“ A STUDY ON ASSESSMENT OF FACTORS THAT

CONTRIBUTE TO LOW INVESTMENT ACTIVITIES”

IN KELLEM WELLEGA ZONE DEMBI DOLLO TOWN

A RESEARCH PROPOSAL SUBMITTED FOR PARTIAL

FULFILLMENT OF BA DEGREE IN MANAGEMENT

BY: AYANTU FANTAHUN

ADVISOR: ZELALEM G/TSHADIK (MBA)

JIMMA UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF MANAGEMENT

DECEMBER, 2011
JIMMA, ETHIOPIA
 Acknowledgment
First of all I would like to thank the Almighty God for helping me in my work. Secondly,
I would to express gratitude to my advisor Zelalem G/tshadik for his invaluable support
and continuous follow up which preparing this reseach proposal thirdly, I would like to
extend my gratitude to Jimma university social science library works for providing
necessary reference for preparing this research proposal. Finally, I would like to thank
W/ro wuablem Agizie for typing this research proposal

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 Abstract
The study is going to be under taken on the title of “ Factors that contribute to low
investment” in the specific area of Dembi Dollo town which is in kellem wellega Zone.
The study Will also a General and specific objective oriented, those are related to
identification of factors that contribute to low investment, and assessing the investment
activity in the community. The necessary data for the study will be gathered from both
primary and secondary sources by using structured questioner and interview. Simple
random sampling technique will be used. Following this, the researcher will select 10%
of the total population of 1000. Generally the researcher believe that the finding will
contribute to current governmental plan and the life style of the society.

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 Table of content
Content Page
Acknowledgment......................................................................................I
Abstract..................................................................................................II
Table of content.....................................................................................III
CHAPTER ONE.......................................................................................1
Introduction............................................................................................1
1.1 Background of the study............................................................................................1
1.2 Statement of the problems.........................................................................................3
1.3 Objectives of the study......................................................................4
1.3.1 General objectives..................................................................................................4
1.3.2 Specific objectives..................................................................................................4
1.4 Significance of the study...................................................................5
1.5 Scope of the study.............................................................................6
CHAPTER TWO......................................................................................7
2.Literature review...........................................................................................................7
2.2 An overview...............................................................................................................7
2.2. Statement of investment policy..............................................................................10
2.3 Investment Types.....................................................................................................10
2.4 The process of investment management.................................................................11
2.4.1 Planning................................................................................................................11
2.4.2 Implementation.....................................................................................................11
2.4.3 Monitoring............................................................................................................11
2.5. Management of Equity securities............................................................................11
CHAPTER THREE.....................................................................................................13
3. Methodology..............................................................................................................13
3.1 Source data ( materials)...........................................................................................13
3.2 Target Population.....................................................................................................13
3.3 Sample size..............................................................................................................13
3.4 Sampling Technique................................................................................................13
3.5 Data collection Tools...............................................................................................13
3.6 Data Processing......................................................................................................14
3.7 Data Analysis and presentation................................................................................14
CHAPTER FOUR..................................................................................15
4. Budgeting...................................................................................................................15
4.1 Time Budget.............................................................................................................15
4.2 . Cost Budget...........................................................................................................16
References.............................................................................................17
Appendix...................................................................................................

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 CHAPTER ONE
Introduction
1.1 Background of the study
- It is doubtless that investment is the key factors for the growth the economy of
one country or nation and with the problems that hinder investment is necessary
and also important in the investment sector before making decisions, one investor
should consider some required points such as:
- Required rate of return
- Rate of expected inflation
- The risks involved, that can have an effect on the investors decision
- Services provided for customers.
It is impossible to say that factors that factors that hindering investment activities are
confined to the above listed required points only in kellem wellega zone dembidollo
town
There will be exist other factors that cut down the growth of investment sector in this
zone.

In general, as market is one basic factors for the determination of not investment activity
that means an efficient market is one in which investment has higher expected return and
also has lesser level of risk, it is also necessary to deal with the market characteristics and
market conditions, when ever we deal will investment. But in many cases, even though
the market is profitable, fearing the risk involved makes business men far apart from the
sector and the researcher’s study will try to find out some of the sector and some of the
basic problems for low investment activity. (From bodeikane arcus p-34)
Investment is the use of lf money for the purpose of making more money, to gain income
or increase capital or both (wwwss 2000.com/glossary/asp)
Investing is act of laying out money or capital in an enterprise with the expectation of
profit. (Wordnet. Princenton.edu/peri/webwn)

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Investing is also using one’s personal funds or the funds of a business to acquire
productive resources. (en- wikipedia org/wiki) investment funds investment).

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1.2 Statement of the problems
Investment has direct relationship with economy of on country. That means the level of
the investment of one country can display the level of an economy of the country.

Despite the natural resources available, there some factors that lead to low investment
activities in different areas of our country among them the following are the major ones
rate of expected inflation or market condition, required rate of return or market and the
risk involved.

Kellem wellega zone Dembi Dollo town has a great potential for investment activity in
most sectors. However, it has not been benefited from this opportunity the rural residents
live under poverty line and have been under going many development problems
unemployment, poor infrastructure facilities, absence of manufacturing industries. The
urban drivellers a reliving with low standard of living, low- income unemployment and
others social service problems.

These are the factors necessitate to go for the study this title and dealing with the factors
that lead to low investment activities in kellem wellega zone Dembidollo town.

Generally this study will attempt to answer the following questions.

- What are the major problems that lead low investment activities?
- What suggestions can be made to over come these problems which is its goal.
- Do the society have a rational attitude towards the investment in the community.

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 1.3 Objectives of the study
1.3.1 General objectives
The general objective of the study is to identifying factors that contribute to low
investment activities in Oromia region kellem wellega Zone Dembidollo town in order to
solve some problems and recommend some reasonable solutions for the future.

1.3.2 Specific objectives

- To determine the general attitude of the population and the government toward investment
activities.
- To investigate the nature and level of investment activities in the town and surroundings.
- To look whether there is a gap between policy formulation and implementation.
- To determine the impact to low investment on the overall economic development in the
town.
- To identify the deferent potentials and opportunities for investment that can be utilized of
suitable conditions a rearranged.

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1.4 Significance of the study
The result of this study will be significant in various aspects firstly, one the basis of the
finding of the study, the report draws some conclusion and identifies the factors that con
tribute to low investment activities in Kellem wellega zone Dembidollo town and signal
that expected to minimize this factors. Means it can help the twon to identify the factors
that contribute to low investment and take corrective measures. Second, the study may
also serve as an initial reference /Point of reference/ for others researchers who want to
conduct further study on the same area. Thirdly, if gives an opportunity for the researcher
to gain deep knowledge in practices of investment activates.

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1.5 Scope of the study
Dembidollo town is selected as the study area among the town in Kellem wellega zone
which has available human and material resource background but owing to different
constraints related to lack to awareness, limited socio- economic infrastructure, lack
managerial and technical skills and mal administration. For the reason that the investment
activity of the Dembidollo town is dwarfed, despite of natural endowments that the
researcher is initated to choose the area too. The study will therefore focus on assessing
factor that limit the level of investment activity and impact on the town development.

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 CHAPTER TWO
2.Literature review

2.2 An overview
For many years, investment has been viewed and defined in different ways by different
authors, Even though it is defined and viewed by different investment policies, rules and
regulations. Fore example one country many give freedom for private investors within
the nations. The other country many close its door for foreign investors more than the
other countries etc. Accordingly, authors suggest different techniques for success in
investment sector for a country or investors.

A investment is defined it is “ a fixed and initial operating resource used for the
production of goods, the provision of services and the development of science and
technology capability”. Helffert also advises investors that they should invest in eternally
(within their own activities) before considering external investing out side the activities
accordingly an investor engaged in oil drilling investments should consider weather
he/she expand this activity before starting (Selecting other activities say manufacturing
activities. (Helffert, 1997,Pg56
- Investment is ”a sizable out lays out lays of funds that committee a firm to same course
action, the firm lies on specific procedures to analyzed and select those investment
properly “(Gitman P32) shoum’s (1998 pg 200) has set the process for evaluating and
selecting long term investment and classifies investment decisions as following.
1. Selection decisions concerning proposed projects that involves investment in long term
assets such as property plant and equipment, resource commitments in the form of
new product development, market research, refunding or long term debt, etc and.
2. Replacement decisions such as replacement of existing.
Facilities with new facilities. Before starting an investment activity one investor must
know in what area he/she is going to invest, the available funds he/she has for
investment the economic and political situations of the country availability of raw
materials for running its activity, and finally, he/she must put a standard of evaluating
the profitability of the investment.

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According to Helfert, an investor engaged in the investment activity must see wither the
investment is contributing some advantage for the nearest society and the nation in
general thus, the following investment objectives may be fulfilled by an investors:-
- To increase in the variety, quality and value of the supplied goods and services of
the country.
- To create employment opportunities.
- Encouraging the expansion involve in variety and quality of the export of the a
nation.
- Encouraging utilization of domestic raw materials, production machinery,
equipments and other goods.
- To develop and utilize the natural resources of the country and others. For Judging
the attractiveness of one investment an investor should first consider: the amount
to be expended on the investment, the potential benefit of the investment, the time
period and any final recovery of capital. Generally, for evaluating investment
projects. Shaums (1998 Pg202-207) has set 5 main method of evaluation.
- A) Pay back period:- Measures the length of time required to recover the amount
of initial investment. According to this method, the investor chooses an investor
chooses an investment activity with the shorter pay bank period.
B) Accounting Rate of Return (ARR):-
This measures the profitability from the conventional stand point by relating this
required investment (average investment) to the future annual net income according
to this rule, the investor has to choose the project with the higher rate of return.

C) Net present value (NPV) method:-

NPV is the excess of the present value of cash inflows generated from the investment
over the amount of the initial investment and the rule says, accept an investment
activities with the positive not present value
d) Internal rate of return (IRR)
IRR is defined as the rate that equals interest with the present value of future cash
endows. In this method, the investment decisions accepted in IRR exceeds the cast of
the total investment.

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e) Profitability Index (PI) Method:-
It is the ratio of the total present value of future cash inflows to the initial investment
i.e PV/I The rule says accept the investment its profitability index is greater than.
Other factors to be considered in investment activities include: risk associated with
the investment, inflation rate, tax policy of the government etc.

Investment is defined by helfert (1997 Pg- 126) as affixed and initial operating
resource used for the production of goods, the provision of services and the
development of science and technology capability when relate this definition with the
statement of the problem. Poor infrastructure facilities, un employment, absence of
manufacturing industries low standard of living, low income and other social service
problems are the results of absence of using the operation researches for the
production of many of factoring industries and the provision of these nullified
service.
Robert C. Radciffes (1996 Pg -162) Investment is the sacrifice of certain current
wealth for possibly uncertain future. Since most investments have uncertain future
values. Investors in such assets will require positive expected future returns.
Bodie kane Marcus (1999,P37-39):- Real assets versus Financial Assets the material
wealth of a society is determined ultimately by the productive capacity of its
economy the goods and services than can be provide ed to its members this
productive capacity is a function of the real assets of the economy. The lands
buildings, knowledge and machines that are used to produce goods and the workers
whose skills are necessary to use those resources. To gather, physical and human
assets generate the entire output.

Financial assets are such as stock or bonds. Shares of stock are no more than sheets
of paper: they do not directly contribute of the productive capacity of the economy.
Because they allow for separation of the ownership and management of the firm and
facilitate the transfer of founds to enterprises with attractive investment opportunities.
Financial assets certainly contribute to the wealth of the individuals or firms holding

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 them. This because financial assets are claims to the income generated by real assets
or claims of income from the government.

International investment refers to investing insecurities beyond the borders of one’s

own country.
Global investment refers to investing in scarcities through out the word.
Robert C. Radcliff (1996 P9. 194-195) Investment management in the 1990s The type
of securities trade as well as the way in which they are traded are constantly evolving
as technology. Society’s needs, and political condition change the pace of change
seems to be accelerating, driven both by increasing numbers of investors and
competition. The major are as of change are in globalization, securitization,
derivatives and technology.

2.2. Statement of investment policy

An organization uses statement of investment that will be best under stood by the
investor. It is common to have three sections.”
(1) investment objective (2) investment constraints and (3) investment policies.
The investment objective is usually a return objective related to the asset allocation
that has been chosen. Investment constraints can include factors such as liquidity
constraints, tax requirements, and any other relevant constraints. Investment policies
represent the strategies that are to beused.. (Bodie kane marcus 1999 Pg -37-78).

2.3 Investment Types

Major types of securities traded in world markets are categore into various classes
based on their type and amount of investment risk. Direct security claims are assigned
to one of three assets classes:
(1) debt securities witch maturity of less than one year referred to as money market
instruments, (2) debt securities with a maturity of more than three years referred
to as capital market fixed income securities, and (3) equity securities, indirect
claims are classified as either derivatives or camming led portfolios.

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2.4 The process of investment management
The process used to manage a security portfolio is conceptually the some as that used ina
any managerial decision.
- Plan
- Implement the plan
- Manito the result

2.4.1 Planning
A this stage, investor and capital market conditions are blended in order to determine a
set of investment and speculative policies as well as a long- run strategic asset allocation.

2.4.2 Implementation
This consists of any activate timing between asset classes and the selection of individual
managers or securities to held in each asset class.

2.4.3 Monitoring
There are three aspects to this mentoring first, the actual portfolio held should be
examined to ascertain it is in compliance with the statement of investment policy and to
determine wither any passive rebalancing of the asset mix is required. Second, investment
performance should be reviewed. This should consists of a review of returns on (1) the
aggregate portfolio, (2) each asset class and investment manager, and (3) the returns
from any speculative strategies employed finally, adjustments to the statement of
investment policy (SIP) and investment managers should be made if necessary (Rapert C.
Radcliffe (1996Pg 454-460)

2.5. Management of Equity securities

- Passive Equity Management
- Active Equity management
Active management: by institutional investors: Active institutional manages use a wide
variety of approaches. The following listing illustrates the general approaches used.
- Top – Down mangers
- Bottom – Up managers.
- Quantitative managers

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- Concept managers
- Value managers
- Growth managers.
- Large cap versus small cap managers. Budie kane Marcus (1999,P931).

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 CHAPTER THREE

3. Methodology

3.1 Source data ( materials)

The relevant data and informations will be gathered from two main sources: Primary
sources of data and secondary source of data the primary sources of data will be gathered
in the form of questionnaires and interview (closed and open ended) for investors and for
users of the investment as well as investment office of the town. Secondary data will be
gathered from different written documents, journals, and brochers.

3.2 Target Population

In order accomplish the study the source of population will be the society of the
community those take part in the investment activity. Because the raised issues are
concerned them.

3.3 Sample size

To under take the study in all existing population, it will be difficult with its large in
number of people due to time and cost constraints. Therefore, the researcher will select
10% of the total population 100, that means, 100 respondents will be selected to give the
necessary information.

3.4 Sampling Technique

In order to select the sample for the study, simpler random sampling technique will be
employed. Because of its simplicity, and time and cost budget saving on the other hand, It
will give similar chance to the selective respondents and it is one at one stage of sample
selection.

3.5 Data collection Tools

As data collections instrument the researcher intends to use both open ended and closed
ended questions and structured interview. Structure interview. Interview give greater
flexibility and opportunity to restructure questions more information in greater depth can

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be obtained. The questionnaire which is structured will be distributed to the target
respondents.

3.6 Data Processing

Data processing implies editing, coding and classifying of the collected so as to make it
suitable for further analysis.
Classification implies arranging or organizing raw facts into groups on the basic of
common characteristics to reduce in to homogenous group as most research studies
resulted in large volume raw data.

3.7 Data Analysis and presentation

Some data will be processed using computer, like using for calculating some simple
calculation and finally, the data collected and analyzed will be presented using methods
such as table, diagram and charts.

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 CHAPTER FOUR
4. Budgeting

4.1 Time Budget

No Activities Months
Sept Oct Nov Dec Jan Feb March Apr May June
1 Title X
selection
2 Literature X
research
3 Proposal X
Development
4 Submission X
of final
proposal
5 Actual data X
collection
6 Data X
Analysis and
processing
7 Report X
writing
8 Submission X
of final
report
9 Presentation X

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4.2 . Cost Budget
S. No Items Quantity Duration in Unit cost Total cast
days
1 Stationary 90.00
materials
Paper 300 0.30 28.00
Pen 8 3.50 4.00
Pencils 4 1.00 30.00
Binder 1 30.00
2 Personal cost
Transportation 5 days 600.00
3 Miscellaneous 100.00
expense
4 Print- cost 90.00
Secretary cost 200.00
Total 1142.00

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 References
1. Badie ,K. (1999). Investment, 4th edition, London: Irwin.
2. Erical, H . (1997); Techniques of financial Analysis, 9th edition.
3. Internet, wwwuss (200). Com/glossary/asp)
4. Internet , Wordent. Princenton. (du) peri)
5. LawrneceJ, G. (1997). Principle of managerial finance. 8th edition. New yourk
6. Robert C. R. (1997); Investment, strategy, objective, policy, 5th edition,
Newdechi; Harper collins
7. Shoums outlines. (1998): Financial management. 2nd edition. New yourk: MC
Graw- Hill.

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 Appendix
Jimma university
College of Business and economics
Department of Management
This questionnaires is prepared by Jimma university graduating class of management
student. The following questions are designed of collect data and information requiring
investment activities and factors that hinder. Its development, its impact on the kellem
wellega zone Dembi Dollo town. Economic development so: the researcher politely
request you provide is confidential and it will be for assessment of factors that contribute
to low investment activities in kellem wellega zone Dembi Dollo town.
Request to the respondents.
1. Read the statement carefully and try to be objective to the possible extent.
2. For “yes” or “No” responses make “X” mark on space (Box) provided.
3. For description questions try to be clear as much as possible.
Thank you advance for your cooperations.
Personal information
I Sex: Male  Female 
2. Age 18-30  31 -50  51 -60 
3. Educational status: a 10-12 complete
b) certificate d) 1st degree 
c) Diploma  e) 2nd degree 
A) The following questions are designed together information on opportunities for
investment activities in kellem wellega zone Dembi Dollo town. The respondents for
these questions will be some residents or users of investment out come and others
sections.
1. Agricultural and agro- processing
a) Production of crops  b) Oil-bearing crops 
C) Cotton  d other (Specify) _________________________________

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 2) Production and processing of livestock
a) Cattle  C) Sheep 
b) Goat  d) other (Specify) _____________________________
3) Manufacturing and processing Industries
4) Minimizing Industry
5) Investment in social service sector
a) Education 
c) Intrastate  b) Health service 
6) Small scale industries
a) Metal work b) weaving 
7) forestry
8) Other ( Specify) _____________________
9) Museum and tourist attraction areas in the kellem wellega zone Dembidollo town.

No Type of attraction Location

10 Mineral resources in the kellem wellega zone Dembi dollo town.

Name of Status Owner
Mineral
Exploited Not exploited Private Government

10.1 Adequacy of mineral resources

Poor  Fair 

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 10.2 In adequacy of mineral resources
a) Telophone  b) Postal service 
c) Transport 
d) Others (Specify) __________________________________________
11. What are the major factors that contributed to the level of limited investment in the
kellem wellega zone Dembidollo town?
a) Lack of resource  b) climatic condition 
c) Lack of awareness  d) Political factors 
e) Social factors 
f) others (Specify) _____________________________________________
12) What effects do you think that these limited investment activities have on the economy
of the kellem wellega zone Dembi Dollo town?
_________________________________________________________
________________________________________________________
13) What kind of cooperation and coordination do you have with investors operating in the
kellem wellega zone Dembidollo town.
_________________________________________________________
__________________________________________________________

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B) The fooling questions are designed to be answered by people who are engaged in
investment activities in the Kellem welega Dembi Dollo town.
1. What is the investment activity your are operating orengaged in?
a) Agriculture  b) Manufacturing  C) Investment insocial service sector 
d) Forestry 
e) Others (Specify _______________________________________________
2. Problems the investor’s face
a) Social problems  b) Government/ Political
c) Infrastructure
d) Others (Specify) _________________________
3. Support or incentives given form government
a) Loan from Bank  b) Fee Land 
C) Exemption from tax
d) market for your good or service e) others (Specify) _________________________
4. What do you think is the solution to enhance level of the activity? (Describe your idea or
suggestion) _________________________________________________________
___________________________________________________________________

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 Jimma university
College of Business and economics
Department of Management
Interview for trade and investment Bureau, and urban Development.
1) What is the role of your bureau in investment activity?
_____________________________________________
________________________________________________
2) What were their major investment activities accomplished in ten past Decade in the
Kellem wellega Zone Dembi Dollo town?
A) Water supply  B) power generation 
C) Construction of largescale industries 
d) Others (Specify) ____________________________________
3) What are the major factor that contributed to low level of investment in Kellem wellega
zone Dembi Dollo town?
A) Lack of resource
b) Climatic factors
C) Political factors  d) lack of motivation 
4) What do you think can contribute to encourage potential investors and activate the level of
investment activities in Kellem Welleg a zone Dembi Dollo town? Please specify
____________________________________________________________________
____________________________________________________________________

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