What is a Money Market Fund?
A money market fund (MMF) is a type of investment where your money is pooled with other investors’ money and invested in safe, short-term securities like Treasury bills, bank deposits, and commercial paper.
Think of it as: A smarter savings account managed by professionals.
How It Works
Step 1: You invest money (from KES 1,000)
Step 2: Fund managers pool your money with thousands of other investors
Step 3: They invest in low-risk, short-term investments:
- Treasury bills
- Bank fixed deposits
- Commercial paper (short-term company loans)
- Repo agreements
Step 4: You earn returns (currently 10-14% per year)
Step 5: Withdraw anytime you need (usually 1-3 days)
Why Money Market Funds?
Higher Returns Than Banks
Savings account: 0-7% per year
Fixed deposit: 7-11% per year
Money market fund: 10-14% per year
Example: KES 100,000 for one year
- Savings account (5%): Earn KES 5,000
- Fixed deposit (9%): Earn KES 9,000
- MMF (12%): Earn KES 12,000
Difference: KES 7,000 more with MMF!
Safe and Low Risk
Invested in:
- Government securities (safest)
- Top-rated bank deposits
- High-quality commercial paper
Regulated by: Capital Markets Authority (CMA)
Risk: Very low (though not zero like bank deposits)
History: Kenya MMFs have strong track record—no major losses.
Easy Access to Money
Unlike fixed deposits (money locked for months/years), MMFs allow withdrawals.
Withdrawal time:
- Request withdrawal online/via app
- Money in your bank account: 1-3 business days
- Some funds offer same-day/next-day
No penalties for withdrawing (unlike fixed deposits).
Low Minimum Investment
Start with KES 1,000-5,000 (varies by fund).
Add more anytime—even KES 500 top-ups accepted by many.
No maximum—invest millions if you want.
Professional Management
Expert fund managers make investment decisions.
You don’t need to:
- Choose which Treasury bills
- Negotiate with banks
- Monitor markets daily
They handle everything—you just watch your money grow.
Top Money Market Funds in Kenya
CIC Money Market Fund
Minimum: KES 1,000 Returns: ~12-13% per year Withdrawal: 2-3 days Known for: Consistency, good customer service Management: CIC Asset Management
Sanlam Money Market Fund
Minimum: KES 5,000 Returns: ~12-14% per year Withdrawal: 1-2 days Known for: Good returns, strong performance Management: Sanlam Investments
Zimele Money Market Fund
Minimum: KES 1,000 Returns: ~11-13% per year Withdrawal: 2-3 days Known for: Accessibility, low minimum Management: Zimele Asset Management
ICEA Lion Money Market Fund
Minimum: KES 5,000 Returns: ~11-13% per year Withdrawal: 2-3 days Known for: Part of ICEA Lion Group (insurance + investments)
Old Mutual Money Market Fund
Minimum: KES 5,000 Returns: ~11-12% per year Withdrawal: 2-3 days Known for: Established brand, reliable
Britam Money Market Fund
Minimum: KES 5,000 Returns: ~11-13% per year Withdrawal: 2-3 days Known for: Part of Britam Group
Note: Returns vary quarterly. Check latest performance before choosing.
How to Invest in a Money Market Fund
Step 1: Choose a Fund
Compare:
- Minimum investment (can you afford it?)
- Recent returns (last 1-3 years)
- Withdrawal time (how fast do you need access?)
- Reputation (check reviews, CMA website)
Tip: All top funds perform similarly—choose based on convenience.
Step 2: Visit Provider or Apply Online
Online (easiest):
- Visit fund’s website
- Find “Invest” or “Open Account”
- Fill application form
- Upload documents
In-person:
- Visit fund manager’s office
- Fill paper forms
- Submit documents
Step 3: Provide Documents
Usually need:
- National ID (copy)
- KRA PIN (copy)
- Passport photo
- Signed application form
- Bank account details (for withdrawals)
Sometimes: Proof of residence (utility bill, bank statement)
Step 4: Wait for Approval
Time: 1-5 business days
Notification: SMS/email when account ready
Account number: Unique to you
Step 5: Make Initial Deposit
Methods:
- M-Pesa: Paybill to fund’s number
- Bank transfer: To fund’s bank account (use your account number as reference)
- Cheque: Deliver to fund office
- Standing order: Automate monthly deposits
Processing: Usually same day or next day
Step 6: Confirm Investment
Check:
- Account balance (via SMS, email, or online portal)
- Number of units purchased
- Current unit price
Units: Your money divided by unit price = units you own
Example: Invest KES 10,000, unit price is KES 10.50 = 952.38 units
Step 7: Watch It Grow
Daily accrual: Interest earned daily
Unit price increases over time (e.g., KES 10.50 today, KES 10.55 next month)
Your wealth: Units × unit price
Understanding Unit Prices
Money market funds use “units” similar to shares.
Unit price: Value of one unit (changes daily as fund earns returns)
Example:
- Day 1: Unit price KES 10.00, you buy 1,000 units (invest KES 10,000)
- Day 30: Unit price KES 10.10 (fund earned returns)
- Your value: 1,000 × 10.10 = KES 10,100 (gained KES 100)
Unit price only goes up (in well-managed funds)—reflects accrued interest.
Fees and Costs
Management Fee
Annual charge: Usually 1.5-2.5% of your investment per year
Deducted automatically from fund returns (you don’t pay separately)
Example: Fund earns 15%, charges 2% fee → You get 13%
Why: Pays fund managers, operations, regulations
Custodial Fee
Small fee for holding your investments
Usually included in management fee
Entry/Exit Fees
Most funds: No entry or exit fees
Some funds: May charge 1-2% when you withdraw early (within first year)
Check before investing
Total Cost
Effective expense ratio: ~1.5-2.5% per year
Still cheaper than: Many actively managed equity funds (3-5%)
Returns quoted: Usually after fees (what you actually get)
When to Use Money Market Funds
1. Emergency Fund
Perfect use case:
- 3-6 months of expenses
- Safe, accessible
- Earns much more than savings account
Don’t use stocks for emergency fund (too risky) Don’t use fixed deposits (money locked) MMFs strike perfect balance
2. Short-Term Savings (1-3 years)
Examples:
- Saving for wedding
- Down payment for car/land
- Holiday fund
- Business capital
Why MMFs: Better returns than bank, accessible when you need it
3. Parking Money Between Investments
Sold shares, waiting to reinvest: Put proceeds in MMF
Received lump sum (inheritance, bonus): Park in MMF while deciding what to do
Better than: Sitting in savings account earning nothing
4. Conservative Portion of Portfolio
Balanced portfolio:
- 30% stocks (growth)
- 50% MMF (stability)
- 20% other (real estate, bonds)
MMFs: Reduce overall portfolio risk
5. Retirees Needing Liquidity
After retirement:
- Need regular access to money
- Can’t afford stock market volatility
- MMFs provide decent returns + accessibility
Money Market Funds vs Other Options
MMF vs Savings Account
| Feature | MMF | Savings Account |
|---|---|---|
| Returns | 10-14% | 0-7% |
| Access | 1-3 days | Instant |
| Safety | Very safe | 100% safe (insured) |
| Minimum | KES 1,000-5,000 | Often KES 0 |
Best for MMF: Money you don’t need instantly Best for savings: Day-to-day spending, instant needs
MMF vs Fixed Deposit
| Feature | MMF | Fixed Deposit |
|---|---|---|
| Returns | 10-14% | 7-11% |
| Access | 1-3 days | Locked (3 months-5 years) |
| Penalty | None | Yes (if withdraw early) |
| Flexibility | High | Low |
Best for MMF: When you might need money Best for fixed deposit: Money you definitely won’t touch
MMF vs Treasury Bills
| Feature | MMF | T-Bills |
|---|---|---|
| Returns | 10-14% | 15-17% |
| Minimum | KES 1,000-5,000 | KES 100,000 |
| Access | 1-3 days | Locked 91-364 days |
| Management | Automatic | You manage |
Best for MMF: Small amounts, need flexibility Best for T-Bills: Large amounts (KES 100k+), higher returns, can lock money
Risks and Downsides
Not KDIC Insured
Bank deposits: Insured up to KES 500,000 by Kenya Deposit Insurance Corporation
MMFs: Not insured—if fund collapses, you could lose money
Reality: Very rare, MMFs highly regulated, invest in safe assets
Mitigation: Choose reputable, well-established funds
Interest Rate Risk
If interest rates drop, MMF returns decrease
Example: Central Bank lowers rates → Treasury bill rates fall → MMF returns fall from 13% to 10%
You can’t do much, but returns still better than savings accounts
Credit Risk
If a bank or company MMF invested in defaults, fund loses money
Very rare: MMFs invest in highest-rated securities
Protection: Funds diversify (don’t put all money in one bank)
Liquidity Risk
1-3 day withdrawal time might be too slow for emergencies
Keep some cash in savings account for true emergencies
MMF for emergency fund backup—not your only accessible money
Returns Not Guaranteed
Unlike fixed deposits (guaranteed 10% for example), MMF returns fluctuate
Usually within 10-14% range, but could be higher or lower
Historical performance: Not a guarantee of future returns
Maximizing MMF Returns
1. Invest Lump Sums ASAP
Time in market matters—the sooner you invest, the sooner you earn
Don’t wait: If you have KES 50,000, invest today, not next month
2. Reinvest, Don’t Withdraw
Leave money to compound
Example:
- Year 1: KES 100,000 earns 12% = KES 12,000
- Year 2: KES 112,000 earns 12% = KES 13,440
- Year 3: KES 125,440 earns 12% = KES 15,053
Power of compounding: Earn returns on returns
3. Automate Monthly Deposits
Set standing order from salary account to MMF
Example: KES 5,000 every month
Benefit: Forced savings, dollar-cost averaging
4. Choose Fund with Lowest Fees
All else equal, lower fees = higher returns
Compare total expense ratios
5. Monitor Performance Quarterly
Check: Is your fund underperforming compared to others?
If yes: Consider switching (but give it time—1 bad quarter doesn’t mean much)
Tax on Money Market Funds
Withholding tax: 15% on interest earned
Deducted automatically before reflected in returns
What you see is what you get: If fund says 12%, that’s after tax
No further action needed for most investors
Common Mistakes
- Treating MMF like a bank account: It’s not instant access—keep emergency cash elsewhere
- Choosing based on last month’s returns: Look at 1-3 year performance
- Ignoring fees: Higher fees eat into returns
- Withdrawing too often: Let it compound
- Not automating deposits: Discipline matters
- Investing money needed tomorrow: MMF for money you won’t need for at least a month
- Expecting stock-like returns: MMFs are stable 10-14%, not volatile 20-30%
- Not diversifying: If investing large amounts (millions), split across 2-3 funds
Checklist: Starting with an MMF
✅ Compared top MMFs (CIC, Sanlam, Zimele, etc.) ✅ Checked minimum investment (can I afford it?) ✅ Reviewed returns (last 1-3 years) ✅ Verified fund with CMA (cma.or.ke—licensed?) ✅ Gathered documents (ID, KRA PIN, bank details) ✅ Applied (online or in-person) ✅ Received account number ✅ Made first deposit (M-Pesa, bank transfer) ✅ Confirmed investment (check balance/units) ✅ Set up standing order for monthly deposits ✅ Added withdrawal time (1-3 days) to financial plan
Next Steps
- Choose one MMF today (start with CIC, Sanlam, or Zimele)
- Apply online this week
- Deposit KES 5,000-10,000 to start
- Set standing order for monthly additions
- Use for emergency fund (build 3-6 months expenses here)
- Monitor quarterly—check statement every 3 months
- Let it grow—resist urge to withdraw for non-emergencies
- Once comfortable, increase monthly deposits
- Combine with other investments (stocks, bonds) for balanced portfolio
Money market funds are the easiest way to earn significantly more than bank accounts while keeping your money safe and accessible. Start small, automate deposits, and watch your savings grow at 10-14% per year. Perfect for emergency funds, short-term goals, or the conservative portion of your investment portfolio. Open your MMF account today!