Kenya’s saving culture shows a nation of ambitious, hardworking individuals, and on the other, a country where savings rates remain stubbornly low.

With only 12 per cent of income being tucked away, Kenya lags behind its East African neighbours, Uganda and Tanzania, who boast savings rates above 20 per cent. But why is this the case?

For years, financial literacy in Kenya has been more of an afterthought than a priority. The result? A population largely unaccustomed to prudent financial planning. Add to this the growing influence of Western consumerism, a ‘You Only Live Once’ (YOLO) mentality, and the allure of instant gratification, and you have a recipe for a spend-first, save-later economy. Social media has not helped either—young people are bombarded daily with images of luxury lifestyles, exotic vacations, and trendy gadgets that scream, “spend, spend, spend!”

But despite the statistics, a financial revolution is underway, and it’s being led by an unlikely group—the same tech-savvy youth who have been accused of reckless spending. Enter the rise of Collective Investment Schemes (CIS), with Money Market Funds (MMFs) and Savings and Credit Cooperatives (Saccos) taking centre stage. Once the go-to financial tool for older generations, Saccos have been challenged by the rising popularity of MMFs, which offer a more flexible and accessible savings alternative.

Mary Kimani, 43, is one of the many Kenyans who have recently switched gears from the traditional Sacco model to MMFs. A random scroll through TikTok introduced her to the concept, and she was instantly hooked. “After seeing video after video of people saying how much their MMFs were earning in interest, I felt like I was missing out,” she admits. Acting on advice from a friend in the banking sector, she swiftly opened an MMF account and has never looked back.

Her reasoning? Accessibility and compounded interest. Unlike Saccos, where funds are locked in and can only be accessed through loans, MMFs allow investors to withdraw their money at any time while still earning interest.

Development loans and MMFs

“I still keep my Sacco membership because I plan to take a development loan in the future, but my main focus is now on MMFs,” Mary explains. She even reinvests the interest she earns from her MMF back into her Sacco, creating a hybrid savings strategy that maximizes both liquidity and future borrowing power.

Erick Karanja, Portfolio Manager at Britam Asset Managers, acknowledges the growing shift towards MMFs, particularly among younger savers. “The biggest appeal of MMFs is their accessibility, low risk, and high liquidity,” he says.

“It’s essentially a savings account that earns interest, but unlike a Sacco, you’re not locked in.”

The numbers speak for themselves. As of 2024, Kenya boasts approximately 5,000 registered Saccos with a membership of around 14 million, collectively holding assets worth Sh971.96 billion. However, MMFs are rapidly catching up, now accounting for a staggering 67.4 percent of total Assets Under Management (AUM) in the country, according to a Britam report on Emerging Market Trends.

Short term saving goals

The question then becomes: which is the better investment? According to Karanja, it all boils down to purpose. “If you’re saving for a short-term goal, like school fees or an upcoming emergency, an MMF is your best bet. The liquidity allows you to access your money whenever needed. But if you’re looking for long-term growth and the ability to take out loans, then a Sacco makes more sense.”

Jane Lois, Business Development Manager at Britam, further explains that MMFs have an edge when it comes to discipline. “Saccos force you to save, but they don’t necessarily teach you how to invest. With MMFs, you are consistently growing your money, and the compounding interest ensures your savings are working for you, not just sitting there.”

That said, Saccos still hold their own appeal. They offer members access to loans at lower interest rates compared to commercial banks, and in some cases, members can borrow up to five times their savings. But Saccos come with their own set of challenges, particularly around governance and transparency. Poorly managed Saccos have been known to collapse under the weight of bad loans and mismanagement, leaving members scrambling to recover their funds.

“Unlike MMFs, which are managed by professional asset managers, many Saccos are run by elected officials who may not have the financial expertise to handle large pools of money,” Karanja points out. “The lack of proper regulation in some cases has made people wary of Saccos, and those who are savvy are now diversifying their savings by parking some of their money in MMFs.”

This shift in Kenya’s savings culture hasn’t gone unnoticed. Financial institutions and government bodies are actively pushing for financial literacy campaigns to encourage a more robust saving and investment culture. In June 2023, sector players launched a public awareness initiative aimed at educating Kenyans on the benefits of structured saving and financial planning. The goal? To move beyond just saving and instead focus on wealth creation.

Even entrepreneurs are tapping into traditional savings models and modernizing them. Margaret Nyamumbo, for instance, integrated Kenya’s age-old table banking system into her coffee startup, Kahawa 1893, to support female coffee farmers. This blend of traditional financial practices and contemporary business strategies is a testament to the evolving landscape of saving and investment in the country.

Both have their strengths, and savvy Kenyans are learning to leverage the best of both worlds. Whether it’s the structured discipline of a Sacco or the flexibility and compounding power of an MMF, one thing is clear: Kenya’s saving