Financial Deepening and Its Implications on Savings and Investments in Kenya

Abstract

The aim of this study was to establish the implications of financial deepening on savings and investments in Kenya. The study therefore adopted a causal research design in investigating the relationship between financial deepening and savings and investments in Kenya. The researcher made use of secondary data on financial deepening indicators, savings and investments from 2006-2011. A regression analysis was conducted in order to be able to establish relationship. There was found to be a strong positive correlation between savings and investments. The study established from the regression results that when there is proper financial deepening, the level of savings and investments in Kenya also improve. If interest rates are not favorable, if the stock market is not doing well, if deposits in banking institutions are not growing, then there will be slow growth and improvement in savings and investments. The study recommends that the government should find ways of improving savings and investments since poor performance of either will affect the performance of the other. It also recommends that the government should establish proper financial and economic policies that can assist in improving financial deepening in the country. With such policies in place, savings and investments will then be able to sprout.