Socio-economic Attributes and Characteristics of the Wealth Portfolios of Salaried Middle and Upper Income Employees in Kenya

Abstract

Personal wealth as denoted by accumulated net assets is a keyingredient of a people ' s standards of living. This is because wealthfacilitates consumption, especially in old age, cushions people againstadversities such as illness and unemployment as well as enables furtherwealth creation through access to bank credit. The assets that comprisewealth include cash and bank balances, properties, shares incooperatives and listed companies, life assurance policies, accruedpension benefits, corporate bonds, and treasury bills and bonds.This article examines size and composition of the wealth portfoliosof salaried middle and upper income employees in Kenya in order tofind out personal attributes that are key determinants of the portfolios.Primary data was obtained from questionnaires that were administeredon a stratified random sample of 1,067 salaried middle and upperincome employees in Kenya in mid 2010, the time of survey. Thepreliminary tests employed the Kaiser Mayer-Olkin (KMO) andBartlett ' s Test based on correlation and partial correlation as well asthe results of Bartlett ' s Test of sphericity to test for the presence ofcorrelations among variables. For this paper, the results KMO measureof sampling adequacy of 0.758 was acceptable, since it was higherthan the recommended minimum of 0.50. Additionally, the Bartlett ' sTest of sphericity recorded an acceptable p-value of 0.000, which waslower than the test value of 0.05 percent, thereby indicating that thereis correlation between the variables.To establish the determinants of the wealth portfolios of employeesin Kenya, 21variables were used. These variables were analyzed usingfactor analysis procedure and in order to achieve a simple andmeaningful structure, that is, have a nonzero loading of the explainedvariance for each individual factors, varimax rotation was done. As aresult, six critical factors were established as the determinants of wealthportfolios of salaried middle and upper income employees, whichinclude earning capacity, life cycle factors, investment objective,employee ' s cultural background, employees ' risk taking behavior andsavings. The findings largely conform to theory and corroborateevidence from prior studies.