Amid the shifts in economic conditions, businesses continually prioritise efficient cash management to preserve capital, generate returns while maintaining access to the funds. Business cashflow management requires balancing revenues with ongoing operational needs.
Revenues often fluctuate with seasons, industry cycles, or project timelines, whereas expenses such as payroll, supplier obligations, and statutory payments remain constant. Ensuring that funds are availed at the right time without lying idle is thus a major consideration in financial planning.
Liquidity is not only about meeting obligations but also maintaining the agility to take advantage of opportunities as they arise, whether that is securing inventory at favourable terms, investing in short-term growth projects or cushions against unplanned expenses.
Current accounts are convenient for daily transactions but often offer negligible returns. With the inflation in July 2025 standing at 4.1 percent, the funds held in current account experience gradual loss in its real value.
Fixed deposits can be used as better yielding alternative for surplus cash, with the interest currently averaging at 8.37 percent as of June 2025, but are far less flexible as funds remain locked out to maturity.
Committing resources to longer-term financial instruments can further lock in much higher yields, yet this comes at the expense of quick access should business emergencies arise. As a result, businesses must carefully weigh the trade-off between returns and liquidity, while ensuring the capital is preserved.
Money market funds (MMFs) provide a strategic approach to managing surplus cash, allowing businesses and institutions to build working capital, invest short-term reserves, and cushion against inflation.
An MMF is a collective investment scheme that pools funds from investors and invests in short-term instruments such as Treasury bills, fixed and call deposits, and high-quality commercial paper.
Specifically designed to preserve capital while delivering steady returns and near-term liquidity, MMFs also diversify exposure across government securities, bank deposits, and corporate debt, reducing reliance on a single counterparty.
Additionally, unlike long-term financial instruments, MMFs provide quick access to funds, helping businesses cover payroll, pay suppliers, and handle unexpected expenses without disruption.
Beyond ensuring liquidity, MMFs provide businesses with competitive returns that track short-term interest rates, making them a reliable cash flow tool in shifting economic conditions.
Positioned at the short end of the yield curve, their performance closely follows interest rate cycles. When the central bank tightens the monetary policy, short-term securities reprice upwards, lifting MMF yields. When policy rates are cut to stimulate activity, MMF returns adjust downward but still remain higher than most savings accounts.
Yields on short-term securities throughout 2025 have generally trended downward with the 91-day Treasury bill currently at 7.98 percent per annum (p.a) and the 182-day at 8.03 percent p.a.
The Capital Markets Authority's robust and transparent regulatory framework has further reinforced investors’ confidence in MMFs. For instance, according to the Capital Markets (Collective Investment Schemes) Regulations, 2023, MMFs must maintain highly liquid portfolios with a maximum weighted average tenor of 18 months or less, ensuring ready liquidity.
Additionally, trustees and custodians provide independent oversight, ensuring adherence to investment guidelines and investor protection.
Together, they create a governance structure that protects investors and enhances confidence in the MMF market. By ensuring safety, liquidity, and steady returns under a strong regulatory framework, MMFs have emerged as a strategic tool for Kenyan businesses to optimise cash flow while preserving capital.
According to the CMA’s Q2 2025 CIS Report, industry assets under management grew by Sh207.1 billion over six months — from Sh389.2 billion on December 31, 2024, to Sh596.3 billion on June 30, 2025 — representing a 53 percent growth.
With Money Market Funds (MMF) accounting to nearly two thirds of this AUM, this trend signals that investors are increasingly adopting MMFs as a primary savings and investment channel.
This dominance can further be mirrored in the market by licensed fund managers such as Madison Investment Managers Limited, which has grown its assets under management to over Sh23 billion across products including its MMF, Fixed Income Fund, and segregated funds.
According to Managing Director Rebecca Tiba, the rising popularity of MMFs demonstrates investors’ growing preference for these CMA-regulated short-term investment instruments.
Whether you’re managing household expenses, running a business or executing large-scale projects, MMFs offer an excellent way to earn on your cash before it’s utilised. They’re not just an investment but also a financial tool for smarter cashflow management for entrepreneurs, corporates and everyday savers.
The writer is Madison Investment Managers Managing Director.
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