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Could Money Market Funds Be the Death of Saccos?

BY Soko Directory Team · July 4, 2019 08:07 am

When it comes to savings and investments, the most important thing for everyone goes down to trust and security.

For the longest time, saccos have offered those two things for most Kenyans and that is why over the past few years, thousands of saccos have been registered to meet the growing demand.

Most Kenyans, for a very long time, have preferred investing in Saccos over other forms of investments.

Recently, however, there have been numerous cases where Saccos have closed down shop due to mismanagement and outright fraud from boards and managers.

This in return has led to savings amounting to billions of shillings belonging to members being lost.

One such scandal was the Ekeza Sacco, where it is said that the Sacco defrauded its members a total of 1.5 billion shillings.

In my perspective, saccos are okay but do not meet most of our (millennials) investment needs and growing need to make fast money withdrawals and deposits.

Recently the words Money Market Funds (MMFs) have been doing rounds in the investment space.

Read Also: Saccos, the New Corruption Vehicles Propelling Greedy People to Instant Riches

There are still a lot of questions surrounding MMFs as most Kenyans do not seem to have a clear understanding of this investment vehicle.

However, there is still a lot of buzz around MMFs and more people are boarding this investment vehicle.

Liquidity

One huge advantage of MMFs over Saccos for me especially is that MMFs are very liquid.

For MMFs, once you save money with it, you are allowed one free withdrawal from your account every month as compared to saccos where you need to wait for other members to give you guarantees or give a form of security.

Daily Interest

Another amazing advantage of MMFs is that your investment earns daily interest known as the daily yield.

The daily interest is computed on the funds in the account daily, summed and credited to your account monthly. The rates fluctuate day to day, though.

Initial Deposit and Additional Deposit

For MMFs, you need an initial deposit, which varies from one MMF to another, which tells the fund manager that you’re now in business and that your investment can begin to earn daily interest.

This is money that is used to earn interest.

For additional investments, this also varies from one MMF to another.

For example, CBA Bank’s minimum initial deposit is 5,000 shillings. A minimum additional investment of 5,000 shillings. Dry Associates’ initial deposit minimum is 1,000,000 shillings. A minimum additional investment of 250,000 shillings.

Zimele Asset Management’s is 100 shillings. There’s no minimum additional investment.

Parting Shot

In essence, money market funds seem like a really good option for most of us at the moment as compared to any other investment option such as the SACCOs.

My only advice at the moment would be, before making any investment decision, you need to sit down and carefully do your research and find out what works best for you.

Read Also: All You Need to Know to Start Investing in a Money Market Fund

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system. Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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