This tool is a Money Market Fund calculator for Kenya or Unit-linked Life Insurance such as Britam Imarika Investment Plan. It helps you calculate your exact compound interest, net daily returns, and growth for top-performing Money Market Funds and investment plans in Kenya.
The tool factors in Kenya’s 15% KRA Withholding Tax (WHT) on interest and management fees to give you your true net profit. Unit-linked Life insurance does not attract WHT, hence possible higher returns than unit trusts.
Kenya Money Market Fund (MMF) Calculator
Estimate your net growth after KRA Withholding Tax (15%) and fees.
How Money Market Funds (MMFs) Work in Kenya
A Money Market Fund (MMF) is a collective low-risk investment plan. It is regulated by the Capital Market Authority.
Money is pooled from individual and institutional investors and put in short-term, low-risk assets.
These debt-instruments include:
- Kenyan Treasury Bills (T-Bills) with the following terms: 91-day, 182-day, and 364-day term.
- Bank fixed deposits and call accounts
- Commercial paper from top-rated Kenyan corporations
MMF interest is calculated daily and compounded monthly. They have higher interest than the traditional commercial bank savings accounts. MMF accounts are for short-term investment and their returns are not guaranteed, they fluctuate according to the market conditions.
If you are looking for long term investment with guaranteed returns that are not taxable and possible higher returns, you should consider unit-linked life insurance such as Britam Imarika or endowment policies with life protection.
Understanding Taxes and Fees on Kenyan MMFs
When MMF rates are published, especially in newspapers, they are net management fee but gross withholding tax.
I hope you understand that point. Let us work on an example using the calculator above for the money market in Kenya. If Britam or any other company declares a 13% rate, this rate is net management fee, but gross withholding tax of 15%. So in the calculator above you will enter an interest rate of 13% and a withholding tax of 15%. Since the management fee has already been deducted, you will enter zero.
Annual management fee is a fee charged by asset managers between 1.0% and 3.0% per year for handling the portfolio. The fund managers in Kenya, ethically, should display yields after management fees, and not before to hoodwink Kenyans that their rates are better than their competitors.
Whenever a fund manager tells you their rate, ask them whether it is after the management fee or before. That way, you shall have a true picture of your MMF investment returns.
Formula for Net Yield:
Net Yield = ((Gross Annual Yield × (1 – 0.5)) – Management Fee
Leading Money Market Funds in Kenya
Leading Money Market Fund managers in Kenya include Britam MMF, CIC Money Market Fund, Old Mutual MMF, ICEA Lion MMF, and Sanlam MMF.
These money market fund managers have proved to be professional and ethical in their investment dealings.
Frequently Asked Questions (FAQ)
- Are Money Market Funds safe in Kenya?
Yes. Money Market Funds are regulated by the Capital Markets Authority (CMA) under the Collective Investment Schemes Regulations.
Your money is held by an independent custodian to safeguard your funds and a trustee is appointed to ensure that your funds are invested in the agreed assets.
For instance, Britam MMF is held by Standard Chartered (custodian) and KCB is the trustee.
- What is the difference between simple interest and MMF compound interest?
Simple interest earns returns strictly on your initial investment principal.
MMFs use compound interest formulas. This means today’s earned interest is added to your capital tomorrow, earning you interest on your interest. I hope this is clear.
- Can I lose money in a Kenya Shilling Money Market Fund?
It is really hard to lose money in MMFs, unless your money is with an unregulated fund manager that might channel your funds to high-risk investment assets.
Capital loss in a standard KES Money Market Fund is extremely rare because assets are held in short-term government debt and top-tier bank deposits.
However, returns fluctuate daily depending on market prevailing interest rates set by the Central Bank of Kenya (CBK).
