Investing for Income in Kenya in 2023: A Step-by-Step Guide

    While a lot of freelancers know how to generate extra income or diversify their income, many more are unsure of how to diversify or where to invest in. However, I can sympathize with the last group because selecting an investment is not easy. Personally, after trying my hand in several business ventures, I nearly gave up because of losses. But, I learned that I have to take charge of my investments because I was listening to others too much yet none of them had ever established any successful business or had real investments.

    So, after extensive research, I discovered convenient but long-term investment opportunities that all freelancers/content creators would love. We all value the expediency of working remotely. Therefore, unless you are good or blessed with setting up a business, you will find these investment paths attractive.

    Remember to conduct research yourself about your selected path to understand the involved risks. Additionally, ensure to specify your financial goals or needs e.g.

• Are you investing to earn income immediately?
• Do you need liquidity or can safely lock your investment for a few years?
• Is your investment a long-term strategy to ensure your financial security?
• Are you diversifying your sources of income?
• How much risk can you take?

    If you are risk-averse or do not want to take a big risk, consider low-risk investments such as government and corporate bonds. Also, start with small amounts so that if losses are incurred you won’t regret much. The key is:

1. Have a good plan and understand when you will need cash, the amount, and the risk you will take,
2. Understand the risk for each option, and
3. Know the amount you need to diversify.

    Investments provide good income but they should not be your sole source especially if you are just beginning. Specifically, diversify your investment options.

We will review nine investment paths for your consideration.

Potential Investment Paths

 

1. Real Estate

    For this type of investment, you may buy raw land or plot and set up rentals or agriculture/any commercial activity. Remember that real estate investments are for the long term. You can sell the plot/land later for up to three times its original value. However, you need to be very careful when purchasing raw land because there are a lot of cons. With the recent digitization of land records, you can follow the guidelines below to ensure that what you are buying is real and belongs to you. Avoid being quick to part with your hard-earned money by following the due process. Have a look at this article: How to Buy Land Legally in Kenya Without Being Conned.

    You can also put your money in Real Estate Investment Trusts (REITs) rather than being involved directly in buying and selling property. REITs are firms that have or finance real estate ventures for a profit. An example in Kenya is Vuka by Acorn Group. The company allows you to invest in its student accommodation ventures such as Qejani and Qwetu. You earn through dividends and capital appreciation of the property. You can start with as little as Kshs.1000.

REITS are identical to mutual funds and involve buying shares and selling them later when the price is good. They offer high incomes and require the assistance of qualified real estate managers.

2. Stocks

    Another option is to participate in the buying and selling of shares in the Nairobi Stock Exchange (NSE). Investing in stocks requires going through a broker because of their experience and knowledge of the stock market. Nearly all banks in Kenya have an investment arm that acts as the broker. The ones I know for sure are KCB Capital and Equity Investment. I am sure your bank offers brokerage services also, talk to them or visit their website. Avoid online forex traders as they are mostly scams promising you quick returns, which is not usually the case in the stock market. 

    Stock investment is good for newbie investors as it offers high returns when done well through market predictions. Remember, you need brokerage experts who know how to work with stocks. As I said earlier, talk to your local bank about brokerage services and work with them. The numerous fluctuations and movements in the stock market require patience because, in the long term, you will gain. 

    Consider for example the Safaricom shares in January 2020. Each share went for Ksh.24.71 before increasing to around Ksh.42 towards the end of that year. But as of December 26, 2022, it had reduced to Ksh.24.23 and Ksh. 16.50 in April 2023. Do you see the difference and the returns in the long term? They fluctuate and but are generally good.

How to Invest in Stocks (NSE):

• Visit your bank’s website or inquire about brokerage services from them (KCB Capital and Equity Investment are real). 
• You will open a Central Depository System Account (CDSA) with your bank brokerage providers to help the central bank know who holds specific shares. You must have a bank account with a commercial bank in Kenya to open a CDSA.
• Follow the due process such as collecting a mandate card from any branch of the Central Bank, providing correct personal account details and contact information, and having two signatories from the bank sign the mandate for verification purposes.
• You will also need at least one passport-sized photograph of yourself, certified and stamped by your bank representatives and a clear copy of your passport, National ID, or alien certificate when submitting the mandate card.
• Once you have the CDSA, choose your stocks or start monitoring the stocks (or follow the advice of your bank).
• Start trading. The bank will do most of the work for you.

    Remember, this is a long-term investment. While you can be lucky, do not expect quick returns in the short term. Since most freelancers are mostly young people or not very old, I consider stocks as a good option.

3. Mutual Funds

    For this investment type, money from investors is pooled together and traded in securities such as stocks, bonds, and the money market. Mutual funds are great options for diversifying your investment portfolio and spreading risk. This is for you if you desire a safe place to keep your money. Earnings are through monthly interest, which can be re-invested to make more money. Remember, market dynamics influence interest rates.

    Examples of mutual funds include money market funds, balanced funds, and dividend funds. CIC Group is a good place to start due to its nice rates. You can start with as low as Ksh.5, 000 without paying any initial fees. However, look at factors such as withdrawal terms, costs, risk and stability, withdrawal limitation, and interest rates when choosing the funds to invest in.

Other firms offering investment opportunities in mutual funds include Cytonn Investment, Old Mutual Kenya, Equity Bank, and Britam Unit Trust among others.

How to invest in mutual funds?

• Choose your preferred institution (e.g. CIC Asset Management).
• Find more information from them about your options.
• Register and start your investment.

4. Government Securities (Treasury bonds and Treasury bills) - A low-Risk Investment option

    Government securities can be used as good replacements for savings because they earn higher interest rates. They involve lending government money for a specific period and earning interest after maturity. The Kenyan government issues securities such as treasury bonds (T-bonds) and treasury bills (T-bills) regularly. Consider the M-AKiba bond  introduced by the Kenyan government. You can transact easily via Mpesa with a minimum of Ksh.3, 000 and earn a 10% interest annually. T-bills are short-term options as they mature in 91, 182, or 364 days. You earn by paying less than the face of the bill when buying but receive its full value after maturity. T-bonds, however, are long-term as they mature in 1 year – 30 years. These are like loaning the government and earning interest. You have probably heard about infrastructure bonds issued by the National Treasury. They are excellent opportunities for investment because they are exempted from tax.

The minimum amount you can invest in bills is Ksh.100, 000 and Ksh.50, 000 for bonds

How to invest in bonds?

• Like stocks, investing in bonds usually involves opening a CDSA account with your bank brokerage services, deciding your investment options, applying and submitting, getting feedback, paying, and waiting for maturity to earn.
• Be sure to monitor the upcoming bond prospectus on the Central Bank website and take note of sale dates and instructions.

    Bond interest payments are made every six months to your bank account across its tenure. You only receive the face value of the bond and the last interest when it matures.

Other Options

Branding

    This is another lucrative investment opportunity for freelancers. You can generate a decent amount of money by establishing yourself in a specific niche. But, first, you must develop your brand. Social media platforms like Facebook, LinkedIn, and Twitter make it easier for you to do this.

With this venture, you can do stuff with wedding decorations, events planning, content creation, and marketing among others.

Tourism

    Kenya being a tourist hub, opportunities exist mainly in tours and travel. Focus mostly on local tourists and organize tours to different destinations across the country. However, this segment requires high hospitality and professional standards.

Agri-Business

    Investments in agriculture are a good option, particularly when you focus on cash crops such as Hass avocadoes and beekeeping. These ventures can help you generate decent income given the high demand for them in the Kenyan and international markets. Let us look at each one of them individually.

Bee Farming

• Needs a few resources but offers good income.
• You need land probably in rural areas. At least an acre.
• Other requirements: veils, hives, smokers, bee suits, and probably workers.

Hass Avocado Farming

• Kenya is the top exporter of avocado in Africa and sixth globally. 
• This is a lucrative opportunity given its rising demand and ready market. 
• You can buy a single Hass seedling for Ksh.150.
• Requires at least an acre of land, which you can purchase cheaply in rural areas.

Starting a Business or Company

    Investing in yourself is also a good option. Base your company on personal interests, work experience, education, or available opportunities around you. This option also needs time because a business does not just start earning higher incomes. Nonetheless, you can be lucky and start earning immediately depending on the type of business.

Bottom Line

    This article discussed diverse ways of investing as a freelancer, content creator or individual. The option you select depends on a variety of individual and financial factors. Analyze your situation carefully before venturing into any investment. If you have to seek advice, consider only qualified organizations or people such as those listed above.