Relationship between Financial Returns of Investable Capital and Financial Portfolio Diversification of Commercial Sugarcane Farmers in Kenya

Abstract

The main purpose of this study was to establish the relationship between financial return on investable capital and financial portfolio diversification among sugarcane farmers in Bungoma and Kakamega Counties in Kenya. The study’s specific objective was to assess the relationship between financial returns of investable capital and financial portfolio diversification among commercial sugarcane farmers in Kenya. Descriptive correlation was then used to describe and establish the relationships among the study variables. The target population for this study comprised of all sugarcane farmers around Kakamega and Bungoma Counties. Both primary and secondary data will be used in this study and the positivistic approach to research guided data analysis will be used for the study. Primary data was collected through the use self- administered questionnaire. Secondary data on the other hand, was used to obtain information from already existing literature. The study variables were measured using both the ordinal scale and summated scale (likert-type scale).The questionnaire was pre-tested on pilot respondents who were not be part of the study respondents but knowledgeable in the study aspects in order to ensure their validity and relevance. Cronbach’s alpha coefficient was used to measure the reliability of the scale. The study focused on farmers of two counties: Bungoma and Kakamega. The regression results also showed that ROI of investable capital had explanatory power on financial portfolio diversification among commercial sugarcane farmers in that it accounted for 15.7 percent of its variability (R square = 0.157). The study results revealed that there was a statistically significant positive linear relationship between financial return on investment of investable capital and financial portfolio diversification among commercial sugarcane farmers (β= .238, p-value = 0.000). Based on these results, the study concludes that commercial sugarcane farmers in Kenya need to pay more attention on financial return on investment of investable capital because it has been found by this study to have a statistically significant and positive effect on commercial sugarcane farmers in Kenya. The study recommends that the commercial sugarcane farmers in Kenya should therefore strive to improve on their financial return on investable capital because it has been found to have a significant and positive effect on their financial portfolio diversification.