In Kenya, where saving is a hustle for many, money market funds (MMFs) have become a go-to for those seeking low-risk investments with steady returns.

With funds like Ndovu offering 15.51% annualised returns and Britam at 12.91% in 2024, MMFs seem like a dream, better than bank savings and more accessible than Treasury bills.

But the question continues to arise: can you lose money in a money market fund in Kenya?

For sceptical investors cautious of “too good to be true” promises, understanding the risks and realities is key.

This article looks into MMF stability, credit risks, and how they compare up against SACCOs and unit trusts, offering transparency to help Kenyans invest wisely in 2025.

What Are Money Market Funds in Kenya?

Money market funds are a type of unit trust that pool investors’ money to buy short-term, low-risk securities like Treasury bills, commercial paper, and bank deposits.

Regulated by the Capital Markets Authority (CMA), MMFs are managed by trusted providers like CIC, Sanlam, and Cytonn, with funds held by custodians in Tier 1 banks.

They’re popular for their liquidity (withdrawals in 2–5 days), low entry points (as little as KSh 100), and returns often outpacing inflation, unlike SACCOs’ rigid terms or bank accounts’ paltry 2–5% interest.

But are they risk-free? Not quite. While MMFs are among Kenya’s safest investments, losses, though rare, can happen. Let’s unpack the risks and realities.

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Key Risks of Money Market Funds in Kenya

1. Credit Risk: When Issuers Default

Credit risk arises when the issuers of securities in an MMF’s portfolio, say, a company issuing commercial paper, fail to repay.

A notable case was Amana Capital’s 2017 loss when Nakumatt’s commercial paper defaulted, slashing returns for investors. While MMFs diversify to minimise this, a major default can dent your principal.

• Reality for Kenyans: CMA-regulated MMFs invest heavily in Treasury bills (government-backed, near-zero risk) and vetted corporate papers. Still, check your fund’s portfolio transparency; providers like CIC publish asset breakdowns.

2. Liquidity Risk: Access Delays

Liquidity risk occurs when an MMF can’t quickly sell its securities to meet withdrawal demands, especially during market stress.

Unlike SACCOs, which may lock funds for 60 days, MMFs typically process withdrawals fast, but rare market freezes (e.g., during COVID-19) could cause delays.

• Reality for Kenyans: Most MMFs maintain cash reserves and invest in liquid T-bills, ensuring quick access. Compare this to SACCOs, where exit delays are common, making MMFs a better emergency fund option.

3. Interest Rate Risk: Returns Fluctuation

When interest rates rise, the value of an MMF’s fixed-income securities (like T-bills) can dip, lowering returns. Kenya’s 2024 inflation (5.1%) and central bank rate (12.75%) have kept MMF yields attractive, but a sharp rate hike could trim gains.

• Reality for Kenyans: MMFs invest in short-term securities (under one year), reducing rate sensitivity. Losses are unlikely, but returns may vary, e.g., from 15% to 12% annually.

4. Management Fees: Eating into Gains

MMFs charge fees (1–2% annually), which can erode returns if poorly managed. High fees on low-yield funds could even lead to negative real returns after inflation.

• Reality for Kenyans: Compare fees; Sanlam’s 1% is lower than some at 2%. Transparent providers disclose fees upfront, unlike some SACCOs with hidden costs.

5. Rare but Real: Fund Failure

While no CMA-regulated MMF has collapsed, mismanagement of a fund or fraud could lead to losses. The 2017 Amana case showed how poor investment choices (overexposure to Nakumatt) hurt investors, though principal was largely recovered.

• Reality for Kenyans: Stick to CMA-licensed funds with reputable custodians (e.g., KCB, Stanbic). Avoid unregulated schemes promising sky-high returns.

Money Market Funds vs. SACCOs and Unit Trusts

MMFs vs. SACCOs

1. Liquidity: MMFs offer withdrawals in days; SACCOs often require 60-day notices or tie funds to loans.
2. Risk: MMFs face credit and rate risks but are diversified; SACCOs risk mismanagement or loan defaults (e.g., Ekeza SACCO’s collapse).
3. Returns: MMFs yield 10–15% (e.g., Ndovu’s 15.51%); SACCO dividends vary (5–12%) and aren’t guaranteed.
4. Access: MMFs start at KSh 100 via mobile apps; SACCOs need membership and higher contributions.

MMFs vs. Unit Trusts

1. Risk Profile: MMFs are low-risk, focusing on short-term securities; other unit trusts (equity, bond) are riskier, tied to stocks or long-term bonds.
2. Returns: MMFs offer steady 10–15%; equity unit trusts can hit 20% but swing wildly.
3. Purpose: MMFs suit emergency funds or short-term goals; unit trusts fit long-term wealth-building.

Are Money Market Funds Safe for Kenyans?

For most Kenyans, MMFs are a safe bet, safer than SACCOs or stocks, with CMA oversight and diversified portfolios.

Losses are rare, tied to extreme events like major defaults or market freezes. In 2024, MMFs managed KSh 208 billion, reflecting trust.

1. Choose Wisely: Opt for funds from established providers (CIC, Britam) with clear portfolios.
2. Diversify: Don’t put all savings in one MMF; mix with T-bills or fixed deposits.
3. Monitor Fees: High fees can erode gains, especially in low-return years.
4. Stay Informed: Check CMA updates. MMFs aren’t risk-free; do your homework! for market trends.

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Why MMFs Still Shine for Kenyans in 2025

Despite risks, MMFs remain a top choice for Kenya’s 13% savings rate population. They offer:

1. Accessibility: Start with KSh 100 via M-Pesa, unlike SACCOs’ high entry barriers.
2. Liquidity: Ideal for emergency funds, unlike SACCOs’ lock-ins.
3. Returns: Outpace inflation (5.1%) and bank rates (2–5%), with Ndovu’s 15.51% leading.
4. Trust: CMA regulation and Tier 1 bank custodians ensure stability, unlike unregulated chamas.

For sceptical investors, transparency is key. MMFs aren’t perfect, but losses are unlikely with due diligence. As Kenya’s financial literacy grows, MMFs bridge the gap between safety and growth.

Take Action: Invest Smart in 2025

Ready to explore money market funds? Here’s how to start:

1. Research: Compare funds or apps like Ndovu, CIC Money. Check returns, fees, and portfolios.
2. Start Small: Invest KSh 1,000 to test the waters, using mobile platforms.
3. Ask Questions: Engage providers or call their helplines.
4. Diversify: Pair MMFs with T-bills or fixed deposits for safety.

MMFs aren’t risk-free, but for Kenyans seeking stable, accessible investments, they’re hard to beat.

Ronnie Paul is a seasoned writer and analyst with a prolific portfolio of over 1,000 published articles, specialising in fintech, cryptocurrency, and digital finance at Africa Digest News.