Kenya’s KSh 680 Billion Investment Powerhouse: How Money Market Funds Reshaped National Savings

The transformation of Kenya’s savings culture has reached a critical inflection point, as evidenced by the spectacular growth recorded in the third quarter of 2025. According to the latest quarterly report by the Capital Markets Authority (CMA), Collective Investment Schemes (CIS) experienced an unprecedented surge, with Kenyans pumping an additional KSh 83.2 billion into these pooled investment vehicles between July and September. This massive injection of capital pushed the industry’s total Assets Under Management (AUM) up by 14%, from KSh 596.3 billion recorded at the end of the second quarter to a staggering KSh 679.6 billion by September 30, 2025 [source: the-star.co.ke/business/real-estate/2025-11-20-kenyans-pump-ksh-832bn-into-collective-investment-schemes/].

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This quarterly performance is the latest chapter in a long-term success story that few other sectors of the Kenyan economy can match. The CMA report highlighted a significant long-term growth trend within the CIS industry, showing that AUM has ballooned from a modest KSh 56.6 billion in March 2018 to the current KSh 679.6 billion in September 2025, representing an 1,100% increase over seven years. This exponential growth solidifies the CIS sector’s position as a dominant force in the financial landscape, acting as a crucial intermediary for domestic savings and investment mobilization. The Authority attributed this growth to the “overall growth reported by existing CIS funds” as well as “additional funds registered by existing umbrella schemes” and “intensified marketing efforts by the fund managers,” indicating a confluence of market maturity, regulatory enablement, and digital accessibility.

The Engine of Growth: Money Market Fund Dominance

At the heart of this colossal KSh 679.6 billion market are the Money Market Funds (MMFs). These funds continue to dominate the Kenyan investment landscape, accounting for KSh 400 billion, or 58.9%, of total assets under management [source: https://www.google.com/search?q=businessdailyafrica.com/bd/economy/money-market-funds-hit-sh400bn-as-investors-ditch-banks-4043960]. MMFs, favored for their safety, high liquidity, and superior returns compared to traditional bank savings accounts, have become the preferred investment vehicle for both retail and institutional investors.

The popularity of MMFs is intrinsically linked to the macroeconomic environment, particularly the high interest rate regime maintained by the Central Bank of Kenya (CBK) to anchor inflation. The high yields on government securities—specifically Treasury Bills and Bonds—are the primary drivers of MMF returns. MMF managers capitalize on the ability to pool funds to access these high-yielding government instruments, which individual small investors often cannot purchase directly. For instance, recent CBK T-Bill auctions have seen persistent oversubscription, with the 364-day paper offering yields significantly higher than typical commercial bank deposit rates, making MMFs an irresistible alternative for preserving and growing capital [source: standardmedia.co.ke/business/article/2001479815/cbk-t-bills-oversubscribed-as-investor-appetite-remains-high].

Following MMFs, Special Funds commanded KSh 137.8 billion (20.3%) of AUM, with Fixed Income Funds close behind at KSh 136.8 billion (20.1%). The prominence of these three categories—MMFs, Special Funds, and Fixed Income Funds—confirms that the Kenyan investor base remains heavily weighted towards debt, liquidity, and capital preservation rather than growth through equity exposure.

Asset Allocation: Fueling the Government Debt Market

A deep dive into how the KSh 679.6 billion is allocated reveals the critical role CIS play in the national financial ecosystem, particularly in supporting government financing. As of September 30, 2025, investments were heavily weighted in:

1. Government Securities: 45.6% of total assets.
2. Fixed Deposits: 31.8% of total assets.
3. Cash and Demand Deposits: 9.2% of total assets.
4. Offshore Listed Investments: 4.0% of total assets.

This allocation clearly demonstrates that CIS are the largest non-bank funding source for the Kenyan Treasury, essentially channeling almost half of the managed assets directly into government debt. Furthermore, the substantial allocation to Fixed Deposits (nearly one-third of the total) shows that fund managers utilize the banking system heavily to hold and manage cash flows, providing a significant source of institutional liquidity to commercial banks.

The data also reveals the current risk-averse nature of the Kenyan investor. Equity funds and Balanced Funds, which typically offer higher potential returns but carry greater risk, remain minor players. Equity funds represented a mere 0.5% of total assets, and Balanced funds accounted for only 0.2%. This marginal participation reflects the prolonged bearish conditions at the Nairobi Securities Exchange (NSE) and the high domestic inflation rate, which makes the predictable, inflation-beating yields of MMFs far more appealing than volatile stock market returns [source: capitalfm.co.ke/business/2025/11/nse-stocks-hit-3-year-low-as-investors-flee-rising-interest-rates/]. The market, therefore, is primarily utilizing CIS for low-risk capital preservation, not aggressive growth.

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Concentration and Competition: The CMA’s Balancing Act

Despite the proliferation of new schemes, the Kenyan CIS market remains highly concentrated. The report confirms that the top five CIS control KSh 432.6 billion, representing a commanding 63.7% of the entire market [source: cafonline.co.ke/news-detail/cma-report-reveals-top-5-collective-investment-schemes-control-63-7-of-the-market/].

Sanlam Unit Trust Scheme remains the largest player, managing KSh 130.5 billion, or 19.2% of the market. This leadership position is closely followed by the Standard Investment Trust Fund, which manages KSh 102.1 billion (15%). The high concentration suggests that while the sector is growing rapidly, the lion’s share of institutional and retail trust remains vested in a few well-established, legacy fund management houses with deep distribution networks.

However, the CMA is actively working to foster competition and break this dominance. The Authority’s proactive stance was highlighted by the recent licensing of eight new Collective Investment Schemes (CIS) and numerous sub-funds, bringing the total number of registered schemes to 57 [source: kbc.co.ke/cma-approves-eight-new-investment-schemes-for-investors/]. These newly licensed funds, spanning money market, equity, fixed income, and multi-asset categories, were granted to a diverse group of providers, including Swala Capital, Lofty Corban, Sanlam, XENO, Globetec, Tradiam, and Capital A Rejesha Umbrella CIS.

CMA Chief Executive Officer Wyckliffe Shamiah emphasized that this expansion reflects the Authority’s commitment to facilitating market development and contributing to the diversification and deepening of Kenya’s capital markets. The introduction of players like the XENO Unit Trust Scheme and the Capital A Rejesha Umbrella CIS—both featuring USD-denominated funds—signals the regulator’s responsiveness to investor demand for currency hedging tools, a critical feature given the volatility of the Kenyan Shilling [source: https://www.google.com/search?q=reuters.com/markets/currencies/kenyan-shilling-hits-record-low-against-dollar-amid-debt-concerns-2024-02-14/]. This targeted diversification into foreign currency funds and specialized assets like Private Debt (as seen in the Lofty-Corban approvals) is designed to give the domestic market alternatives that compete directly with international wealth management platforms, thereby discouraging capital flight.

The Digital Revolution and Financial Inclusion

The 1,100% long-term growth of the CIS sector is fundamentally a triumph of financial technology and inclusion [source: worldbank.org/en/topic/financialsector/brief/financial-inclusion-and-infrastructure]. The sheer accessibility of MMFs through FinTech platforms and integration with mobile money services has been transformative. Kenyans can now invest small, fractional amounts directly from platforms like M-Pesa or Airtel Money into a diversified portfolio in real-time, bypassing the friction and high entry barriers historically associated with investing. This digitization has democratized investing, enabling millions of retail savers to access institutional-grade financial products.

The CMA’s strategy to support this growth has been multi-pronged, including the implementation of the Capital Markets (Collective Investment Schemes) Regulations, 2023, which provides a modernized, comprehensive regulatory framework for the sector. These regulations streamline the approval process for new funds while enhancing investor protection measures, ensuring that the rapid growth is underpinned by stability and compliance.

However, the intensified marketing efforts noted by the CMA are not just about promoting high returns; they are a necessary response to the growing need for investor education. As products become more complex—moving beyond simple MMFs into multi-asset and specialized funds—the risk profile increases. The CMA and fund managers share the responsibility of ensuring that the vast influx of retail investors fully comprehend the inherent risks of products that are not purely short-term government debt, particularly concerning liquidity risk management in special funds.

Future Challenges and Sustaining Momentum

Despite the bullish figures, the sector faces structural challenges that could threaten the sustainability of this growth:

1. Inflationary Erosion of Real Returns: While nominal returns are high, persistent inflation, driven by volatile food and fuel prices, continuously erodes the real returns on MMFs and Fixed Income Funds. Should inflation continue unchecked, the true benefit of these savings could diminish, causing investors to seek even riskier, or more opaque, high-return avenues outside the regulated market. The CBK’s success in anchoring the Monetary Policy Rate (MPR) will be paramount to maintaining the attractiveness of these yields [source: https://www.google.com/search?q=businessdailyafrica.com/bd/economy/inflation-slows-to-5-8-on-easing-food-prices-4034870].
2. Equity Market Stagnation: The negligible allocation to equity funds (0.5%) highlights a significant failure in the market to channel capital toward domestic listed companies. This means that while savings are mobilized, they are not actively fueling the growth of Kenyan corporate sector through primary market listings. Fund managers and the NSE must collaborate to create more attractive and less volatile equity-based CIS products to diversify the risk profile of the national AUM.
3. Regulatory Depth: The sheer volume of new funds and the complexity of special funds—including those investing in private debt or offshore assets—will place an increasing burden on the CMA’s regulatory oversight and compliance frameworks. Maintaining strict oversight is critical to prevent breaches or mismanagement that could destroy the public trust built over years of consistent growth.
4. Tax Policy Uncertainty: Changes in the fiscal environment, particularly regarding the taxation of MMF returns or capital gains, could instantly reverse the current trend. Investors are highly sensitive to tax efficiency, and any adverse policy changes could see the KSh 679.6 billion swiftly flow back into untaxed or lower-risk alternatives.

In conclusion, the surge in Collective Investment Schemes AUM to nearly KSh 680 billion is a landmark achievement, cementing Kenya’s position as a regional financial powerhouse. This growth is a reflection of sophisticated regulatory policy, high government yields, and successful digitization efforts. As CMA Chief Executive Wyckliffe Shamiah continues to champion market deepening, the sector’s future success will depend on its ability to transition from a reliance on MMF debt accumulation to a balanced mix of equity, specialized assets, and offshore exposure, all while managing investor education and regulatory integrity in a highly dynamic environment. The market is effectively betting on the long-term stability and liquidity of the Kenyan government, a bet that has paid handsomely for investors over the past seven years.

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By: Montel Kamau

Serrari Financial Analyst

4th December, 2025