Money Market Funds in Kenya
Many people in Kenya mistake money market funds to be a get rich scheme instead of a saving method that earns little interests. Money market funds are not a get rich scheme but can earn you a significant interest on your saved money.
In this article, you will learn what money market funds are, reasons as to why you should invest in money market funds, top money market funds in Kenya, guide on how to invest, and other key areas that I will share through the article.
What Are Money Market Funds?
It is a type of unit trust fund that pools or collects money from different investors and invests the money on their behalf.
The money collected from investors are invested in the following areas: Treasury bills, commercial papers, fixed deposits, and other interest-bearing assets.
Types of unit trust funds are as follows: Money Market Funds, Bond Funds, Balanced Funds, and Equity Funds.
Why Invest in a Money Market Fund?
They are low-risk. Money market funds mature quickly, they are backed by the government or issued by reputable financial institution, making them low risk investments.
Liquidity. Most money market funds in Kenya allow investors to access their funds within 24 to 72 hours. They don’t invest all their money, they keep some incase a person wants to withdraw their money.
Affordability. You can start investing with as little as Kes 100 or Kes 1,000. Some money market funds like Ziidi and Zimele allows a person to invest as low as Kes 100.
Consistent Returns. They usually offer daily interest payouts or monthly compounding interest.
Better Returns. Money market funds offer better returns as compared to bank savings accounts or fixed deposits.
Regulation and Oversight in Kenya
In Kenya, money market funds are regulated by a body called Capital Markets Authority (CMA) which ensures that licensed fund managers adhere to strict compliance, transparency and reporting standards.
CMA helps to ensure that fund managers provide regular reports and disclosures to enable investors to track performance of the fund and also ensure transparency.
Top Money Market Funds in Kenya
Also, when it comes to selecting a money market fund, you can do your research on the best money market fund you want to invest with. I have just highlighted some of the popular money market funds in Kenya, but in real sense they are many good money market funds in Kenya out there, it’s you to choose what suits you.
Some of the popular money market funds are as follows:
- CIC Money Market Fund
- NCBA Money Market Fund
- Sanlam Money Market Fund
- Zimele Money Market Fund
- Co-op Money Market Fund
- KCB Money Market Fund
- Ziidi Money Market Fund
- Britam Money Market Fund
How to Invest in a Money Market Fund
Investing in a Money Market Fund is easy if you follow this simple step-by-step process:
1. Choose a money market fund regulated by the Capital Markets Authority (CMA)
2. Fill out an application form. This can be done either physically or online. Filling out the form requires you to go to their offices.
3. Provide identification documents. You will be required to provide your National ID, KRA PIN, and a passport photo. After providing your identification documents, you will be registered by the firm.
4. Fund your account. You will be required to deposit initial money into your money market fund account. You can fund your account through M-Pesa and Bank transfer.
5. Start earning interest. Money market fund interests are calculated daily and paid out monthly.
Risks and Considerations
The fact that money market funds are low-risk does not mean that they are risk-free. These are some of the factors to consider before investing in these MMFs:
Inflation risk: Returns on investment may not always outpace inflation. For example, Kenya has a 6% rate on inflation, choosing a money market fund that gives interest rate of 6% does not add anything to you invested money.
Market conditions: Economic changes can affect interest rates and fund performance either positively or negatively. Negative effects can be reduced interest rates, while positive effects can be increased interest rates.
Fund management: Most people choose a money market fund that are over 20 years because they are experienced and they have a good strategy for investing people’s money.
Who Should Invest in MMFs?
Money market funds are suitable for people who want to do the following:
- Individuals building an emergency fund
- Investors looking to park idle cash
- Anyone who wants safety, liquidity, and a better return than what the banks offer.
- Students and young professionals starting their investment journey
The Future of MMFs in Kenya
With positive changes in technology, Kenyan money market funds have become more accessible than ever.
An example of this is the Safaricom company, which came up with Ziidi money market fund, where you can invest as low as KES 100, and you can deposit money easily through M-Pesa. You can withdraw your money instantly through M-Pesa, also Ziidi money market fund is accessible through the M-Pesa App and USSD Code *334#
This shows that there will be improvements in the money market fund sector in the years to come.
Conclusion
Money market funds provide a convenient way to invest your money rather than saving the money in a bank where it offers none or little interest. Moreso, banks also offer money market fund services, these banks are Kenya Commercial Bank, Co-operative bank among other.
Consider reading my other article on, “Best Saccos in Kenya”, if you want to maximize your investment portfolio.
