Learn how Money Market Funds work in Kenya. Step-by-step guide

How Money Market Funds Make Money – Simple Guide for Kenyans

How Money Market Funds Make Money – Simple Guide for Kenyans

Are you unsure where to safely grow your savings in Kenya? Banks offer very low interest, SACCOs can be unpredictable, and stocks feel risky. Money Market Funds (MMFs) provide a low-risk, flexible option—but how exactly do they make money?

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What Are Money Market Funds?

Money Market Funds are low-risk investment accounts that pool money from many investors to invest in short-term, safe financial instruments regulated by CMA, NSE, and CBK, including:

  • Treasury bills (T-bills) – short-term government loans (CBK/Treasury)
  • Commercial papers – short-term loans to Kenyan businesses
  • Bank deposits – short-term deposits in reputable banks

Why Kenyans love MMFs: Safer than stocks, flexible withdrawals, and typically better returns than bank savings accounts.

Related reading: Top Money Market Funds in Kenya 2025

How Money Market Funds Make Money

Step 1: Pooling Money

Investors contribute small amounts. Example: 1,000 Kenyans investing KES 10,000 each create a fund of KES 10,000,000.

Learn how to start investing in Kenya even with small amounts.

Step 2: Investing in Safe Assets

The fund manager invests the pooled money in treasury bills, commercial papers, and bank deposits, earning interest.

Step 3: Deducting Management Fees

The fund deducts a small annual fee (0.5–1%) for managing your money.

Step 4: Distributing Returns

The remaining interest is distributed proportionally among investors based on their contribution.

Pro tip: Why Kenyan SACCOs sometimes underperform MMFs

Examples – How Much You Can Earn

InvestorInvestmentYearly Interest (Estimated 7%)
AliceKES 10,000KES 700
BobKES 20,000KES 1,400
CharlieKES 50,000KES 3,500
[Chart Placeholder: Investment vs Returns]

Pros and Cons of Money Market Funds in Kenya

ProsCons
Low-risk, safer than stocksLower returns than equities
Flexible withdrawalsReturns vary slightly
Better than bank savingsManagement fees reduce earnings slightly
Regulated by CMANot for very high-risk, high-return goals

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TL;DR – Key Takeaways

  • MMFs pool money to invest in safe, short-term Kenyan assets.
  • Investors earn interest after a small management fee.
  • Low-risk, flexible, and generally better than bank savings.
  • Ideal for short-term savings or emergency funds.
  • Not suitable for very high-risk, high-return goals.

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About the Author

Postine Ngeli

Postine Ngeli – Blogger & Kenyan Finance Enthusiast. I create practical guides on investments, SACCOs, Money Market Funds, and personal finance for everyday Kenyans.

Disclaimer

The content provided is for educational purposes only and does not constitute financial advice. Always consult a licensed financial advisor before making investment decisions.

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