1

Table of Contents
WHY WRITE THIS BOOK? ........................................................................................... 3

ACKNOWLEDGEMENTS ............................................................................................. 4

SACCOs ...................................................................................................................... 6

MEMBERSHIP ........................................................................................................ 6

HOW SACCOs WORK ............................................................................................. 8

FACTORS TO CONSIDER WHEN DECIDING WHICH SACCO TO JOIN ...................... 9

ADVANTAGES OF JOINING A SACCO ................................................................... 11

EXAMPLES OF SACCOs IN KENYA ........................................................................ 16

MONEY MARKET FUNDS(MMFs) ............................................................................. 18

ADVANTAGES OF INVESTING IN A MONEY MARKET FUNDS .............................. 19

FACTORS TO CONSIDER WHEN CHOOSING WHICH MONEY MARKET FUND TO

INVEST WITH ....................................................................................................... 22

DISADVANTAGES OF MONEY MARKET FUNDS ................................................... 25

EXAMPLES OF MONEY MARKET FUNDS IN KENYA .............................................. 27

TREASURY BILLS AND BONDS .................................................................................. 31

TYPES OF GOVERNMENT SECURITIES.................................................................. 32

TREASURY BONDS ............................................................................................ 33

BENEFITS OF INVESTING IN TREASURY BONDS................................................ 35

TREASURY BILLS ................................................................................................... 36

3

WHY WRITE THIS BOOK?

Investing in the Kenyan markets can seem to be such a daunting task to new
investors. This is mainly because there isn’t an accurate guide that helps
new investors ease through the markets. While there is enough information
out there on how to invest and on investment vehicles, the information is
scattered and it may take a lot of time and effort before the new investor
gets his way through and starts to invest wisely in the Kenyan markets.
Furthermore, it is also hard to get credible sources that you can trust with
information concerning money matters. This is why I’m writing this book so
that it can act as a guide to local investors and also to foreign investors who
may want to invest in the Kenyan markets.

While investing information remains to be hidden and not easily available to

the public, or without guidance on how to get this information, having gone
through the huge task of consolidating this information for myself and
sharing it with my followers on Twitter, I have seen some light for the local
investor. Through this book, he can easily understand the Kenyan Markets
and how they work, hence increasing his investment options which will
entirely increase his odds of success as he will be more informed and well
trained to invest in the Kenyan markets.
4

ACKNOWLEDGEMENTS
I would like to thank you for taking the time to go through my work. I am
greatly humbled.
5

MESSAGE FROM THE AUTHOR

The information in this book about the various investment vehicles in the
country is the standard for most of them. However, there may be a few
differences depending on individual financial institutions.

That goes majorly for SACCOs and Money Market Funds. The details
contained in this e-book about SACCOs and Money Market Funds are
mostly about how most Money Market Funds or most SACCOs are run.

However, there may be a slight difference when you look at some of the
individual SACCOs or Money Market Funds.

For example, I write that most SACCOs allow their members to borrow three
times their savings. This is what most SACCOs do. However, some SACCOs
do allow their members to borrow four or even five times their savings.
6

SACCOs
A Savings and Credit Cooperative Society (SACCO) is a society that is
registered and authorized to take money from its members in the form of
deposits and lend money in the form of loans to its members.

The SACCO pools the savings and lends them out or invests in various
investment vehicles such as Treasury Bills, Treasury Bonds, Shares, etc.

In Kenya, there are more than one hundred and seventy-five registered
SACCOs.

They are regulated by the SACCO Societies Regulatory Authority (SASRA).

As of 2021, SACCOs had a combined asset value of more than 393B shillings.

MEMBERSHIP
Many SACCOs in Kenya have restricted membership to the industry or
sector of working. For example; Mwalimu Sacco is mostly for teachers.
Magereza SACCO- for prison services employees. Safaricom SACCO- for
workers at Safaricom PLC.

However, in recent years, some SACCOs are opening their membership to

other members of the general public. For example, Stima SACCO is not only
for members working for the Kenya power production company. Also,
police SACCO is not only for the police officers, Sheria SACCO is also not
only for the people who work in the judiciary arm of the government.
Hence, Kenyans can now join most of the SACCOs which are open to the
public.
7

Despite this, it is still advisable to join a SACCO where your workmates,

friends, or relatives are members so that you can easily get guarantors
when the need to take a loan arises.

To be a member of any SACCO, you must first buy shares of the SACCO. It’s
only registered members who can save their money in the SACCO. Just like
Stocks, every SACCO has a minimum share capital. This is the minimum
amount of investment that members are required to contribute to be
registered as members.

MONTHLY CONTRIBUTIONS
Members of a SACCO are required to contribute at least a certain amount of
money every month. The saving scheme of a SACCO is strictly regular. You
have to make your contributions every month without fail. This is why
SACCOs instill saving discipline in their members.
8

HOW SACCOs WORK

In a SACCO, to save is to deposit, and to access your deposit is to borrow. In
other words, you save money in a SACCO through monthly contributions
but you can only access your money by taking a loan. You have to take a
loan to access the money.

That should not discourage you as this is a win-win scenario for both the
SACCO and its members. You help the SACCO grow when you take the loan.
You benefit as the SACCO gives you a loan that is three times your savings at
a relatively low-interest rate compared to other financial institutions.

ACCESSING LOANS
As we have seen above, to access your money in a SACCO, you must take a
loan. The loan you qualify for must be within the limit of your savings.
Additionally, members have to save for not less than six months to be
considered for credit. This may vary for different SACCOs but a minimum of
6 months is the average. In many SACCOs, members qualify for loans that
are up to three times their savings.

While other institutions that offer financial services, such as banks insist on
collateral, for SACCOs, you only need members that will act as guarantors to
guarantee your loan. Most SACCOs stipulate that the guarantor’s
accumulated savings should be equal to the amount being borrowed. The
guarantor bears the burden of the debt in case the member defaults on the
loan. Moreover, the SACCO seizes your savings until you clear the debt.
9

One thing that many SACCO members realize later than sooner is that loan
repayment is usually separate from their regular savings plan. This means
that members have to maintain their regular monthly contributions even as
they repay their loans.

FACTORS TO CONSIDER WHEN DECIDING WHICH SACCO TO JOIN

One of the questions that I’m asked frequently is: “Which SACCO should I
join?” As I have often answered, you are the only person who can tell which
SACCO suits you the best. You should join the SACCO that your work
colleagues, friends, or relatives are members. This is because it will be
easier for you to get guarantors anytime you need to access your money
through a loan. Hence the best way to know which SACCO to join is by first
asking your friends, relatives, and work colleagues about the SACCOs they
are members of.

Moreover, in almost all lines of profession, there are associated SACCOs

that professionals working in those lines can join. For example Mwalimu
SACCO for teachers or Wahasibu Sacco for accountants.

Additionally, there are over 175 registered SACCOs in Kenya. It is very hard
to know which is the very best since one cannot join all those SACCOs at the
same time.

Here are some factors to help you know which SACCO you should join.
10

AUTHORIZATION

The first question you should answer is whether the SACCO is registered. A
quick way to find out is by checking if the SACCO is listed on the SASRA
website. The SACCOs Societies Regulatory Authority (SASRA) lists all the
registered SACCOs in the country. With the increased number of scammers
who are availing the hottest investment deal every day, you should be very
careful where you put your money. The last thing you want to do is lose
your hard-earned money to scammers.

SAFETY OF YOUR MONEY

You want to have insurance for your money. Make sure that the SACCO you
join is not only registered but it is also insured.

INTEREST RATE ON LOANS AND DEPOSITS

Take a keen interest rate on the loans and the deposits. Try and compare it
with that of other SACCOs. Remember that SACCOs pay annual dividends to
their members and the interest rate on deposits will affect the amount of
money you get as dividends. Most SACCOs publish this kind of information
on their websites.

Kindly note that for interest rates, some SACCOs have put it in monthly
rates while others have put it in annual rates. When doing the comparison,
make sure you use a common benchmark for all of them.
11

TECHNOLOGY

In this day and age, you won’t love a SACCO that will keep you flocking their
offices all the time while other people are communicating back and forth
with their SACCOs in the comfort of their homes through their mobile
phones.

LOANS REPAYMENT PERIOD

Go for the SACCO with the most flexible terms. You will want to be given
enough time to comfortably be able to clear your loans.

ADVANTAGES OF JOINING A SACCO

They help you develop a habit of saving.

With a SACCO, you are required to save at least a certain amount of money
every month. This compulsory monthly contribution will help you develop a
saving habit. And as we all know saving is the foundation of financial
independence. It is not how much you earn, but how much you keep that
matters. You can build wealth without a high income, but you cannot build
wealth without savings.
12

Members can easily access loans.

Most SACCOs lend their members three times their savings. Some SACCOs
have more rates like five times your savings. The good thing about this is
that the loans are given at lower interest rates compared to other
institutions that offer the same financial services. More so it becomes easier
to get guarantors for your loan since you have work colleagues and friends
in the same SACCO. If you are a teacher who is a member of Mwalimu
SACCO for example, it will be very easy to get a colleague to be your
guarantor as you borrow the money.

Caution: Before you agree to be a guarantor to someone’s loan, be ready

to clear the loan in case the lender defaults on the loan. Otherwise, you
may lose part of your wealth when the lender fails to clear the loan. Be
very careful about people you help acquire loans with your name.

SACCOs are lifesavers.

This is because they offer their members emergency loans within 24 hours.
They are a perfect backup to your emergency fund. In case of any
emergencies, you can always get an emergency loan from your SACCO.

SACCOs issue dividends annually.

As a member of the SACCO, you own shares of the SACCO, so you will be
entitled to be receiving annual dividends. SACCOs tend to have good
13

dividend rates of more than 10%. You can reinvest the dividends to better
your savings or you can use the dividends to meet your other needs.

SACCOs offer interest rates on deposits/savings.

When you save your money with a SACCO, you will get good returns from a
low-risk investment. This is not only through dividends but also through
interest earned on your savings or deposits with the SACCO.

Next of kin benefits

In case of your death, some SACCOS write off your loan while your savings
are given to your next of kin.

Money-back guarantee

In case you leave a SACCO, you get your money back.

14

WHAT ROLES DO SACCOS PLAY IN BUILDING A PORTFOLIO?

Emergency loans.

SACCOs offer their members emergency loans that they can access within
24 hours of application. As a result, SACCOs can act as backup plans for your
emergency fund as an investor.

Emergencies do happen and misfortunes never come singly hence SACCOs

can be a good place for you to bail yourself out of a financial crisis.

Friendly loans

If you are a businessman, SACCOs are among the best avenues for you to
get loans. This is because SACCOs will offer you three times the money you
have saved. SACCOs unlike other financial institutions do not require
collateral from their members so that they can qualify for a loan. They only
require guarantors. This makes it easier for business owners to easily
acquire loans.

In addition, SACCOs offer their members friendly interest rates on loans.

This makes it much easier for members to clear repay their loans.
15

DIVIDENDS AND INTEREST RATES ON DEPOSITS

If you are an investor looking for passive income, you may consider SACCOs.
They issue annual dividends on share capital and interest on savings or
deposits.
16

EXAMPLES OF SACCOs IN KENYA

SACCO Minimu Minimum Registratio n Dividend Interest

m shares monthly fees(Ksh) s on share on
(Ksh) contribution capital(% deposit s
s ) (%)
(ksh)

Stima 25,000 1,000 2,500 14 10.75

Sacco

Hazina 15,000 1,000 or 5% 1,000 19 10.3

Sacco of your basic
salary(the
highest of the
two)

Safaricom 40,000 3,000 1,000 12% 7.5%

Sacco

Police 50,000 12% of Basic 17% 10.5%

Sacco salary

Sheria 20,000 1,000 16 8.5

Sacco

Harambe 30,000 1,000 6 6

e Sacco

Bandari 10,500 1,500 None 22 12.15

Sacco

Nation 25,000 2,000 15 8

Sacco

Kimisitu 3,000 1,000 15 8

Sacco

Kenya 30,000 3,000 1,000 10 6

Bankers
Sacco
17

Mhasibu 10,000 1600 1,000 15 8

Sacco

FINAL NOTES ON SACCOs

The interest rate on deposits and share capital varies yearly depending on the
performance of the SACCO.

There are over 175 registered SACCOs in Kenya. I have only covered a few of them
for learning and to create a basis of comparison on what different SACCOs offer.
There may be better SACCOs than the ones I have covered.

The best way to know the best SACCO to join is to ask your friends, relatives, and
work colleagues which SACCOs they have joined. Then learn more about the
SACCOs, and use the guidelines above on things to consider when choosing which
SACCO to join. Then choose the SACCO that helps you achieve your financial goals
in the best way possible.
18

MONEY MARKET FUNDS(MMFs)

In simple terms, a Money Market Fund is a low-risk investment mutual fund
that invests in highly liquid short-term instruments. A money market fund is
a type of unit trust fund hence they are sometimes classified as Unit Trusts.
Money Market Funds pool money from investors and invest in highly liquid
short-term investments.

These include Treasury bonds, Treasury bills, and cash equivalent securities.

In Kenya, Money Market Funds are regulated by the Capital Markets

Authority (CMA).

There are over 20 Money Market Funds in Kenya that are regulated by the
CMA.
19

ADVANTAGES OF INVESTING IN A MONEY MARKET FUNDS

HIGHLY LIQUID

When you put your money in an MMF, you can access your money within 2-
5 days of asking. Some Money Market Funds even process their withdrawals
of a limited certain amount of money within 24 hours of asking.

VERY LOW RISK

Money Market Funds are considered risk-free investment vehicles. You can
hardly lose your capital in an MMF. This is because Money Market Funds
pool money from several investors and invest it for them in low-risk
investments like cash equivalents that have very low risk.

LITTLE CAPITAL IS REQUIRED TO START

Money Market Funds help small investors to invest in areas like treasury
bills and bonds that they wouldn’t otherwise invest in as individuals. This is
because Treasury bills and bonds require minimum investments of Ksh
50,000 and Ksh 100,000 respectively. On the other hand, some Money
Market Funds require a minimum investment of Ksh 100 only.

The average initial investment in most Money Market Funds lies between
Ksh 1,000 – Ksh 5,000
20

This helps investors with little amounts of money to enjoy the benefits of
investing.

BETTER RETURNS THAN BANK ACCOUNTS

Money Market Funds have an average annual return rate of around 7 –

10%. Their interest rates vary day to day depending on market conditions.

They offer higher return returns than bank savings accounts and fixed
deposit accounts in the short term.

More so, Money Market Funds are a good hedge against inflation, as their
rates often beat the inflation rates. Hence investors can retain their
purchasing power over time.
21

WHY DO INVESTORS PREFER TO INVEST IN MONEY MARKET FUNDS?

IDEAL AVENUE TO STACK YOUR EMERGENCY FUND

Money Market Funds have features that make them an ideal place for one
to put his emergency fund. You can easily access your money on asking.
Your money is continuously earning interest hence it does not lose its
purchasing power.

ENTRY INTO BIGGER INVESTMENTS

Investors use MMFs to accumulate their savings so that they can enter into
bigger investments like real estate, buying land, or even entry into the stock
market.

CATER FOR SHORT-TERM GOALS

Investors find Money Market Funds to be the perfect avenue to save money
to cater to short-term expenses that they intend to meet in the near future.
These include:

- Wedding plans

- Holiday plans

- School fees
22

FACTORS TO CONSIDER WHEN CHOOSING WHICH MONEY MARKET

FUND TO INVEST WITH
There are over 20 registered Money Market Funds in Kenya that are
regulated by the Capital Markets Authority. Below is a list of some of the
major factors that you should consider when selecting the MMF to invest
with.

REGULATION

Money Market Funds are regulated by the Capital Markets Authority(CMA).

You should ensure that the MMF you are investing with is regulated by the
CMA. Beware of scammers who may want to steal your hard-earned
money.

PERFORMANCE RECORD.

You should want to know how the fund has performed in the last 5-10 yrs.
How have they performed as compared to their peers in the market? How
consistent have they been with their returns? How do their returns
compare with those of the market average?

These are questions that you should answer in analyzing the performance
record of the Money Market Fund.

You can ask the correspondents of the various Money Market Funds you
want to join through their social media handles or by visiting their offices.

Most of these Money Market Funds do have the details of how you can
contact them on their websites.
23

AVERAGE ANNUAL RETURN RATES

You want to invest in a Money Market Fund that can guarantee you good
returns from your money.

However, one mistake that investors make is solely concentrating on Money

Market Funds with high yields.

Be cautious of Money Market Funds that have higher annual return rates
than their peers or the market average. These MMFs may be using more
aggressive strategies that put your money at risk. They may also be
investing your money in high-risk investments that you may fall victim to.

INVESTMENT COSTS

Money Market Funds charge fees like management fees and withdrawal
fees. Unfortunately, some Money Market Funds do not openly disclose the
fees they charge. It’s your responsibility as an investor to make sure you
find out all the charges that you may incur while investing your money with
them.

As a rule of thumb, always prefer Money Market Funds with lower fees.
Investment costs are not your friend. They will eat up some of your interest
hence shrinking your returns.

Many MMFs usually charge a 2% management fee of the invested amount.

This amount is however deducted from the interest that your money will
have earned and not from your principal. So if the annual yield for a certain
24

MMF is 10% and they charge a management fee of 2%, your money will
have earned a net interest of 8%.

EASE OF ACCESS

How easily can you access your money when you need it? On average, you
can get your money within 2 – 3 business days. Some Money Market Funds
allow you to access certain amounts of money within 24 hours. Some MMFs
even allow deposits and withdrawals via M-pesa.

Others have very user-friendly mobile apps, where you can monitor your
funds, deposit, or even withdraw funds from the comfort of your home.

WHERE DO THEY INVEST THEIR MONEY ?

Most Money Market Funds share their portfolios online and even email
their monthly statements to their investors. Look at their investment
portfolios and look at the assets they are investing in. Are they investing
their money in high-risk investments?

If they are, they are likely to lose your money as they pursue higher return
rates.

HOW TO JOIN A MONEY MARKET FUND ?

The requirements for joining any MMF are the same across all funds with
small variations.
25

First, you need to do your research and compare different MMFs and pick
one that works for you according to your interests and preferences.

The most digitized Money Market Funds do have mobile apps where you
can download the app, fill in the application details, submit and
automatically join the MMF upon verification of your details.

For others, you only need to fill out the application form(most of them are
online and you can find them on their websites).

However, many MMFs still need you to drop your documents to their
physical offices.

Requirements include:

- Be at least 18 years of age.

- National ID/passport

- KRA pin

- Bank account details

- Passport size photographs

- Identity details of beneficiaries

DISADVANTAGES OF MONEY MARKET FUNDS
Since Money Market Funds are considered almost risk-free investments,
they do not have many disadvantages. Some of the disadvantages are:
26

UNSUITABLE FOR LONG TERM INVESTMENTS

Money Market Funds are not suitable for long-term investments like
retirement planning because they do not offer much capital appreciation.
There are better investment vehicles like stocks that can offer you better
returns in the long term as compared to Money Market Funds.

Money Market Funds are ideal for short-term investments. Preferably not
more than 3 years.

YOU CAN LOSE MONEY

The chances of losing your money in a Money Market Fund are very low.
You can only lose your money when the MMF is mismanaged.

TAXES
Do note that interest earned from MMFs in Kenya is charged 15%
withholding tax.
27

EXAMPLES OF MONEY MARKET FUNDS IN KENYA

1. MADISON MMF

 The initial investment is Ksh 5,000.

 There is no maximum investment limit.

 You can top up your initial investment with as little as Ksh 1,000
whenever you have additional cash.

 They provide free monthly statements.

 The current annual yield (2021) is 9.62%. Withdrawals are

processed within two working days

2. CYTON MMF

 Annual management fee of 1.5% per annum.

 Minimum investment of Ksh 100  No minimum top-

up.
Allows deposit via Mpesa

3. Co-op Bank MMF

 Management fees of 0.9% per annum

 Minimum investment of Ksh 1,000

 You can top up with any amount and at any time

 Access your money within 2-3 days

 The current annual yield is 8.5% Allows Mpesa deposits

28

4. BRITAM MMF

 Minimum investment of Ksh 1,000

 Minimum top-up of Ksh 100

 Annual management fee of 2.5%

Allows deposits and withdrawals via Mpesa.
Allows one free withdrawal every month

5. CIC MMF

 Minimum investment of Ksh 5,000

 Minimum top-ups are Ksh 1,000

 Access your money within 2-4 working days

 Annual management fee of 2%

 Monthly statements provided

6. UAP OLD MUTUAL MMF

 The minimum investment is Ksh 1,000

 You can use your investment portfolio to secure a loan

 Top up with at least Ksh 1,000 per month

29

 No restrictions on the maximum contributions

 Allow one free withdrawal every month

7. GENGHIS CAPITAL MMF

 The minimum investment amount is Ksh 500

 The minimum top-up is Ksh 500

 Access your money within 2-4 working days

 Annual management fee of 2%

 Easy sign up via G-Kuze app

8. ZIMELE MMF

 Minimum deposit of Ksh 100

 Mpesa options for deposits and withdrawals are available

 No minimum balance is required

 Management fee of 2% per year

9. DRY ASSOCIATES MMF

 Funds accessible within 3 business days

 The minimum investment is Ksh 1 million

 The minimum top-up is Ksh 250,000

 Statements are emailed monthly

10. SANLAM MMF

 Zero initial fees

30

 The minimum investment is Ksh 2500

 Annual management fee of 1.2%

CAUTION: Do not that the order of the MMFs in this list is not a ranking of the
MMFs. It’s just a list and nothing more.

FINAL NOTES ON MONEY MARKET FUNDS

I have tried to cover the most important information on Money Market

Funds and help you understand what they are, how they are run, and what
you will get from investing in them.

I have tried to cover as much as I could but do note that there may be some
minor details that I may have forgotten or omitted during the writing of this
e-book.

Kindly make sure you research the Money Market Fund you want to join so
that you can learn everything about them.

Do not that the details I used to describe Money Market Funds are the
standard benchmark. There may be a few differences when it comes to
individual Money Market Funds.

For example, I wrote that the average management fee charged by Money
Market Funds is 2%. However, there are Money Market Funds that charge
as low as 0.9% and others that charge as high as 2.5%
31

TREASURY BILLS AND BONDS

Treasury bills and bonds are collectively referred to as government
securities. Government securities are debt issuances used to fund
operations and special projects for the government. Investing in
government securities is simply lending the government money for a certain
period.

The government borrows money from both local and foreign sources.
Treasury bills and bonds are part of the government’s initiative to raise
revenue to finance its projects and other services through local debt.

ADVANTAGES OF INVESTING IN GOVERNMENT SECURITIES

They are considered risk-free.

This is because investors are sure that the government will repay the debt.
The government can hardly default to repay a loan even in times of severe
economic stress. This is why government bonds are considered risk-free
even though every investment has some risk that is associated with it.
32

They offer better returns than bank savings and fixed deposit accounts.

In the short term, treasury bills have better returns than banks’ savings and
fixed deposit accounts. Moreover, in the long term, treasury bonds have
better returns than fixed deposit accounts.

Diversity

Bonds cushion investors who invest in other markets like the stock market.
They help them diversify their portfolio and reserve their wealth.
Historically, bonds have tended to zig when stocks have zagged thereby
providing a reprieve for the crunching stock market.

TYPES OF GOVERNMENT SECURITIES

There are two types of government securities. The first is the Treasury Bills
which have a maturity date of 3 – 12 months. The other class is that of
Treasury Bonds that have a maturity date of 1 – 30 years.
33

TREASURY BONDS
Treasury Bonds are a secure, medium to long-term investment. Bonds offer
interest payments semi-annually (after every six months) throughout the
bond’s maturity. Most Treasury Bonds in Kenya have a fixed rate. This
means that the interest rate that is determined at auction is locked until
maturity.

Investors purchase a certain amount, then receive a percentage of that

amount every six months until the bond reaches maturity. When the bond
matures, the investor receives a final interest payment and their initial
investment.

For example:
An investment of Ksh 100,000 in a 10-year bond with a coupon rate of 5%
p.a. This would mean that the investor would receive Ksh 2250 every 6
months. Then after the end of 10 yrs, you would get your initial investment
back.

Caution: The example used above is only for illustration purposes. Bonds tend to
have higher return rates in the range of 10-18%
34

TYPES OF BONDS

Fixed-Coupon bonds.

For these bonds, the interest rate associated with the bond will not change
over the bond’s life.

Infrastructure Bonds.

These are used by the government for specified infrastructure projects.

Investors love them because they are tax-exempt.
35

BENEFITS OF INVESTING IN TREASURY BONDS

SECURITY

Treasury bonds are considered risk-free investments. Unless something

changes, the government historically has always repaid its debt even in
times of economic crises.

REGULAR RETURNS
For most bonds, they carry semi-annual – interest payments. This means
that investors receive returns every six months.

FLEXIBILITY
The Central Bank of Kenya (CBK) auctions several different types of bonds in
a given financial year.

N.B The minimum investment for treasury bonds is Ksh 50,000, for fixed coupon
bonds and Ksh 100,000 for Infrastructure bonds.
36

TREASURY BILLS
Treasury Bills are short-term debt instruments that are issued by the
government and are presented in three tenors. These are 91, 182, and 364
days. They are secure, short-term investments that offer returns after a
relatively short time. In Kenya, they are auctioned by the Central Bank of
Kenya every week and require a minimum investment of Ksh 100,000

AUCTIONING OF TREASURY BILLS

Treasury bills are sold at a discount. What this means is that investors
determine the face value that they would like to purchase. This is usually
discounted by a certain amount they invest. On reaching maturity, the
investor receives the full face value.

FOR EXAMPLE:

Taking a 364-day bill that has a face value of Ksh 100,000 and a 10% interest
rate. An investor would have to pay Ksh 90,392. After 364 days when the
bill reaches maturity, the investor would get Ksh 100,000.

This means that investors receive the face value on maturity while their
initial investment was less than the face value.
37

WAYS OF INVESTING IN BILLS AND BONDS

1. CENTRAL BANK OF KENYA

Starting August 2023, the Central Bank of Kenya introduced the DhowCSD
platform that allows investors to invest in bonds from their mobile phones.

That means you no longer need to visit the CBK offices to get your CDS
account that allows you invest in bonds.

With that said, the easiest way to now invest in bonds is by first
downloading the DhowCSD app on your app store and then registering for a
CSD account.

The process is now quicker and you can get your account approved within
48 hours unlike the 14 days that it took to have a CDS account in the old
system.

A BRIEF GUIDE ON THE DHOWCSD PLATFORM

1. Account creation is entirely online and you only need the following
documents: A clear, colored passport photo, Your identification
document(ID or Passport or Alien Card) and your KRA pin. You will be
required to upload images of those documents in the application
process.
2. You can access the DhowCSD platform either via app or the web portal.
For the app, you can search “DhowCSD” on your app store and
download the app. For the web portal you can visit the CBK website
and you will get access to the DhowCSD portal
3. For guidance on the use of the DhowCSD platform, the CBK has some
guidelines on how to use the platform. You can start from there and in
case you have any questions you can reach out to me via my social
media handles.
4. Here are the important links that you may need:
CBK website: https://www.centralbank.go.ke/
38

DhowCSD web portal: https://www.centralbank.go.ke/dhowcsd/

User guide on using the DhowCSD portal:

https://www.centralbank.go.ke/wp-
content/uploads/2023/08/User%20Guide%20for%20Investor%20Porta
l%20and%20Mobile%20APPs.pdf

Threads on how to open an account:

https://twitter.com/kahome_steve/status/1686605579840544768?s=20

Thread on how to place a bid:

https://twitter.com/kahome_steve/status/1689667815110848512?s=20

2. Through a Commercial Bank or Investment bank.

This is where you invest in Treasury Bills or Bonds as a nominee. The bank
invests on behalf of the investor and hence the investor pays additional
fees.

Despite the introduction of the DhowCSD platform, you can still invest in
bonds via a third party like a bank or a stock broker. They also give you
access to the secondary market.

CAUTION: The best way to invest in government securities is directly through the
CBK to avoid additional costs.
39

TAXES

The discount earned on Treasury bills is charged a withholding tax of 15%.

Interest and discounts on Treasury bonds with a tenor of below 10 years are
charged a withholding tax of 15%. For bonds with a tenor of more than 10
years, they are subject to a 10% withholding tax.
40

WHY DO INVESTORS PREFER INVESTING IN GOVERNMENT SECURITIES?

DIVERSIFICATION

To spread the risk of their investments, investors do add treasury bonds to

their portfolios. Historically when stocks tend to zig, bonds tend to zag.

ALMOST GUARANTEED RETURNS

Bonds are low-risk investments. The Kenyan government has no record of

defaulting loans. Hence it is very hard for you to lose your money when you
invest in government bonds.

HIGH RETURNS IN THE LONG TERM

Unlike Money Market Funds which are preferred for short-term
investments, Treasury bonds are preferred for long-term investments. This
is because the longer a bond takes to mature the higher the return rate.
41

EXTRA UNDERSTANDING OF BONDS

What is a tap sale?

A tap sale is a re-opened bond. This is when the government seeks to raise
more funds by reopening bonds that were previously issued.

Can you sell your bond before maturity?

If you invest directly with the Central Bank of Kenya, you can discount your
bond via CBK at a certain rate.

If you are using a third party like a stock broker, you can sell your bond in
the secondary market. The success of this however depends on the supply
and demand of bonds in the secondary market and comes with some
charges for this.

How often are treasury bonds and treasury bills issued?

Treasury bonds are auctioned every month while treasury bills are
auctioned every week. You can get this information on Central Bank of
Kenya (CBK) social media handles as well as their website.

Why don’t many retail investors focus on bills as much as they focus on
bonds?
Most retail investors only invest in treasury bonds since they are already
invested in treasury bills indirectly via Money Market Funds. Also, many
retail investors don’t have that much money to keep buying treasury bills
weekly that only take a little time to mature.

Treasury bills are often bought by large financial institutions like banks,
insurance companies.

What is the minimum capital required to invest in Treasury bonds and

Treasury bills?

The minimum amount required for Treasury bills is Ksh 100K which must be
in denominations of 50K.
For bonds, the minimum is Ksh 50K.
42

FINAL NOTES ON TREASURY BILLS AND BONDS

This is a debriefing on the way to go through investing in Bills and Bonds in

the Kenyan markets. This is just a summary. If you would like to take an in
depth study and know everything about government securities, do visit the
CBK website. It has all the details well explained.

Also if you would like to understand bonds and bills better, here is a link to
the document on frequently asked questions about bonds. It has more
information and I would advise everyone to go through it.

Here is the link:

https://www.centralbank.go.ke/images/FAQs/Frequently%20Asked%20Que
stions%20on%20GoK%20Securities.pdf
43

FINAL NOTES FROM THE AUTHOR

The purpose of writing this e-book was to help people who are getting
started with investing learn about some of the most common investment
vehicles in the country.

I have used my knowledge and experience in the field to guide you on what
the investment vehicles are, how they are run and why you should invest in
them.

With that, I believe I have achieved the sole purpose of writing this book.

However, do note that there are other investment vehicles that I did not
cover in this e-book for various reasons.

These include: investing in stocks at the Nairobi Securities Exchange,

investing in Offshore stocks and Exchange Traded Funds(ETFs), and
investing in Real Estate Investment Trusts (REITs).

I have however covered them in my threads on Twitter and I hope to cover

them extensively in another e-book in the near future.
44

WHERE DO YOU GO FROM HERE?

You have started your investing journey by reading this book to the end.
However, this is only the beginning. Don’t just read this book and take no
action.

Take the first step and get started with saving and investing your money as
early as now.

One thing about financial success is that it has less to do with what you
know and more to do with how you act.

Also, take the initiative and grab other personal finance and investing
books. They will help you learn a lot and be able to manage and invest your
money confidently.

Thanks for reading this book to the end and happy investing!