Kenyan savers are reallocating cash into higher-yield instruments as interest rates begin to ease from recent peaks, with Money Market Funds, Treasury Bills, SACCOs and select fixed deposits attracting most inflows heading into early 2026.
This follows a period of weak returns on traditional savings accounts. By late 2025, average savings rates across commercial banks were between about 3.77% and 5.5%, prompting depositors to look for alternatives that offer a better balance between yield, liquidity and capital preservation. With inflation relatively contained and early signs of monetary easing emerging, savers are seeking to lock in returns while conditions remain supportive.
Selective demand for high-yield fixed deposits
Despite broad reductions in deposit pricing by large lenders, fixed-term deposits at smaller and mid-sized banks continue to draw interest from yield-focused savers willing to commit funds for defined periods.
Credit Bank PLC currently offers the highest advertised fixed deposit rate in the market, at up to 11.56%, followed by African Banking Corporation at about 11.16%. Both are well above the sector’s average deposit rate of roughly 7.28%, according to industry data.
Tier 1 and upper mid-tier lenders such as Family Bank and Kingdom Bank offer fixed deposit rates ranging between about 8.4% and 9.6%. These banks tend to attract depositors seeking a compromise between institutional scale and returns that remain meaningfully higher than standard savings accounts.
Government securities remain a core allocation
Government paper continues to attract sizeable cash balances, particularly from institutional investors and high-net-worth individuals seeking predictable income with limited credit risk.
As of early February 2026, Treasury Bill yields remained competitive across tenors. The 91-day paper was yielding about 7.63%, appealing to investors prioritising liquidity. The 182-day bill offered around 7.80%, while the 364-day instrument provided the highest short-term return at approximately 9.21%.
Infrastructure bonds remain in demand, largely because interest earned on these securities is exempt from withholding tax. For investors facing the standard 15% tax on interest income, the exemption materially improves after-tax returns compared with taxable deposits or funds offering similar headline yields.
SACCOs continue to post strong payouts
Savings and Credit Cooperatives remain central to household savings strategies, particularly for salaried workers and long-term members. Unlike banks, SACCOs distribute part of their annual surplus through dividends on share capital and interest on member deposits.
For the 2025 financial year, payouts announced in early 2026 continued to exceed bank deposit rates. Tower SACCO declared dividends of 20% on share capital and 13% interest on deposits. Newfortis SACCO paid 14% dividends and 13% interest, while Cosmopolitan SACCO announced dividends of 16.5% alongside 12.05% interest. Yetu SACCO reported dividends of 19% and 13% interest on deposits.
These returns are subject to SACCO-specific rules on withdrawal timing and minimum holding periods, but they remain attractive to members focused on longer-term savings rather than short-term liquidity.
Money Market Funds dominate retail inflows
Money Market Funds continue to attract the largest share of new retail savings, supported by low minimum investment thresholds, daily interest accrual and relatively quick access to funds.
Many funds allow entry with as little as KSh 5,000. As of February 2, 2026, leading MMFs such as Etica and Cytonn were posting annualised yields of about 15.9% and 15.2% respectively, maintaining double-digit returns even as rates begin to normalise.
Fund managers note that yields are likely to moderate as higher-coupon government securities mature and are replaced with lower-yielding paper. Even so, many analysts expect average MMF returns to settle closer to the 10% range, which would still compare favourably with bank savings rates.
Liquidity remains a key attraction, with most MMFs processing withdrawals within two to three business days, making them a common choice for emergency funds and short-term cash management.
Tax-exempt savings gain attention
Some savers are also turning to tax-exempt savings products to improve after-tax returns. Under Kenya’s Income Tax Act, interest earned on certain Postbank products is exempt from the standard 15% withholding tax.
The Postbank Premium Plus Account offers tax-free interest of up to 9.0%. On a taxable-equivalent basis, this is comparable to earning about 12.86% at a commercial bank. Other Postbank products, including Save As You Earn (SAYE) and Bidii Savings accounts, offer graduated, tax-free interest structures aimed at smaller savers seeking predictable growth.
Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.