In Kenya’s evolving investment landscape, Money Market Funds (MMFs) have become a go-to option for everyday savers looking for low-risk, liquid returns that beat traditional bank savings.
Among them, Safaricom’s Ziidi MMF stands out for its seamless integration with M-PESA, allowing investments as low as KES 100.
But with great accessibility comes the fine print: taxes. Specifically, withholding tax (WHT) on your earnings can eat into those returns if you’re not prepared.
What is Ziidi MMF?
Launched in late 2024 and managed by Stanbic Investment Bank (SIB), Ziidi is a unit trust MMF designed for M-PESA users.
It invests primarily in short-term, low-risk securities like Treasury bills and interest-bearing accounts, offering daily liquidity and competitive yields.
By mid-2025, Ziidi’s assets under management had surged past KES 10 billion, reflecting its popularity among retail investors.
Key features include:
- Minimum Investment: KES 100 (no maximum, but subject to M-PESA limits of KES 250,000 per transaction and KES 500,000 daily).
- How to Invest: Dial *334# on your phone, select “Financial Services” > “Ziidi,” or use the M-PESA app. Deposits and withdrawals are free and instant.
- Current Yield: As of late September 2025, the effective annual yield stands at about 6.84% after withholding tax and fees, a solid option in a market where top MMFs hover around 7-10%. Yields fluctuate daily based on market conditions, so check via *334# or the app for the latest.
- Fees: A 2% annual management fee is deducted before yields are quoted.
Ziidi’s appeal? It’s digital-first, earning interest from day one (after a 24-hour settling period), and it’s building features like Shariah-compliant options and group investments for chamas.
Understanding Withholding Tax in Kenya
Withholding tax is a “pay-as-you-earn” mechanism where tax is deducted at the source before you receive your income.
In Kenya, it’s governed by the Income Tax Act and administered by the Kenya Revenue Authority (KRA). For investment income like MMF interest, WHT ensures the government gets its cut upfront.
For interest income:
- Rate: 15% for both residents and non-residents on bank interest and similar earnings, including MMFs.
- Final Tax?: Yes, for MMFs. As a Collective Investment Scheme (CIS), the 15% WHT is final; there’s no need to declare it in your annual tax return unless you’re a non-resident without a permanent establishment.
- Who Deducts It?: The fund manager (SIB for Ziidi) handles the deduction and remits it to KRA on your behalf.
No major changes to MMF WHT rates occurred in the Finance Act 2025, keeping things stable at 15%.
This applies uniformly, whether you’re a salaried worker parking emergency funds or a business building cash reserves.
How Withholding Tax Applies Specifically to Ziidi MMF
Ziidi MMF income is treated like other interest-bearing investments: the gross interest you earn is subject to 15% WHT, deducted automatically before payout.
Here’s the flow:
- You deposit funds (e.g., KES 10,000).
- Interest accrues daily at the prevailing rate (net of the 2% management fee).
- At withdrawal (or periodically), the fund calculates gross interest, withholds 15% tax, and credits your M-PESA with the net amount.
- KRA gets the tax via SIB; you’ll receive a withholding tax certificate if needed for records.
Important: Yields quoted by Ziidi (like the 6.84%) are typically net of fees but before WHT. So, your actual take-home is even lower post-tax. Unlike some MMFs, Ziidi doesn’t offer tax exemptions or special treatments; it’s a straightforward 15%.
READ ALSO:Should You Invest in Ziidi MMF Now? User Reviews & Analysis
For non-residents: The same 15% applies, but if you have no Kenyan permanent establishment, it’s final with no further obligations.
Calculating Your Net Returns: A Simple Example
Let’s crunch numbers to see WHT in action. Assume you invest KES 100,000 in Ziidi for one year at a gross annual yield of 8% (before fees and tax, using a realistic pre-fee rate based on recent trends).
| Step | Description | Amount (KES) |
|---|---|---|
| 1. Gross Interest (before fees) | 8% of 100,000 | 8,000 |
| 2. Less Management Fee (2%) | 2% of average assets (approx. 2% of 100,000) | -2,000 |
| 3. Net Interest (before tax) | Step 1 minus Step 2 | 6,000 |
| 4. Withholding Tax (15%) | 15% of Step 3 | -900 |
| 5. Your Net Earnings | Step 3 minus Step 4 | 5,100 |
| Total Return (Principal + Net Earnings) | 100,000 + 5,100 | 105,100 |
| Effective Net Yield | (5,100 / 100,000) × 100 | 5.1% |
Pro Tip: Use Ziidi’s in-app calculator for personalised projections. Yields are daily compounded, so actual returns might edge higher with reinvestment.
Tax Implications and What to Do Next
- Residents: No annual filing is needed for this income; it’s final. But keep records for audits.
- Non-Residents: Confirm your status; double taxation treaties might allow credits in your home country.
- High Earners: If MMF interest pushes you into a higher tax bracket overall, consult a tax advisor, though WHT remains final for CIS.
- Refunds: Rare for MMFs, but if over-withheld (e.g., due to exemptions), file via iTax for relief.
Track your investments via the M-PESA app, and remember: WHT is remitted monthly by the fund, so your statements will show net figures.
Tips for Maximising Returns Despite WHT
- Invest Long-Term: Daily compounding helps offset the 15% bite; the longer your money stays, the more it grows net.
- Compare MMFs: Ziidi’s 6.84% net is competitive, but check peers like Cytonn (top at ~10% gross) for better pre-tax yields.
- Diversify: Pair with tax-free options like Saccos or infrastructure bonds (10% WHT).
- Stay Updated: Yields and rule changes follow KRA alerts and Ziidi notifications.
- Go Digital: Ziidi’s M-PESA integration means no paperwork, but enable two-factor for security.
Wrapping Up: Tax-Smart Investing Starts with Knowledge
Withholding tax on Ziidi MMF is a straightforward 15% deduction that keeps your investing simple but reminds us: all returns come with a government share.
At current rates, Ziidi remains a hassle-free entry to wealth-building, especially for M-PESA loyalists. Whether you’re saving for a rainy day or scaling up, understanding WHT empowers you to project real take-homes accurately.
Ready to dive in? Dial *334# and start with KES 100 today. For personalised advice, chat with a financial advisor and always verify the latest yields, as markets shift fast.
Disclaimer: This post is for informational purposes only and not financial advice. Tax rules can change; consult KRA or a professional for your situation.
Ronnie Paul is a seasoned writer and analyst with a prolific portfolio of over 1,000 published articles, specialising in fintech, cryptocurrency, climate change, and digital finance at Africa Digest News.
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