Money Market Fund in Kenya: A Guide to Stable Low-Risk Investment

Carson O.
6 Min Read

Investing early is crucial in achieving financial goals, but finding the right opportunities can be challenging. In this article, we will explore the benefits of investing in a money market fund in Kenya and how to earn a stable passive income with them. We will delve into the definition and risks associated with money market funds and provide an in-depth analysis of the top options available in Kenya as of the date of publication. It is important to note that investing in money market funds is not a quick way to get rich and requires patience and perseverance to see significant returns.

Pay attention:

What are money market funds?

A money market fund (MMF) is a collective investment scheme, where a company certified and regulated by the Capital Markets Authority (CMA) provides an opportunity for potential investors to pool resources (money) which will be invested in low-risk but very profitable business ventures. MMFs are a type of unit trust. Other unit trust investment options include:

Money market funds are usually considered very safe investment options as compared to forex markets as the companies offering these investment opportunities take their time to understand and evaluate which business ventures are risk-free.

Usually, money market funds are managed by a professional money manager who is in charge of collecting money from different investors and seeing which business is profitable and has a low risk if one invests in it.

Also, read what are capital gains and how they are taxed.

How much money do you need to invest in a money market fund in Kenya?

One advantage of a money market fund in Kenya is the flexibility in the amount you wish to invest. With as low as Ksh.1,000 money market funds can yield a profit of between 4% to 11%+ compounded yearly.

Compound interest is more profitable than simple interest. Click HERE to understand the difference between compound and simple interest.

What forms of investments do money market funds invest in?

Since money market funds choose low-risk business options, they usually invest in but are not limited to 3 options:

  1. Treasury bills – This is a short-term government loan funded by Kenyan citizens through the Central Bank of Kenya (CBK).
  2. Fixed deposits
  3. Commercial paper

Also, read how to file your KRA NIL returns correctly.

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What are the requirements to join a money market fund in Kenya?

Money market funds are regulated by law and therefore, several mandatory documents are needed to register and start investing. These requirements are:

  • A Kenyan bank account
  • National ID
  • A photo of you (passport size)
  • A filled application form from the relevant MMF investment provider.

Which companies offer money market fund investment opportunities?

In Kenya, many companies offer investment opportunities in money market funds. Here is the list of the top companies you should consider investing in;

  • Co-op Money Market Fund
  • CIC Money Market Fund
  • Zimele Money Market Fund
  • Genghis Capital Money Market Fund/Safaricom Mali Unit Trust
  • Britam Money Market Fund
  • Equity Bank Money Market Fund
  • ICEA Money Market Fund
  • Sanlam Money Market Fund
money market fund in kenya

Also read, 15 Highly Lucrative Small Business Ideas.

How can you determine the best MMF to invest in?

Money market funds are not the same, with some having higher profit margins while others have increased risk. In general, here are the questions to ask before choosing a good money market fund.

  1. How long the company has been in the money market fund business?
  2. Is the company regulated by the Capital Markets Authority?
  3. How much interest do they pay?
  4. Can you withdraw your money any time you want?

What are the risks associated with money market funds?

money market fund in kenya
risks associated with mmfs

Investing in money market funds is not all sunshine without rain. This investment choice has its share of risks and disadvantages and investors should do a background check and ensure there are mitigation options in case of losses. Risks associated with MMFs include:

  1. Risk of low returns as this investment avenue is not the most profitable.
  2. Risk of credit default where the issuer of the security in which the money market fund is invested may default on its obligations.
  3. The value of the securities held by the MMF decreases if the interest rates increase.

Important to note is that most companies regulated by the CMA have mitigated these risks. However, remember to do a background check before investing in any money market fund.

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To sum up, while investing in money market funds may offer the potential for a steady and consistent return, it is crucial to be aware of the associated risks and to perform a comprehensive analysis before committing to such an investment.

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I am a multi-faceted professional with a strong foundation in Business and Finance, honed since 2020. Additionally, I possess a deep passion for automobiles, serving as an avid car enthusiast. In parallel to my diverse interests, I am also a dedicated student pursuing a career in the medical field.