment practices and for promoting financial literacy
were made.
Actual performance figures of four (4) CIS out of the eight (8) that were licensed by the
SEC in 2004 and were fully operational in 2005 were collected from Gold Coast Securities
Limited (managers of Gold Fund) and used to conduct a comparative analysis. The
Internet and the World Wide Web served as additional source of secondary data. To also
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interview questionnaires were developed and administered by two (2) trained National
ethical clearance was sought from all respondents before data collection commenced in
To determine the financial literacy level of Ghanaians regarding CIS, a total of 200 people
out of a population of 200,000 living within the Ho Municipality as per the 2000 Population
and Housing Census were sampled. Out of the 200 sampled units, 100 were from the rural
areas and the rest 100 from the urban centre. All these were to ensure a free and fare
Simple random sampling technique was used to sample 200 people in the Ho Municipality.
The Ho Municipality was used as the case study area. It is one of the eighteen (18) local
authorities in the Volta Region of Ghana with a total population of 200,000 made up of
73,893 representing 37% as urban duelers and 126,107 representing 63% for the rural
The Municipality is located between Latitudes 6° 20”N and 6° 55”N and Longitudes 0°
12”E and 0° 53” E and covers an area of 2.660 sq km. The Municipality shares boundaries
with the Adaklu-Anyigbe District to the South, Hohoe Municipal to the North, South-Dayi
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District to the West and the Republic of Togo to the East. The Ho Municipality is also
i. Some respondents were not willing to give out important information for the study.
They were of the view that issues concerning their investment are their private
ii. The instituted bureaucratic system at various offices hindered secondary data
collection. This resulted into not being able to lay hands on all the relevant
secondary data.
v. Inadequate funds and the need to complete the project within a specified time
vi. The research study was completed and submitted in July, 2010, a shot period for a
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CHAPTER TWO
LITERATURE REVIEW
2.1 INTRODUCTION
To understand the operations of Collective Investment Schemes, one needs to first of all
understand the basic underlying elements that made Collective Investment Schemes
viable investment vehicles. This chapter starts off with a theoretical background of
investment, the need for financial literacy and thereafter, a discussion on the theory of
fund managers and to protect investors are also discussed. The chapter then ended with
the impact of the emergence of Collective Investment Schemes in the United States of
The theory of investment has been with us since the days of the Bible. Matthew 25:14-
27 (New International Version) under the title “The Parable of the Talents” stated that “A
man going on a journey called his servants and entrusted his property to them. To one he
gave five talents of money, to another two talents, and to another one talent, each
according to his ability. Then he went on his journey. The man who had received the five
talents went at once, put his money to work, and gained five more. So also, the one with
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the two talents gained two more. However, the man who had received the one talent went
off dug a hole in the ground and hid his master's money.
After a long time the master of those servants returned and settled accounts with them.
The man who had received the five talents brought the other five. 'Master,' he said, 'you
His master replied, 'Well done, good and faithful servant! You have been faithful with a few
things; I will put you in charge of many things. Come and share your master's happiness!'
The man with the two talents also came. 'Master,' he said, 'you entrusted me with two
His master replied, well-done, good and faithful servant! You have been faithful with a few
things; I will put you in charge of many things. Come and share your master's happiness!
Then the man who had received the one talent came. 'Master,' he said, 'I knew that you
are a hard man, harvesting where you have not sown and gathering where you have not
scattered seed. So I was afraid and went out and hid your talent in the ground. See, here
His master replied, 'you wicked, lazy servant! So you knew that I harvest where I have not
sown and gather where I have not scattered seed? Well then, you should have put my
money on deposit with the bankers, so that when I returned I would have received it back
with interest”.
The Bible approves of investment as a prudent decision one can take because the
possibility of earning an interest on your investment is very high if the right investment
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decisions are made. Those who are scared of investment risk should save their money
with the bank, if not for anything, for safekeeping and interest. The Bible disagrees with
under the heading “It is a common phenomena nowadays to find investors looking
beyond…”, investment has been defined as the commitment of funds to one or more
assets that will be held over some future time period for return that is commensurate with
risk. The field of investments, therefore, involves the study of the investment process.
Investment is concerned with the management of an investor’s wealth, which is the sum of
The writer went further to state that there are two (2) main forms of investments; 1) Direct
Investment which involves an investor investing directly in financial assets in return for
dividends and / or interest and capital gains. In this case, the financial assets are owned
directly by the investor. 2) Indirect Investment involves buying and selling financial assets
of securities and are entitled to a pro rata share of the dividends, interest, and capital
gains generated. Shareholders also pay a pro rata share of the company’s expenses and
its management fee, which are deducted from the portfolio’s earnings as it flows back to
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In its 2009 budget, the Government of Canada announced its intention to establish a
national task force dedicated to the issue of financial literacy. The Government in June,
Force on Financial Literacy. In their report published in February, 2010 titled “Leveraging
Task Force reported that before beginning its mandate, they agreed on a common
meaning for the term “financial literacy” to guide its efforts and discussions with
Canadians. They looked at various definitions and terms that existed, and decided to
blend the key ideas into the following broad definition: “Financial literacy means having the
The Task Force went further to summarize the various parts of the definition for financial
literacy as follows:
knowledge, skills and confidence they have gained to make choices that are
“financial literacy is the understanding of money and financial products that people can
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apply to financial choices in order to make informed decisions about how to handle their
finances”.
Dr Sam Mensah, Technical Director at the Ministry of Finance and Economic Planning,
said in 2008 at the launch of the 2008 Financial Literacy Week celebration in Accra that
financial literacy is “the ability to read, analyze, manage and communicate personal
financial conditions that affect material well being”. Financial literacy he said includes the
ability to discern financial choices, discuss money and financial issues without (or despite)
discomfort, plan for the future and respond competently to life events that affect everyday
Schagen and Lines (1996) in a report to the National Foundation for Educational Research
in the United Kingdom as quoted by Dr Sam Mensah defined financial literacy as “the
ability to make informed judgments and to take effective decisions regarding the use and
management of money.”
The financially-literate should not only have the ability to understand key concepts in
and a range of analytical skills, but also possess a facilitating attitude to the effective and
Alan Greenspan (2002) stated that financial literacy helps to inculcate in individuals the
financial knowledge necessary to create household budget, initiate savings plan, and
make strategic investment decisions. He further explained that such financial planning can
help families meet their short term obligations and maximize their long term well being.
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M. Cohen & J Sebstad (2003) explained that “broadly speaking, the purpose of financial
education is to:
3) Learn basic skills related to earning, spending, budgeting, saving, borrowing, and
investing money;
4) Help people set financial goals and optimize their financial options; and
5) Help people manage cash flow, build assets, manage risks, and plan ahead for the
future.
Ernest Senyo Dzandu (2009) noted that the importance of financial literacy cannot be
literacy in Ghana. He stated that issues of financial literacy are assuming great importance
resources.
Mr. Dzandu advised that due to the emergence of fraudsters disguising themselves as
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defrauding unsuspected individuals, Ghanaians need to possess the ability to understand,
Masahudu Ankiilu Kunateh stated in the Ghanaian Chronicle published on Thursday, 20th
August 2009 that a survey, undertaken by the United States Agency for International
Development (USAID), the Trade and Investment Programme for a Competitive Export
Economy (TIPCEE), and the Ministry of Finance and Economic Planning (MoFEP) has
revealed that, adults in Northern Ghana have the lowest financial literacy in the country.
According to the survey, the national mean score of the country in 2008 was 44%,
compared with 57% as the score for the 2007 Urban Financial Literacy Survey.
The research considered the southern belt to comprise the Eastern, Volta, Western,
Greater Accra and Central regions, the middle belt involving the Brong Ahafo and Ashanti
regions, and the Northern belt involving Upper East and Upper West regions. The
research findings indicated a returned total financial knowledge scores of 51, 44 and 38%
respectively, establishing the northern belt as the least financial knowledgeable belt in
Ghana.
The study was conducted by CDC Consult Ltd., with the specific objectives of providing
evidence of the extent of personal financial literacy among rural adults, examining why
some rural adults were relatively more knowledgeable than others, and finding out how an
issues.
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Presenting the findings of the second baseline survey on Rural Financial Literacy at a
stakeholders' forum in Accra on August 19, 2009, the Team Leader of the CDC Consult
Limited, Mr. Ernest Dzandu, further revealed that on general basic financial knowledge,
the southern, middle and northern belts returned mean scores of 63, 57 and 51%
respectively.
Two regions in each of the three geographical belts were selected, and the selection was
based on the regions with the highest rural population, except the middle belt, which has
two regions. Mr. Dzandu indicated that in the southern belt, a total of 630 people were
sampled, whilst 354 and 316 were also sampled in the middle and northern belts
respectively. In all, a total of 1,303 rural adults, aged 18 years and above, were
instrument.
disclosed that a number of people interviewed, recorded a mean score of 0.45 on a scale
of zero to one, saying, “Commercial and rural banks are the well known financial
Mr. Dzandu intimated that the well-known banking services and products known among
adults in rural Ghana, included money transfer, savings and current accounts,
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representing 74, 37 and 31% accordingly. He added that the middle, southern and
northern belts returned financial institutions, services, and products, scores of 53, 45, and
37% respectively. The results underline the disparity between the availability of financial
institutions, services, and products in the northern belt, compared with the other belts.
Mr. Dzandu in his recommendation stated that, “There is the need to attach importance to
rural financial literacy, especially with the ongoing changes on the financial landscape,
further shrinking of small businesses, and the emergence of alternative financial service
providers, including fraudsters, who bolt away with meager savings of their “clients”.
Another research conducted by Edward AI-Hussainy (2008) buttress this point by stating
The first closed-end investment company was formed in 1822 by King William the 1st of the
by another investment trust in Scotland in 1880. This blew over to the United States in the
1890’s. The first open-ended mutual fund was the Massachusetts Investor’s trust
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M.M. Ibrahim (2005) reported that, Mutual Funds or Unit/Investment Trusts as they are
known in different jurisdictions are financial intermediaries that pool the resources of many
small investors by selling shares to them and use the proceeds to buy securities of quoted
firms. Through the asset transformation process of issuing shares in small denominations
and buying large blocks of securities, mutual funds can take advantage of volume
securities. This allows the small investor to obtain the benefits of lower transactions costs
securities held.
Andries Blake Walters (2008) also reported that a Collective Investment Scheme is a
regulated pooled investment fund where the underlying investors own units in a shared
portfolio. He noted that collective investments have become a very popular investment
vehicle in South Africa because it is, among other things, transparent, liquid and easily
accessible. He went further to state that the growing investor knowledge, good market
returns and suitability for automatic diversification which minimizes risk also contribute to
the popularity of collective investment schemes. Blake was emphatic that in South Africa,
the Collective Investment Schemes Control Act (CISCA) of 2002 defined collective
which members of the public are invited or permitted to invest money or other assets in a
(a) two or more investors contribute money or other assets to and hold a
Governance for Collective Investment Schemes” published in February, 2005 stated that
the goal of investor protection relates to, among other things, the prevention of misleading,
manipulative and fraudulent practices. It is also related to the prevention of loss due to
malfeasance or negligence on the part of those that organize and operate the CIS. The
general goal is not to protect investors from suffering any market-driven loss, but rather to
enable investors to understand the risks that pertain to investments in specific CIS.
In Ghana, Stephen Asante Biney (2006) stated that Ghana derived its corporate
governance regulations from the Ghana Companies code of 1963, Ghana Stock Exchange
Listing Regulations (GSE, 1993), Security Industry Law of 1993, (PNDC LAW, 333),
amended in 2000 (Security and Exchange Commission, 2000) and finally the code of
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disclosures that meet international standards. The Security Industry Law was amended to
In Ghana, for mutual fund to qualify for licensing, the first step is the incorporation of a
Mutual Fund Company under the Companies Code 1963 (Act 197) as a public limited
liability company with the sole aim of holding and managing portfolio of securities and
other financial assets. After the incorporation of the company, an application is made by
the company to the Security and Exchange Commission for a license to operate the fund.
The Commission requires the following documents to be submitted to it for its review for
i. Company Regulation
In terms of unit trust, an application must be made to the Securities and Exchange
for a license to establish a unit trust. The SEC requires the following documents to be
submitted to it for its review for the issue of a license to operate a unit trust:
i. Management Agreement
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It is also stated that all securities in Ghana are subject to securities laws that are
administered and enforced by the Securities and Exchange Commission (SEC). The
securities laws regulate Collective Investment Schemes in four basic ways. Through:
1) Licensing Requirements,
2) Prospectus Requirements,
2010).
Every person who establishes a scheme or manages the investment portfolio of a scheme
must be registered (licensed) by the Commission. Those who sell the shares/units are
registered as dealers. Those who make investment decisions for collective investment
Commission to ensure that each operator, dealer, or adviser has the basic qualifications
Every scheme that intends to sell securities to the public must first file a prospectus with
the Commission and must give a summary disclosure document to each purchaser. The
information contained in these documents is intended to allow investors and their financial
advisers to make prudent and informed investment decisions. The mutual fund company
or the unit trust manager is accountable under the law for the statements made in the
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prospectus. Once a fund has filed a prospectus it is also obliged to provide investors with
The Securities and Exchange Commission has also established regulations that govern
investment and marketing practices, the way in which fund assets must be held and the
types of incentives that can be paid to those who manage or sell the funds. Many dealers
who will sell shares/units of funds will also be members of the Ghana Stock Exchange
(GSE) which is the industry's Self-Regulatory Organization (SRO) and both they and their
employees are subject to the rules, by-laws and policies that are established by the GSE.
investment schemes with a view of ensuring that they maintain proper standards of
conduct and acceptable practices. Licensed operators are obliged to submit financial and
operational reports periodically to the Commission. These reports are reviewed alongside
set standards and criteria to ensure that licensed operators continue to remain compliant
over the period of operation and not only at the time of first application of
In Nigeria as reported by M.M. Ibrahim (2005), Section 8(g) of the Investments and
Securities Act No.45 of 1999 empower the Securities and Exchange Commission (SEC) to
among other functions, register and regulate the workings of all collective Investment
Schemes. The rules and regulations emanating from this Act deals with the following
important matters:
The Mutual funds have to be registered as a trust or a trust company in accordance with
the provisions of the Trustees Act, Investment and Securities Act and the Companies and
Allied Matters Act 1990 as amended. The assets of the mutual funds have to be managed
by an Asset Management Company (AMC) registered under the companies Act. The
responsibilities of the AMC include managing the mutual fund and its investments in
Although the mutual fund is free to formulate its own Investment strategies for the money
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ii. Provision that promoters of the scheme shall subscribe to a minimum of 10% of
i. Properly evaluate the net asset values and periodically declare them for the
ii. Comply with the method of valuation of securities adopted in accordance with the
regulations; and
iii. Limit the expenses for floating a scheme and also for managing the assets in
Mr. Ibrahim went further to state that the AMC is eligible for an annual service charge
under SEC’s Rule 247 (j) and (k) not exceeding 5% of the Investment corpus or fund, but
payable out of income. It is also entitled to an initial charge (as appropriate) not exceeding
2.5% of any amount invested in the scheme as part of the purchase price. In addition, the
manager is also entitled to an incentive fee of 1% of total returns in excess of 20% of the
Investor Protection
With respect to investor protection, the collective investment schemes are bound by a
code of conduct as regards their advertisements. This is to ensure that unfounded claims
are not made by the fund managers to attract investments. Fund managers are also
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expected to file monthly returns in an acceptable format signed by their sponsoring
individuals to enable a regular off-site surveillance of the Schemes with a view to provide
an early warning system. The publication of audited accounts every year along with
It is important to remember that collective investment schemes like any other investments
have varying levels of risks associated with them. While certain types of funds are low-risk
(such as money market or T-bill funds), others (such as equity and bond funds) can
change significantly in price in response to the ups and downs of the economy, interest
rates, foreign exchange rates, and other economic variables. These fluctuations can cause
the value of your investment to decline, particularly over the short term. This is known as
market risk, and no regulator can protect you from this. However, regulations have been
established to help ensure that the money you invest in these funds is handled carefully
and professionally. For example, the CIS assets must be held separately by a
custodian/trustee. Again an independent auditor reviews and reports on the finances and
practices of the funds each year. The dealers who handle CIS transactions for clients are
also subject to detailed rules governing their conduct to ensure that clients are dealt with
Candice Paine, Head of Retail at Sanlam Investment Management (SIM) South Africa
stated that in light of the latest scandal to hit the global financial industry, the alleged
$50bn hedge fund defrauded by Bernard Madoff in the US, investors may be wondering
how safe their money really is. She reassured investors that consumer protection is of
utmost importance in the South African Collective Investment Schemes industry, with
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structures and gatekeepers firmly in place, as well as vigilant media and financial
The litany of disasters, from simple poor investment management to outright fraud, seems
to keep growing with 100-year-old institutions failing, others begging for bail outs and
rating agencies failing to rate correctly. South Africa is not immune, as evidenced by the
“What most investors tend to do is concentrate their efforts on looking at investment risk,
costs, relative performance, asset class exposure, mandates, objectives and the like. Very
few questions are asked about the governance of CIS and consequently how safe their
“By way of explanation, CIS are governed by the Collective Investment Schemes Control
Act (CISCA) which regulates, amongst other things, how funds are managed, what
securities can be held in the fund and who can act as trustees. The Financial Services
Board (FSB) polices CISCA and also approves the trustees. All assets in a CIS are held
separately from the investment manager or the management company’s assets, and are
“The trustee is licensed under CISCA, appointed by the management company, and
regulated by CISCA and the Financial Institutions Act (FIA). It is the trustee’s responsibility
to ensure that the CIS is run in compliance with CISCA. The trustee is the custodian of the
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The management company appoints an investment manager, regulated under the FAIS
Act and the Financial Institutions (Protection of Funds) Act, to manage the assets of the
“In addition, both the management company and the investment manager are required by
law to monitor compliance with the founding document and the investment mandate of the
CIS and its various portfolios, and to highlight any discrepancies to the trustee as well as
the portfolio manager so the portfolio can be brought back in line,” Paine says.
The manager is also obliged to send investors a quarterly report and an annual report
listing all the assets in the portfolio in which they are invested. Paine also reassured
investors that the local financial press acts as a watchdog of sorts through its constant
coverage of issues like performance and fees. And, because of widespread use of CIS for
institutional investments, there are myriads of analysts and other financial professionals
constantly carrying out very detailed due diligences on these funds which cover not only
appreciate and value the ability of collective investment schemes to build wealth, with the
Investments [ACI] was established in 1967 as The Association of Unit Trusts [AUT] and
Association is to facilitate the development and growth of the industry, through its dealings
with the authorities and regular communication with the media and investing public.
Working on behalf of its members, the Association acts as the custodian of codes of
practice and standards throughout the industry, and is the forum for identifying and
investments.
regulators.
Education
To promote and increase the competency and understanding of the collective investment
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To promote and protect the interests of associate members, by raising and addressing
Fund Management
To ensure the industry maintains a highly competitive position through the use of
innovative and worldwide practices in fund management, with particular focus on fund
Governance
To facilitate the development and global competitiveness of the industry and the
Industry Development
processes and platforms and product structures to ensure continuing product innovation
within the ambit of the Collective Investment Schemes Control Act, thereby retaining
existing and attracting new investors to the collective investment scheme industry.
Industry Promotion
To build the ACI brand and to raise the profile of the industry through communication and
promotional activities;
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Industry Supervision
To set standards for the industry members in the conduct of their businesses and in their
dealings with intermediaries as well as the investing public; to monitor adherence to these
Technical
Taxation
To clarify and resolve taxation issues that have bearing on the collective investment
industry with fiscal and state authorities by investigating and addressing both threats and
It is very unfortunate that in Ghana, the Collective Investment Schemes have not been
able to come together to form this useful association compelling the funds to engage in the
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Ekkachai Boonchuaymetta (2008) conducted a thorough research into the various
scholars. He started by saying that the performances of fund managers are regularly
examine the mutual fund performance by proposing both theoretical and empirical studies.
Harry Markowitz (1952) first introduced the principle theory of portfolio selection, which
uses the mean-variance analysis explaining how investors can select the optimal portfolio.
Merton (1972) derived the mutual fund theorem which also explains the efficient frontier
portfolio as the set of feasible portfolio. The optimal portfolio provides the highest expected
return for a given level of risk. The risk of the portfolio can be measured by using variance-
covariance matrix. This theorem is consistent with the concept of the Capital Asset Pricing
Model (CAPM) which is popularly used to analyze the characteristics of the mean-
variance.
Ekkachai went further to state that, Treynor and Mazuy (1966) proposed a quadratic term
to test for market timing ability of fund managers. They argued that fund managers should
have not only an ability to select the undervalued securities, but also an ability to forecast
explaining that the components of mutual fund performance which can measure the funds’
The first part is selectivity, determining fund managers’ ability in selecting the securities
into the portfolio. Another part is timing, measuring fund managers’ ability in predicting the
market price movement. Therefore, a fund manager with a market timing ability is likely to
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invest a greater equity proportion of the portfolio during the bull market and hold a smaller
equity proportion of the portfolio during the bear market. Based on the regression
However, the empirical study of Cumby and Glen (1990) who applied the Treynor-Mazuy
timing model, found a significant negative coefficient, meaning that fund managers do not
have an ability to forecast the market movement. This finding in a negative coefficient is
Ekkachai Boonchuaymetta said nowadays, there are several empirical studies on the
evaluation of mutual fund performance. The U.S. mutual fund is the most widely used in
the evaluation. For example, Fama and French (1996) introduced three-factor model of
evaluating the return of mutual fund. The model explains that the expected return on a
portfolio in excess of the risk-free rate is determined by the sensitivity of its return to three
factors:
(2) The difference between the return on a portfolio of small stocks and the return on a
(3) The difference between the return on a portfolio of high-book-to-market stocks and the
Carhart (1997) proposed four-factor model to evaluate the fund performance by adding the
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2.7 THE IMPACT OF CIS ON FINANCIAL SECTORS
The Investment Company Institute (ICI) May, 2009 survey report stated that, mutual funds
have grown to represent an important part of the U.S. financial system over the past two
decades. Between mid-year 1989 and mid-year 2009, assets held in mutual funds have
increased from $899 billion to $10.0 trillion. The number of U.S. households that owned
mutual funds rose from 23.2 million to 50.4 million over the same period. As a result, as of
mid-year 2009, 43 percent of U.S. households owned mutual funds, representing 87.1
significant component of the savings and investments of many American households, with
mutual fund assets now accounting for one-fifth of households’ financial assets.
The Security and Exchange Commission of Ghana in its 2008 Annual Report, reported
that the Collective Investment Scheme industry which consists of Mutual Funds and Unit
Trust Schemes, represent one of the fastest growing segments of the financial industry in
Ghana, as it allows for small and flexible investments by ordinary Ghanaians. The
collective investment schemes have provided vast opportunities for small investors to pool
resources to collectively participate in the capital market which hitherto was perceived as
the preserve of the rich and the elites in society. The report noted that, the continuous
public education campaign mounted by the SEC is gradually breaking cultural and
psychological barriers to savings and investment in the country. In 2008, there were seven
(7) Mutual Funds and Four (4) Unit Trust Schemes operating in the CIS Market with a total
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net asset value of GH¢149, 581,990.74 representing an industry growth of 21.18% over
the previous year. The entire industry made an average return/ annualized yield of
25.81% for investors, compared to 21.30% industry average return in 2007. Total amount
of funds mobilized also increased by 7% over the same period. The total number of unit/
share- holders in the schemes went up from 99,167 in 2007 to 123,265 in 2008,
Andries Blake Walters (2008) reported that the Collective Investment industry in South
Africa started in 1965 with the introduction of the first unit trusts, the South African Growth
Equity fund (SAGE). The fund was created with the objective to give the man in the street
access to the Stock Market without actually investing directly. The original unit trusts
mainly gave access to equities on the security exchange. As the success of this new
investment vehicle grew, access was also given to other asset classes such as property,
Blake further noted that gradual awareness of the benefits of collective investments as an
investment vehicle has led to more and more individuals as well as institutions in South
Africa taking note of and starting to invest in it. He said this growth has culminated in an
industry in South Africa that in 2006 had R546,656 million assets under management that
investors. The total of all the equity holders under management in the industry constitutes
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Leon Campher, CEO of the Association for Savings and Investment of South Africa
(ASISA), described the rate at which the local CIS industry continued to grow as truly
remarkable, considering that this growth was achieved while the world was suffering the
He noted that the South African collective investment schemes (CIS) industry displayed
unprecedented resilience amidst the worst ever global financial markets crisis, with assets
addition, the net quarterly inflows of R26-billion for the fourth quarter of 2008 was the
second highest ever recorded by the CIS industry. The highest ever net quarterly inflows
of R28-billion were attracted in the first quarter of 2007. Net inflows for 2008 totaled R60-
billion, only R9-billion behind the R69-billion achieved in 2007. In 2006, total net inflows
were R58-billion, the same as in 2005. And five years ago in 2004, net inflows were R42-
billion. At the end of 2008, investors could choose from a record number of 884 funds,
compared to only 204 ten years ago. Leon Campher (2 April 2009).
performance of Collective Investment Schemes in Nigeria between 1990 and 2002 that,
the deregulation and liberalization of the financial system following the introduction of the
structural adjustment programme by the then military regime in 1986 stimulated a number
of financial innovations in line with the changing market conditions. One of such
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innovations was the commencement of the Mutual Fund or unit trusts schemes in 1990.
mutual funds or unit trust scheme within the last decade and a half. Many banks had
engaged in selling mutual funds shares to their customers and in many cases act as
Investment Advisers and managers of the schemes. Since 1990, a number of schemes
mainly bank promoted have been registered. By 31st December 2002, the Securities and
Exchange Commission (SEC) had registered up to 20 Mutual Funds while others still in
the pipeline. Out of these 15 were promoted by banks and only 5 five were non – bank
promoted schemes. Practically all the funds are open-ended except one that is a closed-
ended fund. Furthermore, 14 or 70% of the funds managed have been raised as
income/growth funds.
Gross sales of all the mutual funds in Nigeria was N5.024 billion as at 2002, up from a
previous record of N2.4 billion in 1997. This amount was significant when compared to the
paltry sum of N54.27 million initially recorded by the industry at inception in 1991. The
appreciated when viewed from the perspective of the growth in shareholder values over
the 10 year period. The aggregate net asset values of the Funds rose from a very narrow
base of N25.2 million to N2.34 Billion in 1997. As at the end of 2002, investors had
grossed over N8.39 Billion. The major factors behind that phenomenal growth are capital
appreciation and the surge in sales by an increasing number of registered Funds. One
reason for the surge in sales has been the previous bifurcation of banks into commercial
and merchant categories that placed the later in competitive disadvantage in mobilizing
retail deposits. As part of their new product development to circumvent the rule, the
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merchant banks promoted an increasing number of mutual fund schemes. Thus out of the
CHAPTER THREE
METHODOLOGY
3.0 INTRODUCTION
Various research methodologies were evaluated, after which a specific methodology was
chosen. A description of the research methodology used is given, why it was chosen and
how it was applied. During the data collection session, ethical issues that needed to be
addressed pertaining to the data collection process was addressed to ensure that data
collected was relevant and comprehensive enough to give substance to the findings.
The Ho Municipality is one of the 18 districts in the Volta Region of the Republic of Ghana.
It is located between Latitudes 6° 20”N and 6° 55”N and Longitudes 0° 12”E and 0° 53” E
and covers an area of 2.660 sq km. The Municipality shares boundaries with the Adaklu-
Anyigbe District to the South, Hohoe Municipal to the North, South-Dayi District to the
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West and the Republic of Togo to the East. The Ho Municipality is also home to the
regional capital of the Volta Region. This, of course, makes it the largest urban centre in
the region.
The Municipality has thirteen (13) Area Councils namely; Yangon, Sokode, Kpedze, Tsito,
Abutia, Avatime, Hokpeta, Weto Hedzefe, Ho Urban, Dutasor, Anyirawase, Norvisi and
Honuta/Kpoeta
Mission
facilitates the effective mobilization and utilization of human and material resources for the
and the environment (2010 – 2013 Medium Term Plan of Ho Municipal Assembly).
Objectives
Climate (Temperature)
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Generally, mean monthly temperatures in the Municipality range between 22°C and 32° C
while annual mean temperatures range from 16.5°C and 37.8° C. In effect, temperatures
are generally high throughout the year, which is good for plants and food crop farming.
During the dry season however, daily temperatures are so high that, except for irrigation in
The mountainous settlements like Amedzofe, Biakpa, Vane and Ashanti Kpoeta have very
low temperatures during some parts of the year and are often referred to as the “local
winter” of the Volta Region. These low temperatures have favorable conditions for tourism
and holding capacity for foreigners who enjoy the low temperatures. For example,
Amedzofe is known to have recorded as low as 16.6° C in the month of July. Similarly,
average mean humidity for Amedzofe is also between 70% and 96% (0600hrs) and
Rainfall
The rainfall pattern is characterized by two rainy seasons referred to as the major and the
minor seasons. The major season is between March and June whiles the minor season
starts from July to November. The rest of the year is referred to as dry season. Mean
annual rainfall figures are between 20.1mm and 192mm. The highest rainfall occurs in
June and has mean value of 192mm while the lowest rainfall is in November recording a
value of 20.1.
Vegetation
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Ho Municipality falls into two main types of vegetation zones: these are the moist semi-
deciduous forest which mostly cover the hills in the Municipality and savannah woodland
which covers the rest of the municipality. The several tree species provide for domestic
fuel wood and some timber species like Wawa, Mahogany and extensive strands of
Borassius Palm (Agorti) for construction. The Shrubs and grasses provide fodder for
livestock.
Population Characteristics
The population of the Municipality has its own unique features. It has always experienced
growth in numbers over the years and has a large youthful population which is male
dominant. The population of the Municipality is not evenly distributed, and the number of
From 1970 to1984, the Municipality experienced a population growth rate of 1.17%. This
growth rate remained unchanged for the 1984-2000 censual years. This is represented in
Table 3-1
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1984 195,441 1.17
The population growth rate of the region is 1.17% in 2000; the municipality growth rate
remained 1.17% during the same period. The current population growth rate of the
According to the 2000 Population and Housing Census, the Municipality has a relatively
larger male population compared to the female. This structure is not different from that of
the Volta Region where the Municipality is located. It however differs from that of the
National sex structure that shows a female dominance. The large male population in the
Municipality is due partly to the continuous influx of settler farmers who come into the
Table 3-2
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In terms of age structure, the Municipality has a large youthful population. The two cohorts
that contain most of the people are 0-14 group and 15-64 groups.
Table 3-3
Another significant feature of the Municipality’s population is its large labour force. The
cohort that falls within the active labour force constitutes 56.3% of the Municipality’s
population. This is a bit higher than the regional and national active labour force of 52.4%
The total population of Ho Municipality is 200,000 as per the 2000 Population and Housing
Census. The urban population of the Municipality is 73,893 being 37% while the rural
Ewa tribes are represented by various groups such as Avatime, Asorgli, Awudome.
In terms of religion, Christians dominate by 90% of the total population. The Muslim
community forms 6%. Traditional religion still has a place in the Municipality and it is
Traditional Set-Up
There are five Traditional Paramount Chiefs in the Municipality. These are Asorgli
Traditional Area, Awudome Traditional Area, Avatime Traditional Area, Kpedze Traditional
Area, and Abutia Traditional Area. These five stools however collaborate in promoting the
The tradition of communal spirit, both in terms of labour and funding, is a major project
implementation strategy of the Municipality. This spirit has however become very low or
almost non-existent in the urban communities as compared to the rural areas. The
traditional set-up is endowed with some cultural practices and festivals such as Yam
festival of Asorgli state, Zendo Festival for the people of Klefe, Sasa Festival of the people
of Afrofu. Traditional drums and dances such as Adabatram, Zigi, Borborbor and zagada
Health Facilities
The Ho Municipality had fifty-six (56) health facilities out of which forty-five percent (45%)
were under Ghana Health Service – Ministry of Health. The rest were Mission and Private
owned.
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Table 3-4
Breakdown of Health Institutions
№ Category Number
1 Regional Hospital 1
2 Municipal Hospital 1
3 Polyclinic 1
4 Health Centre 39
Private Clinics 3
Total 56
Education
The Municipality has 188 Primary Schools, 129 Junior high Schools, 187 Kindergartens,
University.
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3.0.2 Research Design
The Ho Municipality was considered as the population of the study. As per the 2000
Population and Housing Census of Ghana, the Municipality has 200,000 inhabitants made
up of 73,893 representing 37% living in the urban centre and 126,107 representing 63%
as rural duelers.
Sample Size
To ascertain the financial literacy status of Ghanaians regarding CIS, a sample size of 200
Out of the 200 sampled, 100 were from the urban centre and the other 100 from the rural
communities.
Sampling Technique
To fairly represent the population by the sample size, a simple random sampling technique
was adopted. This sampling technique involves selecting units at random from the
sampling frame. It was selected because the Municipality is very vast with different people
from different religious, educational, tribal, political, and social groupings. Using any other
sampling technique was difficult leading to the choice of simple random sampling to
objectives, methods and procedures (Welman et al, 2007). There are two (2) main
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research methodologies; quantitative and qualitative. Quantitative methodology concerns
controlling the situation and using remote, empirical and inferential methods. Qualitative
administration. The questionnaires contained both open-ended questions that gave the
questions by which respondents were only given the opportunity to agree or disagree by
Because quantitative methodology is used to evaluate reliable and set of objective data, it
was adopted to evaluate the performance of four (4) CIS organizations. They include
3.0.3 Assumption
To be able to demonstrate in real terms the value that the four (4) selected CIS had
invest decided to invest this amount equally in Epack, Fortune Fund, Gold Fund and
Mfund for four (4) years effective January, 2005 to December, 2008. The amount gained
To ensure that data collected was of the acceptable quality, all questionnaires retrieved
from respondents were coded by a team of three (3) people made up of the Principal
76 | P a g e
Researcher as the moderator and two (2) trained National Service Personnel. Particular
The questionnaires were then sent to the Statistical Laboratory of Ho Polytechnic where
Statistical Package for Social Sciences (SPSS) software was used to analyze them.
The biggest ethical issue was the confidentiality of the information provided by the
respondents since it borders on their personal investments. Several questions were asked
in this regard. Some of the respondents wanted an assurance that the information
It was explained to them that the information been sought was only for the purpose of
using the summary of the results for this dissertation in partial fulfillment for the award of a
Consultancy and that, none of their personal data would ever be disclosed to the public.
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CHAPTER FOUR
4.1 INTRODUCTION
The data collected as described in Chapter 3 is analysed in this chapter both for urban and
rural centers. The purpose of this chapter is to demonstrate with statistical evidence and
research. The chapter starts with the profile of the respondents after which the responses
The total sample is 200 respondents residing in the Ho Municipality. Each of these
residents reside either in the urban or rural centers of the Municipality. Here are the main
profiles:
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Figure 4-1
70
60 62%
50
40
38%
Percentage
30
20
10
0
Male Female
Figure 4-1 shows the gender of respondents who responded to the questionnaires in the
urban centre. Out of the 100 respondents from the urban centre, 62 percent were males
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Figure 4-2
Female
46%
Male
54%
In the rural centers, the gender distribution of respondents is represented by, 54% as
The gender profiles of respondents from both the urban and rural communities provide us
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Table 4-1
20-30 years 47 47
Table 4-1
31-40 years 28 28
represents the
41-50 years 23 23
age group of
51-60 years 2 2
respondents in Total 100 100
the urban
centre. Out of 100 respondents, 47 percent fall within the age group of “20-30 years”; the
second highest frequency of 28 representing a percentage value of 28 was within the age
group of “31-40 years”. Those between the ages of “45–50 years” formed 23% of the total
respondents. The age category of respondents that recorded the lowest frequency of 2
Figure 4-3
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Age Profile of Respondents in the Rural Centers
40
35%
33%
30
26%
Percentage
20
10
6%
0 31-40
41-50 51-60 20-30
The bar chart above depicts the age distribution of respondents who respond to the
questions in the rural centers. Out of the 100 questionnaire, 35% of the respondents fall
within the age group of “31-40 years” as the highest percentage in this case, followed by
respondents whose age groups fall between “41-50 years” representing 33%. The next
percentage value of 26 was recorded for those whose age was “20-30 years”. Lastly, 6%
of them fall within the age group of “51-60 years” as the lowest percentage in this case.
Figure 4-4
60
Percentage
40
20 22%
3%
0
Basic Secondary Tertiary
Figure 4-4 shows the educational levels of the respondents. Out of the 100 respondents
who responded to the questionnaires in urban centers, 75 percent had tertiary education,
being the highest in this case. 22 percent had secondary education, and 3 percent of the
Figure 4-5
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70
60 61%
50
40
Percentage
30 31%
20
10
8%
0
Basic Secondary Tertiary
The bar chart above represents respondents’ level of education in the rural area. It can be
seen that 61% of the respondents were tertiary education certificate holders, 31% of them
were secondary education certificate holders and lastly only 8% of them were basic
The research sampled 100 respondents from the urban centre and another 100 from the
rural communities making a total of 200 respondents. It is wealth noting that, not all
respondents answered all the questions or selected all the propositions in the questions.
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However, all the graphic depictions below are applied to show the results as a percentage
of the total population of 200. To be able to properly analyse the responses from the field
to meet the objectives of this research, responses for the six (6) research questions as
How did the following CIS that were fully operational between January, 2005 and
December, 2008 performed?
data on their performance was obtained from Gold Coast Securities Ghana Ltd, a copy of
which is attached as Appendix 2. For the purpose of this research question, data in
Table 4-2
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Fund Unit Price Unit Price Return Per Unit
GH¢ %
Jan. 2005 Dec. 2008
From Table 4-2, a unit of Epack was sold at GH¢0.4526 in January, 2005 but rose to GH
¢0.8326 in December, 2008 making a capital gain of GH¢0.800 per unit. Fortune Fund
also made a capital gain of GH¢0.1286 on shareholder’s investment per unit from GH
¢0.0514 in January, 2005 to GH¢0.1800 in December, 2008. Gold Fund, one of the funds
that is expanding its branches all over the country was offering a unit of its shares in
January, 2005 at GH¢0.0525, this rose to GH¢0.1023 by the end of December, 2008
creating additional value for its shareholders to the tune of GH¢0.0498. The last but not
the least is Mfund which increased investor’s capital from GH¢0.1128 in January, 2005 to
Figure 4-6
300
Performance of Collective Investment Schemes
250 Jan. 2005 – Dec. 2008 (%)
200
Epack
150 Fortune Fund
Gold Fund
100
Mfund
50
0
Return Per Unit (%)
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Figure 4-6 demonstrates the performance of the selected CIS in percentage terms. It is
obvious that Fortune Fund managed by Strategic African Securities Ltd increased
investor’s capital by 250.19 percent within four (4) years (2005 – 2008), followed by Gold
Fund with 94.86 percent capital gain, Epack with 83.97 percent, and Mfund 71.45 percent
To practically demonstrate the financial value that had been added to investor’s capital by
these four (4) CIS as depicted by Table 4.2, the following assumption is made: Let us
invest it equally into these four (4) CIS for four (4) years ending December, 2008. The
Table 4-3
Hypothetical Scenario of Investing GH¢500.00 each in Four (4) CIS for Four years
A B C D E F
Fund Unit Price Capital to No. of Units Return Per Capital Gain
as at Jan, be Invested of Shares Share After GH¢
2005 GH¢ GH¢ Bought 4 yrs. (D×E)
(C÷B)
Epack 0.4526 500.00 1,104 0.3800 419.52
Fortune Fund 0.0514 500.00 9,727 0.1286 1,250.89
Gold Fund 0.0525 500.00 9,523 0.0498 474.25
Mfund 0.1128 500.00 4,432 0.0806 357.22
Total 0.6693 2,000.00 24,786 0.639 2,501.88
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Source: Adopted from Appendix 2.1, 2.2, 2.3 & 2.4
After four (4) years as depicted by Table 4-3, the investor would earn an amount of GH
¢2,501.88 extra income on his investment representing 125.09 percent capital gain.
What is the financial literacy status of Ghanaians both in the urban and
rural areas regarding CIS?
This question seeks to find out the level of financial literacy within the urban and rural
duelers as far as CIS are concerned. Respondents were asked whether they are aware of
the benefits of CIS or not. Data collected from respondents is represented in Table 4-4
below.
Table 4-4
A look at Table 4-4 indicates that, 41 respondents in the urban centre said they were
aware of the benefits of investing in CIS; whiles 59 of them said they were not aware. In
the rural area, 30 respondents said they were aware and 70 of them said they were not
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aware. The aggregate of the responses from the urban and rural communities is
Figure 4-7
140
120
100
80 Aware
60 Unaware
40
20
0
Awareness
Figure 4-7 shows that, 129 respondents representing 64.5 percent of the total population
were not aware of the operations of CIS and only 71 respondents representing 35.5
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4.3.3 Research Question Three
The brain behind this question is to determine the number of respondents with regular
income either formal or informal that invest part of their regular income. To obtain reliable
data for this question, an earlier question was asked as to whether the respondents have a
regular source of income (Reference Appendix 1, Q 6). The responses from this question
indicated that 138 respondents in both urban and rural communities have regular income
source. This led to the research question under consideration (Do people with regular
income invest part of their income?). Out of the 138 respondents who have regular income
source, 112 said they regularly invest part of their income and only 26 said they do not
Table 4-5
The result in Table 4-5 is graphically represented in Figure 4-8 below with majority of
Figure 4-8
120
100
80
60 Yes
No
40
20
0
Investment Status
This question seeks to find out the actual investment product that the 112 respondents
who said they regularly invest part of their income invest in.
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Table 4-6
From Table 4-6, 45 respondents with regular income save part of their income with banks
for interest. 16 people invest in Mutual Funds, 26 invest in Treasury Bills, 8 in shares of
public limited liability companies, 4 in Fixed Deposit. 6 of the respondents said they plough
back their income into their businesses, 2 invest in Debentures, 1 respondents each
indicated that they put part of their income in Insurance and Provident Fund. The rest of
the 3 respondents invest part of their income with Credit Unions. The percentage
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Figure 4-9
45
40 Bank Deposit
Mutual Fund
35
T-Bill
30
Share
25
Fixed Deposit
20
Business
15
Debenture
10 Insurance
5 Provident Fund
0 Credit Union
Investment Products
The Risk-Return Trade-off principle had been stated emphatically in Chapter one of this
report. The principle states “the low levels of uncertainty (low risk) are associated with low
potential returns, whereas high levels of uncertainty (high risk) are associated with high
potential returns”. Figure 4-9 indicated that respondents who invest part of their income do
this in riskless products. As many as 40.18 percent said they keep their money in their
Bank Accounts and the next highest of 23.21 percent invest in Treasury Bills. This means
that, majority of the respondents lack the ability to take calculated risk therefore invest in
low-risk financial products. The impression that putting once money in bank deposit is
Financial literacy as defined earlier in Chapter two is the ability to read, analyse, manage
and communicate personal financial conditions that affect material well being”. This
implies that the financial information must be made available for reading or listening and
93 | P a g e
analyzing. This is the bases on which this question was asked. The question seeks to find
out from the respondents the medium of communication that made the most impact on
their financial literacy status. Data collected in this regard is illustrated in Table 4-7 below.
Table 4-7
TV 10 7 17 18.09
Newspaper 12 10 22 23.40
Radio 7 9 16 17.02
Friends 11 7 18 19.15
Agents 6 15 21 22.34
Total 46 48 94 100
In the beginning of the research report, it was stated that the collective investment
schemes have provided vast opportunities for small investors to pool resources to
collectively participate in the capital market that hitherto was perceived as the preserve of
the rich and the elites in society. It is also stated that “the continuous public education
campaign mounted by the SEC is gradually breaking cultural and psychological barriers to
savings and investment in the industry”. This was tested with Appendix 1 question 16 to
vehicle and through which medium they are best communicated in the urban and rural
areas of the Ho Municipality. The results are shown in Table 4-7 above. These results are
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Figure 4-10
25
20
TV
15 Newspaper
Radio
10
Friends
5 Agents
0
Mediumof Communication
Figure 4-10 indicated that 23.40 percent of respondents said they receive information on
the operations of CIS through newspapers. 22.34 percent of respondents indicated that
they heard of CIS through Agents of the CIS. Majority of them gave credit to Gold Coast
Securities Ghana Ltd for being the only operator to open a branch in the Municipality.
Interestingly, 19.15 percent of the respondents said they heard of CIS through friends and
family members. The electronic media, TV and radio recorded 18.09 and 17.02 percent
respectively. This is not good enough taking into consideration the proliferation of TV and
The motive behind this question was to find out from those respondents who indicated that
they do not invest in CIS why they do not invest. The responses to this question as
depicted in Table 4-8 below shows that 47 respondents complained that yes, they receive
regular income, but the income they receive is not sufficient enough to enable them invest
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part. 30 complained that the official operational location of these funds is not favourable to
them. Another 30 responded that they do not trust the operations of these funds, 29 said
to investment in CIS while only 9 said people do not invest because of the poor investment
Table 4-8
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Figure 4-11
25
20
Inadequate Income
Low Income Status
15
Lack of Information
Location of CIS
10
Lack of Trust
Poor Investment Habit
5
High Cost of Living
0
Factors
The responses to this question as depicted in Figure 4-11 shows that majority of
pattern as far as CIS are concerned, followed by the location of these funds and lack of
trust in their operations. Following closely is low income status of Ghanaians, lack of
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comprehensible information on CIS, high cost of living and poor investment habit of
Ghanaians.
It is worth noting that, among all the fifteen (15) CIS that are operational in Ghana as at
March, 2010 and illustrated in Table 1.2 in Chapter 1, only Anidaso Mutual Fund operated
located outside Accra. It was also found out that, only Gold Coast Securities Ghana Ltd
has a branch in the Municipality and two branches in the Volta Region.
Gender
During data collecting, 62 percent of respondents in the urban centre were males and 38
percent were females. In the rural area, 54 percent were males and 46 percent were
females.
Age
The age distribution of respondents in the rural area was; 35 percent between 31-40
years, 33 percent between 41-50 years, 26 percent between 20-30 years and 6 percent
between 51-60 years. In the urban centre, 47 percent were between the ages of 20-30, 28
percent were between 31-30 years, 23 percent were between 41-50 years, and 2 percent
Education
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In the urban centre, 75 percent of respondents have tertiary level education, 22 percent
with secondary level education, and 3 percent with basic level education. Results from the
rural area indicated that, 61 percent of respondents have tertiary level education, 31
percent have secondary level education, and 8 percent have basic level education.
How did the following CIS that were fully operational between January, 2005 and
There is no doubt that the four (4) CIS between January, 2005 and December, 2008 made
significant growth in terms of value addition to investor’s capital, supporting the position of
SEC in their 2008 Annual Report that “the CIS industry is one of the fastest growing
segments of the financial industry in Ghana”. Fortune Fund led the pack by 250.19
percent, followed by Gold Fund with 94.86 percent, Epack with 83.97 percent, and Mfund
with 71.45 percent capital gain. On yearly basis, all the funds in exception of Epack
consistently added value to shareholder’s capital between 2005 and 2008. Epack
experienced a decline in its unit price in 2008 from GH¢0.8631 in 2007 to GH¢0.8300 in
2008.
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To demonstrate the trend of yearly growth for the individual funds, Table 4-9 is used.
Table 4-9
From Table 4-9 above, a unit of Epack was sold at GH¢0.4327 in 2005, moved to GH
¢0.5708 in 2006, GH¢0.8631 in 2007, and dropped to GH¢0.8300 at the end of 2008.
Fortune Fund also had a unit price of GH¢0.0514 in 2005, GH¢0.0565 in 2006, GH
¢0.1234 in 2007, and GH¢0.1759 in 2008. The price quoted for Gold Fund was GH
¢0.0507 at the end of 2005, GH¢0.0580 in 2006, GH¢0.0745 in 2007, and GH¢0.0745 at
the end of 2008. Mfund ended 2005 with as unit price of GH¢0.1279, went up to GH
To graphically demonstrate the yearly individual performance of CIS from December, 2005
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Figure 4-12
1
0.9
0.8
0.7
Epack
0.6
Fortune Fund
0.5
Gold Fund
0.4
0.3 Mfund
0.2
Figure0.1
4-12 indicates that all the four (4) funds consistently added value to their investor’s
0
capital except Epack
2005 that experienced
2006 a drop in its unit price in
2007 2008. Does this mean that
2008
Epack has reached its peak, or the decline was as a result of operational challenges?
These are questions that should have been investigated but were not due to time
constrains. Another interesting picture depicted by Figure 4-12 is the high unit price for
Epack shares. None of the other funds in Figure 4-12 have its unit price at the end of 2008
equal to the unit price of Epack at the end of 2005. This can be attributed to the fact that
Epack as per Appendix 2.1 was established eight (8) years before the other funds. Epack
might have enjoyed monopoly for long that raised its unit price to GH¢0.4327 before the
What is the financial literacy status of Ghanaians both in the urban and rural areas
regarding CIS?
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A very worrying situation as far as the Government’s effort in promoting financial literacy is
concern was observed in the Municipality. Despite the remarkable growth generated by
CIS for investors, only 41 of the respondents in the urban centre and 30 from the rural
communities said they were aware of the benefits of investing in CIS; whiles 59 of them in
the urban and as much as 70 in the rural communities said they were not aware. This
resulted to an aggregate of 71 respondents saying they were aware and as much as 129
indicating that they were not aware of the benefits of CIS. This means that majority of
respondents were not aware of CIS, left along have any idea about their operations. The
question then is; who are the main beneficiaries of this growth? The main objective for the
establishment of CIS is to give the man in the street the opportunity to invest on the stock
market which hitherto was the preserve of the rich and corporate entities. If the ordinary
person in the street does not know about CIS as per the research findings, then what
caliber of people are the investors? This the researcher will find out in another research
work.
It is worth noting that majority of Ghanaians invest part of their income. The study
revealed that 56 respondents in the urban centre invest part of their income whiles 14 said
they do not invest. In the rural communities, 56 respondents invest whiles 12 do not invest
part of their income. However, a total of 45 respondents both from the urban and rural
communities who indicated that they invest part of their income put their money in bank
policies. The findings that majority of respondents who invest their income do that through
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bank deposit is not good enough since interest on bank deposits in Ghana is nothing to
write home about. It is laudable to keep money at the bank for safe keeping, precautionary
purposes and to inject liquidity into the economy not as an investment. The continuous
public education campaign mounted by the SEC is not enough and this calls for the
coming together of all CIS to form the Association of Collective Investment Schemes that
play pivotal role in the effective and efficient operations of CIS in other jurisdictions. A list
Communication is very vital in all spheres of endeavors. It is the process through which
the public can be informed and educated on the benefits of CIS. The results as shown in
Table 4-7 indicated that 10 respondents from the urban centre and 7 from the rural
communities receive information on CIS through TV, 12 in the urban and 10 in the rural
communities said from newspapers, 7 and 9 in the urban and rural communities
respectively said through radio, 11 in the urban and 7 in the rural area said through
friends, and 6 in the urban centre and as much as 15 in the rural communities said they
receive information on CIS through agents of the funds. Surprisingly, fund managers are
not taking advantage of the proliferation of FM radio stations all over the country most of
Some of these factors include; lack of adequate regular income, low general income
high cost of living in the country. The research specifically shown that, 47 respondents
complained that yes, they receive regular income, but the income they receive is not
sufficient enough to enable them invest part. 30 complained that the official operational
location of these funds is not favourable to them. Another 30 responded that they do not
trust the operations of these funds, 29 said general low income status of Ghanaians do not
the major hindrance to investment in CIS while only 9 said poor investment habit of
CHAPTER FIVE
product and a market where he can diversify his portfolios and succeed in gaining returns
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commensurate to the level of risk assumed. This implies that each and every one of us is
required to make decisions that have financial implications for us in our day to day lives.
Our ability to understand, analyze and use information to make financial decisions today
and plan for the future could be said to be a reflection of our level of financial literacy.
Financial literacy has been an issue for a lot of countries and people over the past decade.
Governments and development partners have identified financial literacy as an area that
can help strengthen individuals, households and nations. Ghana’s Financial Sector
Strategic Plan (FINSSP) has given recognition to the need to improve the financial literacy
financial products, and the emergence of fraudsters that disguised themselves as financial
service providers some of which promise unrealistic interest payments and end up
defrauding unsuspecting individual clients. These call for urgent strategies to empower
individuals to be well equipped in order to make independent and well informed decisions
in relating to these institutions and ultimately improve the individual’s financial well being.
Collective investment schemes are pools of funds that are managed on behalf of investors
becoming a very popular investment vehicle because it is, among other things,
transparent, liquid and easily accessible. The growing investor knowledge, good market
returns and its suitability for diversification which minimizes risk, also contributes to its
popularity. The industry which consist of Mutual Funds and Unit Trust Funds represent
one of the fastest growing segments of the financial industry in Ghana, as it allows for
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small and flexible investments by ordinary Ghanaians. The industry as per the 2008
Annual Report of the Security and Exchange Commission of Ghana have provided vast
opportunities for small investors to pool resources to collectively participate in the capital
market which hitherto was perceived as the preserve of the rich and the elites in society.
This research was conducted to ascertain the financial literacy status of Ghanaians with
To begin with, various relevant written materials were critically reviewed to ascertain the
facts on the ground on the subject. It was revealed that, the Collective Investment industry
which consists of Mutual Funds and Unit Trust Funds represent one of the fastest growing
segments of the financial industry in Ghana, South Africa, Nigeria and the U.S. In Ghana
for instance, the industry made a total net asset value of GH¢149,581,990.74 in 2008
made a total net inflow of R42-billion in 2004 and a record R661-billion by the end of
December 2008. The industry in Nigeria was not left behind in the remarkable
from a previous record of N2.4 billion in 1997. It was also noticed that, Governments in
these countries have put in place legal frameworks to regulate and monitor the operations
of Collective Investment Schemes to protect investors, the industry and their economies.
The research was necessitated by the need to investigate and find out how much value
these Collective Investment Schemes have actually added to investor’s capital within
January, 2005 and December, 2008 in Ghana, and to determine how informed are
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Ghanaians regarding the viability of the industry. To be able to do these, market
performance figures for four (4) Collective Investment Schemes was collected from Gold
Coast Securities Ghana Ltd. to conduct a comparative analysis. There are: Gold Fund,
Epack, Fortune Fund, and Mfund. These funds were selected because they were licensed
to operate by the Security and Exchange Commission of Ghana in 2004 and market
performance records on them were available at the time of the research. It would have
been useful to consider all the CIS that were licensed in 2004, but due to time constrain;
only four (4) were considered. With regards to the financial literacy status of Ghanaians,
the Ho Municipal Assembly with a total population of 200,000 as per the 2000 Population
and Housing Census was used as a case study area. Out of the total population, a simple
random sampling technique was used to sample 200 respondents made up of 100 rural
duelers and 100 urban duelers. Questionnaires were administered by two trained National
Service Personnel. Data gathered from the field was sent to the laboratory of the
The empirical study revealed that between January, 2005 and December, 2008, Collective
Fund made 250.19 percent on investors capital within four (4) years (2005 – 2008),
followed by Gold Fund with 94.86 percent capital gain, Epack with 83.97 percent, and
Mfund 71.45 percent within the same period. However, majority of Ghanaians were not
aware of the viability of the industry. 129 respondents representing 64.5 percent of the
total population were not aware of the operations of CIS and only 71 respondents
representing 35.5 percent were aware of CIS as an investment vehicle. It is worth noting
107 | P a g e
that 112 respondents out of 138 who receive regular income indicated that they invest part
of their income, however, majority of them-45 representing 40.18 percent indicated that
they keep their money at the bank followed by 26 respondents representing 23.21 percent
said they invest in treasury bills. It was also found out that, 23.40 percent of respondents
their income.
Conclusion was drawn to the effect that the Collective Investment Scheme industry is a
fertile ground to invest therefore, fund managers must come together to form an
association to promote the interest of Collective Investment Schemes in the area of public
education on the operations of the industry. It is also recommended that the proliferation of
local FM stations all over the country should be seen as an opportunity by fund managers
5.2 CONCLUSIONS
Indeed collective investment schemes are fertile ground to invest because, apart from the
industry’s remarkable performance between January, 2004 and December, 2008, they are
easily accessible.
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Majority of Ghanaians seems not to be financially literate as far as CIS are concerned.
Issues relating to finance must be accorded with ultimate importance it deserves because
a more financially literate population could actually improve the economy as funds would
be prudently invested. All important aspects of our lives will improve when we improve
financial literacy. We will plan in advance for predictable and unpredictable life events; we
will plan in advance for the education of our children and other dependents; we will plan
our families better and indeed live healthier and more prosperous lives in young and old
age.
The interesting thing about financial literacy is that it affects all of us irrespective of our
income, educational, cultural, social, religious, and gender status. Every Ghanaian Living
Everywhere therefore needs some level of financial literacy commensurate with the needs
5.3 RECOMMENDATIONS
1) The collective investment schemes in Ghana should come together to form the
and growth of the industry, through its dealings with the authorities and regular
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2) Fund Managers must take advantage of the proliferation of FM radio stations in the
country most of which broadcast their programmes in both English and local
dialects the reach out to the people on their operations. They should also open
branches all over the country to make their operations easily accessible,
Where it is not feasible to open branches, some banks could be contacted to act as
agents.
3) The Security and Exchange Commission should provide some incentive package
for funds that will locate their headquarters outside Accra to encourage the
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