The NCBA money market fund has experienced a steady growth rate in the past few years, ranking 3rd overall by yield, according to Cytonn. While the effective annual rate as of December 9th, 2022, was 9.8%, things haven’t always been like that.
For example, the highest annual rate in 2020 and 2021 was 8.47% and 8.33%, respectively. So, obviously, 2022 was impressive, and investors can only hope for 2023 to improve.
It takes a Ksh 5,000 minimum deposit to join the Money Market Fund (MMF) and an equal top-up. Moreover, the fund enjoys a 2% annual maintenance fee, but there is no entry or existing fee, and you can withdraw anytime and have your money within three days.
But just like other money market funds in Kenya, the earnings from the NCBA MMF are subject to a 15% withholding tax.
Here are the things I’ll discuss concerning the money market fund:
- What is the NCBA money market fund?
- How does the NCBA MMF work?
- What are the advantages of the NCBA MMF?
- What are the fund’s downsides?
- Who should invest in the money market fund?
- How do you join NCBA MMF?
- How do you withdraw from the NCBA MMF?
Let’s jump into it!
In a hurry? Check out the NCBA MMF fact sheet below:
NCBA Money Market Fund Fact Sheet
|Fund Manager||NCBA Investment Bank|
|Custodian||NCBA Bank Kenya|
|Auditor||Deloitte & Touché|
|Portfolio Size||Ksh 14.89 billion (June 2022)|
|Minimum Investment||Ksh 5,000|
|Minimum Top-Up||Ksh 5,000|
|Effective Annual Yield||9.8 % (As of December 9th, 2022)|
|Withholding Tax||15% of interest earned|
|Annual Management Fee||2%|
What Is The NCBA Money Market Fund?
The NCBA money market fund, also known as the Kenya Shilling Denominated Fund, is a type of unit trust that invests in short-term investment instruments. The instruments include treasury bonds (T-bonds), treasury bills (T-bills), and fixed deposits, among other interest-bearing assets.
How Does The NCBA Money Market Fund Work?
The NCBA MMF ecosystem features several key pivotal players in its operation. First, we have the investors, also known as the unit holders, whose job is to pool money that the fund manager (NCBA Investment Bank Ltd) manages and invests.
Note that the fund manager is licensed and CMA-approved. CMA stands for capital markets authority of Kenya.
The fund manager, however, does not hold the funds. It’s the custodian (NCBA bank Kenya) that does that.
The fund manager and custodian are held accountable for using the investors’ money by the trustee (KCB bank). In case of financial malpractice, the trustee acts as the whistleblower.
The last member of the ecosystem is the auditor (Deloitte & Touché), whose job is to review the financials.
Regarding investments, the minimum deposit is Ksh 5,000, and you can make an equal minimum top-up anytime. The investment earns interest which is compounded daily.
As of December 9th, 2022, the NCBA money market fund interest was 9.8%. So, it could be thereabout at the moment. The interest earned, however, is subjected to a 15% withholding tax, but since the compounding is daily, NCBA allows you to withdraw at any time.
Annually, the funds attract a 2% maintenance fee, but no exit or entry fee exists.
What Are the Advantages of The NCBA Kenya Shilling Denominated Fund?
The NCBA Money Market Fund generally enjoys these advantages:
- Decent returns – Over the past few years, the NCBA MMF has averaged an annual interest of about 8.9%, and as of December 2022, the NCBA Money Market Fund Interest Rate was about 9.8%. That’s pretty decent, only bettered by Cytonn (10.7%) and Zimele (9.9%).
- Daily interest compounding – NCBA allows you to earn daily interest not only on your principal but also on your interest earned. So, yes, you earn compound interest and not simple interest.
- Fast withdrawal – According to NCBA, withdrawals take up to 3 days once you send your application.
- Low fees – NCBA does not charge any entry or exit fees. Though the minimum top-up and investment are slightly high (Ksh 5,000), the account maintenance fee is low (2%).
- Low risk – The NCBA MMF is a low-risk money market fund. Primarily, that’s because the fund is CMA-approved, and so are the fund manager and custodian. A team of experienced investors constantly looks for the safest money market investment.
- Anytime top-up – NCBA allows you to top up your money market fund account anytime.
- Savings culture – Though the NCBA Kenyan Shilling-Denominated Fund is a short-term investment vehicle, you can use it as your short-term savings plan. It allows you to save for emergencies, fees, mortgage or land deposits, weddings, vacations, and other short-term financial goals.
- Low tax – Understandably, the income earned attracts a 15% tax which is not a lot, given that earned income invites as much as a 30% tax levy.
What Are the Downsides of The NCBA Kenya Shilling Denominated Fund?
The NCBA MMF suffers a few downsides, which you should know before committing your hard-earned money. The downsides are as follows:
- Slightly higher top-up limit – Unlike most money market funds which either have no top-up limits or have a lower limit, NCBA expects you to make a minimum top-up of Ksh 5,000.
- The withdrawal application process can be tiring – Though the funds processing takes up to 3 days, the withdrawal application process is not the most enjoyable. You’ve to fill out a Unit Trust Unit selling form to indicate the number of units you want to sell in exchange for cash. One unit equals 1 Ksh.
- Interest unpredictability – Yes, the current interest rate (9% +) is pretty impressive, but in one way doesn’t indicate future returns. The yield rate could go up or down depending on the market.
Who Should Invest in The NCBA Kenya Shilling Denominated Fund?
The NCBA MMF is practically a good choice for two sets of people:
- The investor (includes low-risk appetite investors and those looking for capital preservation)
- The saver (includes those looking for regular income or just capital preservation)
How Do I Join The NCBA Money Market Fund?
To join the NCBA money market fund, you must fill out a Unit Trusts account opening form. The form requires you to provide your primary identification information and signature.
You’ll also need to indicate the type of Unit Trust (in this case, NCBA money market fund) and the deposit amount (Ksh 5,000 minimally). Once you fill out the form and make the deposit, you can submit it and wait for NCBA’s response.
Alternatively, you can visit the NCBA money market fund page and drop your name, email, and phone number. NCBA will follow up with further information.
How Do I Withdraw from NCBA money market fund Kenya?
To withdraw funds from NCBA MMF, you must fill out a Unit Trusts Unit selling form and indicate the number of units to exchange for cash at a rate of 1 unit/1 Ksh.
The funds processing takes up to 3 days, and the deposit is via the bank account.
NCBA Money Market Fund Contacts
- Head office – Mara Road, Upper Hill, Nairobi
- Mobile – + 254 732 156 444 / +254 711 056 444
- Toll-free – 0800 720 444
- Box number – 44 599– 00100 Nairobi, Kenya
People Also Ask
1. Does NCBA have a Money Market Fund?
Yes, NCBA has a money market fund called the Kenya shilling-denominated fund. The fund has an annualized interest rate of about 8-9% and requires a Ksh 5,000 minimum investment.
2. How Much Interest Do Money Market Funds Pay?
Money market funds in Kenya pay an annual interest rate of 8 – 10 %. Of course, the interest is not carved in stone. It’s perpetually changing, sometimes favoring investors and sometimes not so favoring.
3. Should I Invest in a Money Market Fund?
A money market fund is a decent investment vehicle for those looking for a high-interest, short-term investment. The interests are pretty high (though unpredictable), and you can turn your money market fund into a short-term savings account.
4. Is a Money Market Fund Better Than a Savings Account?
In terms of yield, money market funds promise better interest than savings accounts. However, there is no guarantee which means you could lose your investment. That’s unlike a savings account where you keep your money.
5. What Are Some of the Best Money Market Funds in Kenya?
Based on yield rate, here are the top 5 money market funds in Kenya according to a 2022 Cytonn report:
- Cytonn Money market Fund (10.7%)
- Zimele Money Market Fund (9.9%)
- NCBA Money Market Fund (9.8%)
- Apollo Money Market Fund (9.5%)
- Sanlam Money Market Fund (9.5%)
6. What Are the Drawbacks of a Money Market Fund?
A money market fund’s biggest disadvantage is its unpredictable yield rate. It keeps fluctuating, and that’s concerning. You could lose money when the rates are abysmal.
7. Can I Withdraw Money from A Money Market Account?
Yes, you can withdraw money from a money market fund. Most of these funds allow you to transfer money to your bank or MPESA within 1 – 4 days.
Above is everything to know about the NCBA money market fund. In terms of yield, ease of saving, and safety, NCBA is doing well, making the money market fund a good choice for short-term investing or saving.
While the risks are always there, they are low, and that’s the exciting part about the NCBA MMF.
Talk to us on social media if you want to learn more about the NCBA money market fund or any other lucrative investment opportunity. As the Cent Warrior family, we are always happy to offer advice on financial and investment matters.