Kenya’s banking sector is entering 2026 with a clear numerical backdrop: an industry-weighted non-performing loan ratio of 16.4%, a benchmark lending rate trimmed to 9.0%, and a regulatory shift that will force more transparent credit pricing. At the same time, collective investment schemes are absorbing retail liquidity at a record pace, with assets under management topping KSh 680 billion and retail participation surpassing 2.5 million accounts. Those figures frame a competitive contest between banks and fund managers over where savers park their cash.
The contest is unfolding against a banking system that remains central to credit creation but is navigating asset-quality strain. Manufacturing and trade exposures have contributed to rising loan stress, pushing lenders to tighten underwriting while searching for stable deposit funding. The Central Bank of Kenya’s December 2025 rate cut to 9.0% has lowered the cost-of-funds trajectory, while a Risk-Based Credit Pricing Model scheduled for full rollout by March 2026 is expected to standardize how rate changes reach borrowers. For depositors, that combination is reshaping return expectations just as alternative investment vehicles gain scale.
Collective investment schemes are capturing that shift in saver behavior. Industry assets expanded from roughly KSh 254 billion in mid-2024 to more than KSh 680 billion by late 2025, driven largely by money market funds. These funds account for 58.9% of total CIS assets, making them the default short-term parking place for households seeking yield and liquidity. Sanlam leads the segment with a 19.1% market share, while newer special funds focused on alternative assets have expanded their footprint from 13.6% to 20.3% of industry assets. Products such as Mansa-X, which reported returns of 20.74%, illustrate how higher-risk strategies are attracting yield-focused investors.
Retail adoption has accelerated in parallel. The number of CIS accounts reached about 2.5 million by mid-2025, more than doubling year-on-year. That surge indicates that fund managers are no longer competing only for institutional flows; they are pulling in everyday savers who previously relied on bank deposits. For banks, deposits remain a primary funding source, so retaining liquidity is both a balance-sheet and profitability issue.
Bank-Led Funds and Internal Competition
Rather than ceding ground, large banks are building in-house investment products designed to keep customer cash within their ecosystems. Tier 1 lenders have rolled out bank-sponsored money market funds that sit alongside transactional and savings accounts. Standard Chartered’s SC Shilingi fund, for example, is embedded in its mobile platform, allowing customers to subscribe, redeem, and monitor balances without leaving the banking app.
Scale is part of the pitch. Institutions such as KCB and NCBA emphasize their balance-sheet strength and brand familiarity when marketing internal funds to customers who prioritize perceived safety. Yield is another lever. While traditional savings accounts average about 3.67%, bank-backed money market funds such as KCB’s have historically posted returns reaching the mid-teens, narrowing the gap with independent managers and reducing the incentive to transfer funds externally.
Digital Infrastructure and Liquidity Access
Speed and convenience are central to the deposit race. Independent fund managers have gained traction through mobile integrations, particularly with M-Pesa, enabling low-ticket, high-frequency investing. Banks are responding by redesigning their digital channels to automate the movement of idle cash.
Sweep features are becoming more common, allowing surplus balances in current accounts to be shifted into higher-yield internal funds in near real time. The objective is to replicate the flexibility that has drawn savers to standalone platforms. Beyond digital rails, banks continue to deploy their physical and agent networks, estimated at more than 60,000 agents nationwide, to reach customers in areas where app-based onboarding is less prevalent. That hybrid model blends digital access with in-person touchpoints, widening the deposit funnel.
Yield Competition and Portfolio Positioning
Performance remains a decisive factor. Leading money market funds such as Etica and Cytonn are delivering returns above 11% in early 2026, compared with an average bank deposit rate of roughly 7.28%. For savers facing moderating inflation and lower policy rates, that spread is material.
Banks are countering through product diversification. Beyond plain-vanilla money market funds, some lenders are distributing or partnering on higher-yield special funds aimed at more risk-tolerant clients. Vehicles modeled on strategies like Mansa-X targeting returns above 20% through alternative assets, are entering bank distribution channels, giving customers access to a broader risk-return spectrum without leaving the banking environment.
Cross-subsidization also plays a role. Banks with diversified revenue streams, including fees, corporate lending, and treasury operations, have more flexibility to offer preferential deposit or investment terms to high-value customers, tying liquidity retention to broader relationship banking.
Regulation, Stability, and Investor Perception
Regulatory positioning is another competitive axis. Banks operate under Central Bank of Kenya capital and liquidity frameworks that are often marketed as a buffer against systemic stress. For risk-averse savers, the perception of institutional resilience can outweigh marginal yield differences.
Fund managers, meanwhile, are navigating tighter Capital Markets Authority oversight, including Risk-Based Capital Adequacy reporting requirements introduced in January 2026. While the measures are designed to strengthen industry discipline, they also raise the compliance bar. Banks frequently emphasize custodial structures and segregation of client assets when pitching in-house funds, framing governance and asset protection as part of the value proposition.
Taken together, the competition for deposits is no longer limited to headline interest rates. It now spans digital experience, product architecture, regulatory credibility, and access to yield. As savers treat liquidity management as an investment decision, both banks and fund managers are reshaping their offerings to capture a larger share of Kenya’s evolving cash economy.
Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.