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Chamas, Saccos, mutual funds and treasury bills – where should I put my money?

Before committing your hard-accrued savings into business, it is important to make sure that you have chosen the right business idea, have enough capital, a realistic market entry strategy and a definite market niche.


Job losses and pay cuts since the onset of the Covid-19 pandemic in March last year has seen a record number of individuals rush to start their own businesses in a quick survival race.

Data from the Business Registration Service (BRS) shows that 154,155 businesses were registered between July last year and last month, a 30 percent rise from the 118,609 start-ups that were set up in the preceding 12 months.

This number does not capture the thousands of unregulated businesses that sprout up annually especially in informal settlements and rural areas, a factor that highlights the rising appetite and need for new and additional sources of income to cope up with a rising cost of living.

However, it is estimated that for various reasons, a third, or 51,384 businesses that were registered over the past year will not survive beyond their second birthday, a worrying statistic that sheds light on a ruthless business environment that needs skill, strategy and resolve to navigate.

Starting a business

While it is the most preferred means of investment and growing one’s income, starting a business is not the only way to grow your money, therefore, before withdrawing the last bit of your hard-accrued savings from your bank, Sacco or chama and committing it into that long-held business idea, it is important to make sure that you have chosen the right business idea, have enough capital, a realistic market entry strategy and a definite market niche.

Dr Wanjiru Kibe, the lead consultant at Finesse Consulting, points out that an investor should identify market segments that offer the best return on investment to maximise earnings on the initial capital.

“There are many profitable businesses you can start in Kenya without a lot of capital… the only challenge with starting a business is that you are in it for life and cannot cash in and out like happens in the stock market if you make a mistake,” she cautions.

Mutual Funds

The labour-intensive nature of starting and running a business means that it is not the best investment vehicle for everyone, especially individuals who have less time but want to grow their money safely.

Mutual funds include money market funds, equity funds and fixed income funds, they allow individuals to harness the full power of economies of scale by pooling their resources together to invest in highly liquid assets such as bills and bonds.

This diversification spreads investment risks across the portfolio, which minimises some of the inherent risks of going out all alone in business, for example, and generates a steady stream of income at periodic intervals.

Data from the Capital Markets Authority shows that assets being managed by mutual funds in Kenya have grown 85 percent during the past two years alone from Sh56.6 billion in March 2018 to Sh104.7 billion in December last year, highlighting their growing popularity as viable investment tools.


The stock market, Dr Kibe says, gives individuals fertile soil to cultivate their money as it does not require significant capital to start trading. Listed stocks at the Nairobi Securities Exchange allow individuals to do their own research to identify the best possible companies to invest in based on market performance and future growth prospects. However, the financial advisor notes that stocks come with a significant measure of risk and can be quite scary to new entrants in the trade, and that it requires pragmatic trading and making of shrewd moves if you spot an opportunity in the market.

Investing in stocks also allows you to shield your investment from inflation which reduces the value of your money, is highly liquid as it can be bought or sold fairly quickly, and exposes your dividends income to relatively lower tax rates compared to other forms of investment.

For instance, your dividend income is only charged a 5 percent tax unless you hold a 12.5 percent voting power or more in the company that is paying the dividend, compared to numerous licenses, levies, operational costs and turnover tax that your income will be subjected to in a business.

Treasury bills and bonds

But if you are risk-averse and do not want to bet on a business that may collapse, stocks that may lose value and wipe your savings or mutual funds that may fold, putting your money in the safe treasury bills and bonds, Dr Kibe advises, could be your best bet yet.

Treasury bills and bonds are a debt instrument used by the government to borrow locally to finance its operations, and earn investors returns on their money over a short period of time.

“If you do not want to lose even a single cent of your money, consider buying a treasury bill which you can get even for as low as Sh50, 000, or a treasury bond, which now goes for Sh100, 000 or Sh200, 000. You can buy these through the Treasury’s online savings bond portal. Treasury bills take 21 days to mature, while bonds run for two years, others five years and above,” Dr Kibe says.

Fixed deposit savings account

The financial advisor says that individuals can also earn tidy income annually from interest accrued on savings in a fixed deposit account at a reputable bank.

“If you are very conventional, then you can put your money into a savings account with a reputable financial institution, where you will start getting returns based on the interest that bank is offering, but here you would get very low returns. If anyone gives you very high rates for a fixed deposit, do not invest there,” she warned.

Saving in a Sacco, meanwhile, gives depositors dividends at the end of each accounting year depending on the Sacco’s performance and amount invested, while also helping the depositor to boost their portfolio for future loans.

Informal savings groups, popularly known as chamas, are also a key instrument in helping one foster a savings culture especially for low-income earners, which can be harnessed to start a business and also be used to access low-interest loans that can be used to pay for necessities when need arises. –

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