Money Market Funds Performance
In recent months, Money Market Funds (MMFs) in Kenya have witnessed a decline in yields, raising concerns among investors who rely on these traditionally stable instruments. The downturn is primarily driven by macroeconomic factors, including declining interest rates, reduced Treasury Bill (T-bill) yields, and falling inflation. As MMFs adjust to these market shifts, digital investment platforms like Ndovu are offering alternative solutions to investors seeking optimal returns.
In order to best understand why MMF interest rates have declined, it is important to understand what happens with the money you invest in fund managers like Ndovu. The Ndovu Fund previously had returns of 15.51% and end of 2024, the returns dropped to 13.06%. This article helps you understand the reasons for the decline of the Money market funds in Kenya.
Where do Fund Managers like Ndovu Invest your Money?
Treasury Bills
Treasury bills (T-bills) in Kenya offer a lucrative opportunity, providing competitive rates and a quick turnaround on your funds. With weekly auctions, they are easily accessible to investors seeking stability and growth.
T-bills are sold at a discount, meaning you pay less than their face value at purchase and receive the full amount upon maturity—allowing you to earn a return effortlessly.
Investing has never been easier! Through the Dhow CSD portal and mobile app, Ndovu can invest in Treasury bills directly—bypassing intermediaries—by registering for a CSD account at Dhow CSD. Alternatively, individuals and corporations can invest via their preferred Kenyan commercial or investment banks, acting as custodians.
The Treasury bill auction on February 6 witnessed an overwhelming investor response, attracting KSh 71.2 billion in bids—nearly three times the advertised KSh 24.0 billion. This staggering 296.6% performance rate highlights the growing appetite for government securities.
However, despite the strong demand, interest rates on 91-day, 182-day, and 364-day T-bills
The table below shows the decline of treasury bills' interest rates from 2023:
The decline of these interest rates over the last months since last year is the reason for the decline in the interest rates for the Money Market Funds. For instance, the 91 days T bills started at 15% in 2023 December and more than a year later in 2025, the interest rate dropped to 9.116%, a huge drop. This drop in interest rates means the Money market fund interest will also be affected therefore dropping too.Â
The Central Bank Rate
According to Section 36 (4) of the Central Bank of Kenya Act, the Central Bank is required to publish the minimum interest rate it charges when lending to banks—this is officially known as the Central Bank Rate (CBR).
The Monetary Policy Committee (MPC) reviews and announces the CBR at least every two months. Any adjustments in its level—whether up or down—serve as a key indicator of the country's monetary policy direction. As the foundation for all monetary policy operations, the CBR ensures transparency and consistency in implementing financial regulations.
In a bold move to stimulate the economy, the Monetary Policy Committee (MPC) met on February 5, 2025, and announced key rate cuts. The Central Bank Rate (CBR) was lowered from 11.25% to 10.75%, making borrowing more affordable, while the Cash Reserve Ratio (CRR) dropped from 4.25% to 3.25%, freeing up more liquidity for banks to lend. These cuts have directly influenced MMF returns, as they typically invest in short-term government securities whose yields are sensitive to central bank policies.
Falling Inflation Rates
The inflation rate in Kenya over the year 2024 has been on a decline from around 5% to as low as 2.99% by December. At the beginning of the year January 2025, the inflation rate did increase to around 3.28%. Lower inflation often leads to reduced interest rates, which in turn affects the yields offered by MMFs.
Money market rates fluctuate in response to broader economic trends and shifts in interest rates set by the Central Bank. When the Central Bank of Kenya tweaks the Central Bank rates, it aims to balance long-term interest rates, sustain maximum employment, and keep inflation in check. This dynamic plays a crucial role in investment decisions, including those on platforms like Ndovu, where savvy investors can optimize returns by staying attuned to market movements.
Disclosure:
 Ndovu is a regulated Robo-advisory platform operated by Ndovu Wealth Limited (‘NWL’). NWL is a Fund Manager licensed by the Capital Markets Authority (Kenya).
The information provided on this platform and the products and services offered are intended solely for persons in regions and jurisdictions where such distribution and utilization are in accordance with local laws and regulations. Ndovu does not promote its services in regions where it lacks the necessary licenses; It is exclusively available to persons residing in countries where it holds a valid license or has regulated partners. Ndovu does not extend its services to citizens of the United States, Canada, Japan, and other restricted territories.
Disclaimer:
 All ETF products are subject to risk, including country/regional, liquidity, and currency risks. Market prices of securities within the ETF may rise and fall, sometimes rapidly and unpredictably.
While ETFs provide diversification through exposure to a basket of securities, they do not eliminate the risk of loss. Diversification does not ensure a profit or protect against a loss. These are non-cis products and are registered by the SEC.