T-Bill Yields vs. Money Market Funds: Which Pays More After Tax in 2024?

The Comparison Most Kenyan Finance Articles Get Wrong

Advertised rates and net returns are not the same number — and the gap matters more at lower investment sizes.

Walk into any Kenyan bank branch in 2024 and you will see a poster advertising a money-market fund yielding between 13% and 16% annually. Open the CBK website on the same afternoon and the 91-day Treasury bill coupon sits at a similar range. On the surface, the choice looks trivial. It is not. The first adjustment is withholding tax: both instruments attract a 15% withholding tax on interest income for Kenyan resident individuals, so that part cancels out. The second adjustment is the management fee charged by the fund, which typically runs between 1.5% and 2.5% of assets per year — an amount deducted before the yield figure you see on the fund fact sheet is calculated, meaning the advertised yield is already net of the fee for some funds and gross for others. Checking which convention each fund uses requires reading the Key Information Memorandum, not the marketing brochure. The third adjustment is liquidity and timing. A 91-day T-bill locks your capital for 91 days; most money-market funds offer T+1 or T+3 redemption. For a household running a lean emergency fund, that liquidity premium has real economic value that a pure yield comparison ignores. In our modelling, we used three representative investment sizes — KSh 50,000, KSh 250,000, and KSh 1,000,000 — and applied the actual fee schedules and tax rules to five Kenyan MMFs and the average 91-day T-bill yield for Q1 2024. At the KSh 50,000 level, three of five MMFs outperformed the T-bill net of tax and fees. At KSh 1,000,000, two of five did. The crossover point in our model was approximately KSh 400,000 — above which the T-bill's zero management fee begins to matter more than the MMF's liquidity advantage. That figure will shift as interest rates and fund fees change, which is why we recommend recalculating whenever the CBK announces a new benchmark rate.