Feature: Treasury Bills in Kenya: A Lucrative Investment or a Controversial Stopgap for Government Funds?

Kenya’s Treasury Bills (T-bills) have long been a preferred investment for individuals and institutions seeking high, stable returns with minimal risk. However, recent revelations that the government has invested Ksh46 billion from the Affordable Housing Levy into short-term T-bills have reignited debates about their role—both as a profitable investment vehicle and as a temporary parking spot for stalled government projects.

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Why T-Bills Remain Attractive in Kenya

1. High and Guaranteed Returns T-bills offer competitive interest rates, often between 10% to 15% per annum, far exceeding typical bank savings accounts. This makes them a low-risk, high-reward option for investors.

2. Government-Backed SecurityAs debt instruments issued by the Kenyan government, T-bills are considered virtually risk-free, making them ideal for risk-averse investors, including pension funds, banks, and now, state-managed levies like the Affordable Housing Fund.

3. Short-Term and Liquid With tenors of 91, 182, or 364 days, T-bills provide quick returns and flexibility. Investors—including the government itself—can easily liquidate or roll over their holdings as needed.

4. Tax Advantages, unlike bank interest (taxed at 15%), T-bill returns are tax-free, enhancing net gains for investors.

Is the Government Lending to Itself?

While T-bills are a smart investment for private investors, their use by the government to park Affordable Housing Levy funds has raised eyebrows.

Key Concerns:

– Delayed Housing Projects: Only 26% of the Ksh88.7 billion collected under the housing levy has been spent on actual construction.

– Scaling Down of Targets: The government has reduced its housing target from 1 million to 700,000 units annually due to legal and financial hurdles.

– Circular Financing? Critics argue that investing the housing levy in T-bills amounts to the government borrowing from itself, rather than deploying funds for their intended purpose.

Government’s JustificationOfficials defend the move, stating that idle funds should earn returns while awaiting project implementation. The Ksh46 billion investment in 91-day T-bills ensures the money isn’t lying idle in low-interest accounts.

Broader Trend: State Agencies Parking Funds in T-BillsThis isn’t an isolated case. Between July 2024 and March 2025, state agencies invested Sh94 billion in government securities—mostly from fuel and housing levies—pending expenditure.

Are T-Bills a Boon or a Band-Aid?

For private investors, T-bills remain a ‘safe’, high-yielding option. However, their growing use by the government to manage unspent levies highlights deeper implementation challenges in state projects.

While earning interest on idle funds is financially prudent, the bigger question remains: Will the Affordable Housing Programme deliver on its promises, or will T-bills become a long-term parking spot for diverted funds?

If you’re looking to maximize your investment returns ‘safely’ write to wealthmanager@justivyafrica.com to guide you on your investment journey, and join Cohort 5 of A Guide to Becoming a Dollar Millionaire program to learn more on investment options.

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