I run a savings group on Facebook and I have always recommended that people put their savings in a
money market fund where they can earn better interest than in a bank's saving
account.
In layman's terms, I
would describe a money market fund as a chama
(investment group) where members put their money together to get a huge lump
sum which they then invest in something big and earn interest, dividends or
profit, which is then distributed to members based on their contribution.
In technical terms, a money market fund is a form of unit
trust. A unit trust is a collective scheme where many people pool their money
together and then it is invested by a professional investor in things like
treasury bills, bonds, commercial paper, overnight lending, etc.
Many money market funds usually earn an interest of over 10
per cent per year (fluctuating depending on the performance of the markets. This year there are funds that have not gone below 10%, while others barely make it to 10%), which is better than a bank's two per cent. Interest is
calculated every weekday, but compounded every month. The rates tend to
fluctuate, though. You can check the change in interest rates on your fund
manager's website or in the business pages of the newspapers.
How to join a money
market fund:
Different
money market funds have different requirements. They have a minimum initial
deposit and amount of top-up. You can deposit a lump sum; you can top up
the stipulated amount regularly or intermittently.
Usually, you are allowed one
free withdrawal every month, but subsequent withdrawals are charged a certain
amount determined by your fund manager. They charge an annual fee, usually of 2
per cent (usually not per person, but on the whole fund, so members cost-share
this cost) and a withholding tax of 15 per cent on interest, but even after
subtracting these, the interest earned is usually still higher than what you
would earn in the bank.
To join, you
fill in the forms and make your first deposit. In your form you can decide to
make regular contributions and choose to do so by check-off system, which makes
your savings automatic, so you are able to save even if you lack discipline. You will get monthly statements showing you how much
interest your money has earned minus the withholding tax.
To withdraw money, you fill in a form (or send instructions) and then wait for two to three working days for the money to be transferred to your bank account. What I like about this: I find it too much of a hustle. I can’t get my money instantly, and I have to fill in forms and then wait for days … when I think of all the drama involved, I just let my savings be and they continue to grow until I actually need them for the project I was saving for.
Some money market funds can be joined through a mobile phone USSD code e.g. *480# for Old Mutual. Most money market funds also have a pay bill number to help you make deposits conveniently, but remember Mpesa charges apply.
To withdraw money, you fill in a form (or send instructions) and then wait for two to three working days for the money to be transferred to your bank account. What I like about this: I find it too much of a hustle. I can’t get my money instantly, and I have to fill in forms and then wait for days … when I think of all the drama involved, I just let my savings be and they continue to grow until I actually need them for the project I was saving for.
Some money market funds can be joined through a mobile phone USSD code e.g. *480# for Old Mutual. Most money market funds also have a pay bill number to help you make deposits conveniently, but remember Mpesa charges apply.
Kenyan money market funds:
Here are some money market funds you
can research on and choose from. I prefer these ones (2016) because they rarely seem
to go under 10 per cent. Zimele is here because it doesn't require very high
contributions, especially for those who are saving Sh200 per day, and it has
been performing relatively well this year:
Fund
|
Minimum
initial fee
|
Top-up
amounts
|
Fees
|
*Amana
Capital
|
Sh10, 000
|
2, 500 and above
|
2% p.a.
|
*Apollo
|
Sh10, 000
|
Sh2, 000 and above
|
2% p.a.
|
*Madison
Asset
|
Sh50, 000
|
Sh5, 000 and above
|
2% p.a.
|
*Pan
Africa Pesa+
|
Sh2,500
|
Multiples of Sh1,000
|
2% p.a
|
*Zimele
|
Sh250
|
Any amount
|
2% p.a
|
*GenCap Hela by Genghis Capital (affiliated with Chase Bank), used to be one of the best, but
it was suspended after the collapse of Chase Bank and was not revived even
after Chase Bank reopened.
Comparison of performance in 2016:
Fund
|
1st January 2016
|
26th June 2016
|
9th July 2016
|
12th Aug. 2016
|
||||
Daily yield
|
Annual rate
|
Daily yield
|
Annual rate
|
Daily yield
|
Annual rate
|
Daily yield
|
Annual rate
|
|
Amana
|
17.90
|
19.44
|
13.24
|
14.08
|
12.06
|
12.75
|
11.68
|
12.32
|
Apollo
|
13.30
|
14.14
|
10.81
|
13.32
|
10.74
|
13.23
|
||
Britam
|
12.44
|
13.18
|
Below 10%
|
Below 10%
|
9.54
|
9.97
|
Below 10%
|
Below 10%
|
CIC
|
15.79
|
16.79
|
Below 10%
|
Below 10%
|
10.89
|
11.37
|
11.22
|
11.73
|
Madison
|
17.43
|
18.90
|
12.28
|
13.43
|
11.35
|
11.96
|
11.40
|
12.01
|
Pan Africa (Sanlam)
|
16.60
|
18.09
|
11.45
|
12.13
|
11.04
|
11.67
|
11.40
|
12.01
|
Zimele
|
11.00
|
11.46
|
10.34
|
10.75
|
10.34
|
10.75
|
10.34
|
10.75
|
·
Daily yield
means the amount of interest per year you would earn if you put money in a money market fund for a day.
·
Annual rateis the average yearly interest earned by members who have put their money in
the fund.
Here are the contact details, but
please note that money market funds are not just for people in Nairobi. Most of
these companies have a branch network countrywide and with mobile money (money
transfer) and email, you can make your contributions and communicate via email
from any part of Kenya and even the diaspora.
Fund
|
Contact details
|
Amana Shilling Fund
|
Amana Capital Limited, 2nd
floor, block C, Saachi Plaza, Argwings Kodhek Road, Kilimani, Nairobi
Tel:
0721700076 or (020)2351735 or (020)2351741/42
Email:
info@amanacapital.co.ke
|
Apollo Money Market Fund
|
APA Insurance, Apollo Centre,
Westlands, Nairobi
Tel: (020)2862000
or (020)3641000
Email: info@apainsurance.org
|
CIC Money Market Fund
|
CIC Asset Management
Tel:
0703099120 or 0703099347 or (020)28223313 or (020)2823347
Email:
cic.asset@cic.co.ke
|
Madison Asset Money Market Fund
|
Madison Asset Management Services,
Madison Insurance House, Upper Hill Close, Nairobi
Tel: (020)2721340 or (020)2864500
Email: info@mams.co.ke
|
Pan Africa Pesa+ Fund (Sanlam)
|
Sanlam (formerly Pan Africa Asset Management), 3rd
floor, Pan Africa Life House, Kenyatta Avenue, Nairobi CBD
Tel: (020)2220559
|
Zimele Money Market Fund
|
Zimele Asset Management Company, 7th floor,
Ecobank Towers, Muindi Mbingu Street, Nairobi CBD
Tel: 0734207662
or 0722207662 or 0733111108/9
Email: info@zimele.net
|
OTHER MONEY MARKET FUNDS
Fund
|
1st January 2016
|
11th August 2016
|
Minimum initial amount
|
Top-ups
|
Annual fee
|
||
Daily yield
|
Annual rate
|
Daily yield
|
Annual rate
|
||||
African Alliance Shilling Fund
|
11.26%
|
11.88%
|
7.49%
|
7.76%
|
Sh100, 000
|
Sh1, 000, though they say any
amount
|
1%
|
Britam
|
12.44%
|
13.18%
|
9.44%
|
9.86%
|
Sh100, 000
|
Sh10, 000
|
2%
|
CBA
|
12.81%
|
13.53%
|
7.96%
|
8.24%
|
Sh100, 000
|
Sh20, 000
|
2%
|
EIB Equity
|
12.71%
|
13.48%
|
6.64%
|
6.85%
|
Sh1, 000
|
Sh1, 000
|
|
*GenCap Hela
|
17.26%
|
18.41%
|
Suspended
|
Suspended
|
Sh500
|
Sh500
|
2%
|
ICEA LION
|
16.48%
|
16.74%
|
8.98%
|
9.39%
|
Sh10, 000
|
Sh2, 000
|
|
Nabo Africa
(US dollars)
|
$94.15
|
$94.15
|
$101.1
|
$101.1
|
$50,000 (USD)
|
Call them for more information
|
2.5% Redemption fee 1%
|
Old Mutual (merged with UAP)
|
8.42%
|
8.75%
|
7.40%
|
7.66%
|
Sh1, 000
|
Sh1,000
|
3%
|
STANLIB
|
14.78%
|
15.82%
|
6.91%
|
7.13%
|
Sh10, 000
|
Sh5, 000
|
2%
|
Contact details:
Fund
|
Contact details
|
African Alliance Shilling Fund
|
African Alliance Kenya Investment
Bank, 4th floor, Kenya Re Towers, off Ragati Road, Upperhill, Nairobi
Tel: (020)
2777000
Email: info@africanalliance.co.ke
|
Britam Money Market Fund
|
Britam Asset Managers (Kenya)
Limited, 5th floor, Britam Centre, at the junction of Mara Road and Ragati
Road, Upperhill, Nairobi
Tel:
0703094091 or (020) 2833000
|
CBA Money Market Fund
|
Commercial Bank of Africa,
Mara/Ragati Road, Upperhill, Nairobi
Tel: (020)
2884000
Email: contact@cbagroup.com
|
EIB Equity Money Market Fund
|
Equity Investment Bank, Equity
Centre, Hospital Road, Upperhill, Nairobi
|
GenCap Hela
|
Genghis Capital, 6th floor, Prudential Insurance Building, Wabera Street, Nairobi CBD
Tel: (020)2774750/1/2
Email: hela@gencapunittrust.com
|
ICEA LION Money Market Fund
|
ICEA LION Centre, Riverside Park,
Chiromo Road, Westlands, Nairobi
Tel:
0719071999 or (020)2750000 or 0730151000
Email: wecare@icealion.com
|
Nabo Africa Money Market Fund
|
Nabo Capital (affiliated with
Centum), 7th floor, International House, Mama Ngina Street, Nairobi CBD
Tel:
0709902700 or (020)2286700
Email: info@nabocapital.com
|
Old Mutual Money Market Fund
*UAP merged with Old Mutual
|
Old Mutual Investment Group,
corner of Mara Road and Hospital Road, Upperhill, Nairobi
Tel:
(020)2829800
|
STANLIB Money Market Fund
|
Stanlib Kenya, 1st floor, Liberty
House, Mamlaka Road, Nairobi
Tel:
0711076111 or (020)3268508
|
Advantages of money market funds:
- They are a low-risk, high liquidity method to grow your money. Low risk means you can’t lose the principal amount you put in and your money grows every month. The only risk I see is if the fund collapsed with your money. High liquidity means you can get your money back quickly when you need it (within three working days).
- You earn compound interest not simple interest. So the interest you earn is added to your principal each month and then that new principal earns more interest. Simple interest is calculated on the principal alone, but compound interest is calculated on the principal and interest earned. So for example, for simple interest of 1% for Sh10, 000, the first month you’ll earn Sh100 (1% of the principal 10, 000), the second month you will earn another Sh100 (1% of 10,000), so in total you’ll have Sh10, 200. But in compound interest, the first time you’ll earn Sh100 (1% of 10, 000) but the next month interest will be calculated as 1% of 10, 000 + 100 (principal plus interest to make new principal). So 1% of 10, 100 = 101. So the second month on compound interest, you’ll have a total of 10, 201. The third month on simple interest you’ll have 10, 300; on compound interest 10, 303. So basically your money grows at a faster rate.
- Your money is invested by professionals to ensure maximum return and low risk.
- You can top up at any time, unlike with a fixed deposit account at a bank where you can’t top up any time.
- Attractive interest. Although the interest rate fluctuates, you get way better interest than you would in an ordinary bank savings account.
Questions to ask a potential fund manager:
- How much is the initial amount needed to join this fund?
- Is the principal secure? Can I lose my money?
- Can I top up any amount and at any time?
- Is there any initial joining fee? Annual management fee? How much? How is it calculated? Are there other (hidden) charges or fees?
- Do you charge for withdrawals? How much?
- Can I get my money on short notice? How fast can I get my money when I need it?
- Can I do automatic top-ups via check-off system?
- Can I top up using mobile money?
- What do I need to join this money market fund (requirements)?
- Do you send client statements? How often? Via email?
- Are there any tax obligations due on my earnings? Principal? Which ones?
- How long has this (money market) fund been around? What’s the average performance of this fund historically? How long have you been around? Can I see the annual report for the fund for last year/ the last few years?
- Who is your custodian/trustee?
- Look out for stability. You don’t
want a fund to collapse with your money.
- Is there anything else I need to know that I may not have asked?
Requirements for joining a money market fund:
- Fill the joining/application forms
- Copy of ID card
- Photographs
- KRA PIN certificate
- Bank deposit or Mpesa confirmation of first deposit
- Utility bill for proof of residence (may or may not be required)
Comparison of how much you’ll earn in a savings account
versus a money market fund:
We’ll use the figure of Sh6000 per
month
Savings in:
|
Interest
|
Amount after 12 months
|
Savings in
|
Interest
|
Amount after 12 months
|
Money market fund
|
10%
|
Sh75843.21 of which Sh72, 000 is
principal and Sh3843.21 is interest. Take away 15% withholding tax. Interest
earned Sh3266.728
|
Savings account
|
2%
|
Sh72, 777.63 of which Sh72, 000 is
principal and Sh777.63 is interest
|
Would you rather earn Sh3266.72 on
your Sh72, 000 or Sh777.63 on your Sh72, 000?
*This is just a guide. Please get current information from the
money market fund(s) of your choice.
