What Are Government Securities – And Why Should You Care?
Government Securities are debt instruments issued by the Government of Kenya. In simple terms, they are loans that you give to the government, and in return, the government promises to pay you back with interest after a specific period. These are among the safest investment options in the country and are a great way to grow your money with minimal risk.
The Central Bank of Kenya (CBK) manages these securities on behalf of the National Treasury. If you’re looking for a reliable way to invest your money, understand how these options work:
Types of Government Securities
Kenya offers two main types of Government Securities:
1. Treasury Bills (T-Bills)
- Short-term investment: 91, 182, or 364 days (3, 6, or 12 months).
- How they work: You buy them at a discount and get full face value at maturity.
- Example: If you buy a one-year T-Bill with a face value of Kshs. 100,000 at a 10% discount, you pay about Kshs. 90,932 today and receive Kshs. 100,000 after 12 months.
- Good for: Short-term savings, parking cash securely, and earning more than a savings account.
2. Treasury Bonds (T-Bonds)
- Long-term investment: From 2 years to 30 years.
- How they work: You earn interest (coupon payments) every six months until the bond matures.
- Example: If you invest Kshs. 100,000 in a 10-year bond with a 5% annual interest rate, you receive Kshs. 2,500 every six months and your Kshs. 100,000 back at the end of 10 years.
- Good for: Long-term planning, building passive income, and retirement saving.
What About Taxes?
- T-Bills: The profit (discount earned) is taxed at 15% withholding tax.
- T-Bonds:
- Bonds under 10 years are taxed at 15%.
- Bonds 10 years or more are taxed at 10%.
- Infrastructure bonds are tax-free (great for maximizing returns!).
Who Can Invest?
Anyone who is:
- A Kenyan citizen or a resident
- Has a Kenyan shilling (KES) bank account
- Has a CDS account (explained below)
Even if you’re not a citizen but live in Kenya and have a local bank account, you can still invest. If you’re abroad, you can submit a mandate form to invest remotely.
How to Start Investing in Government Securities
Here’s a simple step-by-step process:
Step 1: Open a CDS Account (Free!)
A Central Depository System (CDS) account is like an investment account at the Central Bank. It’s completely free to open.
What you need:
- Your national ID or passport
- A passport-size photo
- A filled mandate card (get it from the CBK website or your bank)
Step 2: Decide How Much and What to Buy
Choose whether to invest in T-Bills or T-Bonds based on:
- Your financial goal (short-term or long-term)
- How much you want to invest
- The current rates (available weekly from CBK)
Step 3: Fill and Submit the Application Form
Submit the following:
- Your CDS account number
- Your bank account number
- The security issue number (specific bill/bond you’re buying)
- The amount you want to invest
Submit before 2pm on auction day (usually Wednesdays or Thursdays).
Step 4: Check Results
Call CBK to confirm whether your bid was successful and how much you’ll need to pay.
Step 5: Make Payment
Pay by 2pm on the Monday after auction results are announced.
Late payments can get you blacklisted from future investments.
Step 6: Get Paid
Interest payments (for bonds) or full maturity amounts (for T-Bills) are automatically sent to your bank account.
Why Invest in Government Securities?
- Safe – Backed by the government
- Affordable – Start from around Kshs. 50,000
- Better returns than banks
- No account maintenance fees
- Flexible terms (3 months to 30 years)
Bonus Tip: Use a Commercial Bank (Optional)
If you prefer, you can invest through your bank. They’ll handle the paperwork for you, but they may charge a small fee.
Final Thoughts
Whether you’re saving for school fees, retirement, or just want your money to work for you, Government Securities are one of the safest and smartest ways to invest in Kenya. You don’t need millions or a financial degree — just a little patience and planning.
To learn more or download the mandate forms, visit the Central Bank of Kenya website.
