Abstract:
The stock markets, particularly the DSE, have continued to serve as sources of
employment and income generation for individuals and companies in Tanzania.
Nevertheless, individual participation has been reported to be low, and the reason
behind that stagnation is low financial literacy. Therefore, this study sought to analyse
the role of financial literacy on stock market participation among millennials in Arusha
City. Specifically, the study assesses the levels of financial literacy, and stock market
participation, and examines the influence of financial literacy indicators on investment
decisions among millennials in Arusha City. A mixed method approach, combining
qualitative and quantitative was employed. The study adopted pragmatism philosophy
and the Life Cycle theory guided the study. A survey questionnaire was used to collect
data from different institutions in Arusha City. A sample of 400 respondents was
drawn, although 302 were usable for analysis. Upon collection of data, descriptive
statistics were used to analyse the demographic characteristics of the sample and the
double hurdle model for analysis of both the decision to invest and the extent of
investment. Findings demonstrated that financial literacy, such as confidence in
financial decisions, better knowledge of interest rates and inflation, and regular
seminar attendance had a significant positive impact on both stock market participation
and investment extent. Moreover, access to macroeconomic information and positive
financial behaviours significantly influenced the extent of investment. The results also
revealed that 45% of respondents actively participated in the stock market suggesting
a relatively engaged investment community while on average only respondents were
29% financially literate implying that the level of financial literacy is drastically low
among the studied group. Hence the study highlighted the need for comprehensive
financial education programs, particularly to boost the stock market involvement of
millennials. As a result, this study recommends, among other things, to develop
targeted financial literacy initiatives and foster a culture of investing among young
adults to enhance financial decision-making and long-term financial stability.
