In an economic climate where the cost of living is rising and disposable incomes are shrinking, saving has become a challenge—and Kenyans still saving are looking for less risky, more liquid options.
For years, the go-to investments for many Kenyans were parcels of land and livestock. But today, the tide is turning.
"Money market funds have become quite a good magnet for investors to look at in this collective investment space," says Wilson Wariari, Chief Investment Officer at Arvocap Asset Managers, describing the wave of where Kenyans are putting their money in today's economy.
Money market funds, government bonds, digital assets, and structured real estate products are now gaining ground.
Financial experts say Kenyan investors are exploring new ways to grow their wealth and it is not just the wealthy who are doing it.
According to Mr Wariari, more Kenyans—across income levels—are exploring new ways to create and grow their wealth.
“In the current economic climate, what we have observed in the market space, over the last year there has been a huge shift of investments towards money market funds,” he says.
This shift did not happen overnight. When the interest rates on government bonds started rising in 2023 and 2024, many investors were drawn to them. But later, especially in the second half of 2024, there was a noticeable movement into money market funds as interest rates on bonds started to drop.
“We have also seen quite a huge growth in asset management in the money market funds,” he adds.
Why the appeal?
Money market funds offer both liquidity and steady returns—qualities that are increasingly attractive during economic uncertainty.
However, money market rates have also started coming down, forcing investors to shift their gears again, this time towards what is called actively managed funds.
"The rates now start coming down and clients are trying to move to new investments, to new spaces within the capital markets," Mr Wariari adds.
What is an active fund?
“An active fund is where we have professional investment managers. You give them the mandate to actively make the investment decisions of when to buy, when to sell, what to buy and what to sell within the capital markets space,” he says.
The financial expert says this is ideal for busy professionals who do not have the time to track the markets. Instead, these groups of investors rely on trained managers to grow their money with the aim of delivering above-the-market returns through different funds like bond funds, equity funds, or multi-asset strategy funds.
“With the information age and the knowledge that clients are acquiring about markets both locally and globally, we have seen clients seeking new investment opportunities outside the vanilla products they were used to such as shares and bonds,” adds Mr Wariari.
Digital assets, he says, are one investment option that is attracting interest. Kenyans want to learn more about them and invest, especially younger investors.
Digital assets, often misunderstood, are gaining traction—especially among younger investors.
“When you think about the digital assets, even shares you’re not getting a physical certificate anymore. You’re getting an allocation based on a certificate of deposit (CD) portfolio. Same for bonds you go to the Central Bank of Kenya (CBK) platform, purchase a bond, and there is no certificate,” says Mr Wariari.
He adds, “In simple terms that becomes a digital asset. Even though it’s a traditional product, you are now holding it through a digital allocation out of it.”
Of course, there is also the newer world of cryptocurrencies like Bitcoin. Mr Wariari says, “It’s an asset that you don’t get a physical certificate of. But based on a digital ID, you are getting a certain allocation of an asset class that gives you certain economic rights.”
For real estate investments, another option, he says, Kenyans' mindsets have changed and they are taking an interest in non-traditional investment vehicles. Instead of buying land or buildings outright, more Kenyans are looking into structured real estate products like REITs (Real Estate Investment Trusts).
“Investors are more tuned to structured real estate products such as REITs. We have seen a lot of interest,” Mr Wariari says, though he notes that the market still lacks enough options to meet the demand.
So, who is investing today?
Wealth managers say young professionals, retirees, and business owners are increasingly showing a growing interest in saving and investing.
But unlike in the past, the financial experts say today’s investment interest is being driven not by opportunity—but by necessity.
“The cost of living is high. Disposable incomes are not quite high, what people are doing is trying to get into small savings to build toward their life goals,” Mr Wariari says.
For younger professionals, he adds that high land prices have made it difficult for them to invest in property directly. Instead, they are saving through money market funds, hoping to accumulate enough capital for larger investments down the line.
Financial literacy has also played a role in where people are investing their money.
“People used to save through their banks. But now, with more financial knowledge, they are sensitive to the return they are getting. If I can get a higher return from a money market fund at the same level of risk, then I’d rather go there,” he says.
Business owners are also becoming more strategic. Rather than reinvesting all earnings into their ventures or parking their earnings in banks, many are setting aside funds for alternative investments.
“The reinvestment risk into a new business is a bit high. So they feel like, ‘Okay, I need to put some money aside.”
Passive income is another growing trend, with investors increasingly drawn to government bonds for their reliable cash flow.
“We have seen the growth of retail investors in government bonds as they learn about the good passive cash flows they can get from it. It is the interest rate magnet. When interest rates on bonds reached 18 percent, retail investors took notice,” he says, “It’s the kind of passive income that’s hard to ignore."
Monthly returns
Investors are keen to park their money in investment areas where they can withdraw their income monthly, unlike in land which takes years to appreciate in prices and is hard to sell instantly.
Gerald Muniu, the Treasury Manager at Credit Bank Plc also paints another picture of this investment transformation.
“Most individuals now prefer investing in financial services, agribusiness, and energy. These [sectors] are currently attracting investors, especially if driven by government initiatives,’’ he says.
As Kenya pushes to diversify its energy mix and improve access to electricity, investors are eyeing profits from renewable energy investments.
But as rates begin to retract with the CBK recently lowering the Central Bank Rate (CBR) by 75 basis points to 10 percent, he says, “more investors are now going for longer-dated Treasury bills in an attempt to lock in higher yields offered by these securities compared to the shorter-dated papers."
Speculative investing
Consequently, in the equities market, some are taking a completely different route. “In the equities market, investors have taken a highly speculative approach by buying cheap high-risk stocks with the intention of making quick capital gains on any spike in price,” Mr Muniu adds.
This evolving approach to investment is fuelled by the rising tide of financial awareness. Mr Muniu is quick to emphasise the importance of financial literacy.
“Financial literacy helps individuals to make informed investment choices. This in turn leads to better financial management and higher returns. With a better understanding of investment options, individuals can assess risk and potential returns leading to more informed choices. This, in turn, breaks the cycle of poverty by encouraging individuals to save and invest.’’
Still, even in a landscape of rising awareness, common missteps persist. Mr Muniu attests that overspending and failing to plan for the future is a big contributor.
“The rising cost of living makes many individuals also rely heavily on credit. Many individuals struggle with controlling their spending, leading to financial strain and debts. Failure to plan for the future can lead to financial insecurity in the long term,” the expert says.
