A Study of the Factors Contributing to the Development of Tanzania Derivatives Markets

Abstract

Purpose: The study's goal was to identify the key characteristics that drive the establishment of efficient and effective derivative markets in Tanzania. 
 Methodology: The study employed a descriptive research approach. As a consequence of the deliberate non-probability selection approach, the population for the census was taken from the Dodoma Securities Exchange brokers, financial/investment advisors, and senior officials from the Capital Markets Authority of Tanzania. We used both primary and secondary data. The acquired data was checked, corrected, and coded before being analyzed with the Statistical Package for Social Sciences (SPSS) software. To summarize the data, descriptive statistics such as percentages and frequencies were employed. Tables, charts, and diagrams are used to present data. 
 Findings: It was stated that because demand for derivatives is anticipated to be low, derivatives instruments would be scarce for hedging in the local market. Derivatives trading will increase market turnover in the underlying markets while also increasing the country's GDP. The performance of Tanzania's derivatives markets will be heavily impacted by the political climate, derivatives expertise, participant attitude, financial infrastructure, and overseas competition. It was determined that the central government's assistance in the development of derivatives markets could be assessed as reasonable, but investor knowledge of derivatives instruments was rated as poor. 
 Conclusion: According to the research findings, government expenditure on financial infrastructure is insufficient for effective derivatives markets, and taxes impedes derivatives market growth. 
 Recommendations: As a result, the report suggests that the government enhance its intervention by increasing expenditure on financial infrastructure and enacting tax policies that do not hinder derivative trading. Sensitization should also be carried out to raise public knowledge about the function of derivatives trading.