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Money Market Funds in Kenya: How Returns and Tax Work
6 min read · Updated 15 October 2026 · More investment tools
A money market fund (MMF) pools money from many investors and invests it in short-term, low-risk securities such as Treasury Bills, bank deposits and commercial paper. In Kenya they are popular because they are easy to access, often through M-Pesa, and pay interest daily.
This guide explains how the return is earned, how tax is applied, and how MMFs compare with the other common cash options.
How a money market fund earns interest
Your money is invested in short-term instruments that mature within about a year. The interest those instruments earn is passed on to investors, usually accruing daily and being reinvested so the balance compounds.
Because the underlying instruments are short-term, the fund yield moves with prevailing interest rates. It is not a fixed rate and can rise or fall over time.
Tax on MMF returns
Interest earned in a money market fund is subject to 15% withholding tax, which is a final tax for resident individuals. The fund deducts it before crediting your account, so the amount you see is already net of tax.
Good to know: Compare funds on their net yield, not the headline gross rate. A higher gross rate can end up lower after fees and tax.
MMF vs fixed deposit vs Treasury Bills
- MMFs are designed for parking money and preserving capital, not for high growth.
- Fixed deposits may pay more for locking money away for a set term.
- Treasury Bills are bought at a discount and generally require larger minimum amounts.
Comparing common cash investments in Kenya
| Feature | Money market fund | Fixed deposit | Treasury Bills |
|---|---|---|---|
| Return | Variable, tracks short-term rates | Fixed for the term | Fixed at the auction discount |
| Access | Usually on demand | Locked until maturity | Held to maturity |
| Tax on interest | 15% withholding tax | 15% withholding tax | 15% withholding tax |
| Regulator | CMA | CBK | CBK |
What to check before investing
- The net effective annual yield, after management fees and tax.
- Annual management fees, which reduce your return.
- How quickly you can withdraw and whether withdrawals cost anything.
- Who the fund manager and trustee are, and whether the fund is CMA-regulated.
- How the fund has performed across different interest rate environments, not just the last month.
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Money Market Funds in Kenya: Returns & Tax FAQs
How much tax do you pay on a money market fund in Kenya?
Interest earned in a money market fund is subject to 15% withholding tax, which is a final tax for resident individuals. The fund deducts it before crediting your returns.
Are money market funds safe?
MMFs invest in short-term, low-risk instruments and are regulated by the Capital Markets Authority, with assets held by a trustee. They aim to preserve capital, but returns are not fixed and are not guaranteed.
Is a money market fund better than a fixed deposit?
It depends on your needs. MMFs offer easy access and daily compounding, while fixed deposits may pay a higher fixed rate in exchange for locking your money away for a set term.