Interest Rate Drops to Hit Money Market Funds

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Kenyan Wall Street
June 16, 2025

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Why Your MMF is Set to Pay Less

Money market funds, which make up the bulk of collective investment schemes, are set to start paying less returns, as the government moves to lower commercial interest rates and stem its appetite for domestic debt.

  • With the CBK’s persistent climb downwards in interest rates, most bond auctions are now returning yields under 10%, which means you are now making less from your MMF’s as funds roll over assets at today’s lower rates.

  • More than two million Kenyans are now invested in collective investment schemes, with the largest proportion being money market funds.

  • The industry has grown almost ninefold, from just a total of 57 billion shillings in 2016 to almost half a trillion shillings by the end of March 2025.

Wary of pyramid schemes and other cons, more and more Kenyans have been seeking safer, regulated investments. And the markets have noticed, pushing fund managers to invest heavily in marketing, splurge on digital onboarding, and do everything they can to bring in retail investors. 

It has become such an attractive market that Safaricom’s own money market fund, Ziidi, has seen assets-under-management grow more than 331% in just three months. 

Much of this growth has been coming from the government’s insatiable appetite for loans, sweeping up every available shilling in the market, in addition to borrowing externally. 

You may ask why changes in interest rates impacting government securities will impact you MMF and the answer is simple. Since MMF’s mostly hold a basket of government securities, many allocating over 60% to bonds and t-bills, lower interest rates will obviously have an impact on your return. 

Looking ahead, the industry faces a key question: will Kenya’s millions of new investors stay patient with shrinking returns, or will they seek out riskier alternatives in search of higher yields? Ultimately, the coming quarters will test how well both managers and investors adapt as Kenya’s “easy yield” era winds down.

Stay updated on this and other important news on The Kenyan Wall Street.

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Poverty: a temporary financial low, curable by money.

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