Standard Chartered Bank Uganda (Stanchart) has recently launched a new money market fund account called SC Shilingi Funds. The fund is currently available to its customers through their SC Mobile App. Anyone with the Stanchart app can easily open up an account and start investing.
SC Shilingi Funds is a platform that offers money market funds in Uganda Shillings from various provider(s). A money market pools contributions of many investors into one large fund (pooled fund), which can then be invested in a variety of financial products including bank deposits, government treasury bills & bonds, and corporate bonds. Money market funds are regulated by the Capital Markets (Collective Investment Schemes) Regulations 2003 and an independent trustee who is the registered holder of the scheme’s underlying assets.
The fund is basically a unit trust being offered in partnership with Sanlam Investments East Africa Limited. This is essentially an umbrella scheme which pools funds from many investors and invests on their behalf. Any profits accruing are redistributed to members. The Sanlam Umbrella Unit Trust Scheme became operational in October 2020 and currently has about ugx 74bn of assets under management as of 31st March 2023.
Units trusts are what you would call Collective Investment Schemes (CIS). Basically, different people pool resources and hand them to an investment manager who manages the investment on their behalf. Unit trusts should not be confused with investment clubs or SACCOs.
In Uganda, unit trusts are regulated by the Capital Markets Authority (CMA) under the Collective Investment Scheme Act, 2003. The market has grown tremendously as adoption and awareness have increased. Currently, there are six licensed firms offering unit trusts and these include UAP, Britam, ICEA, XENO, Sanlam, and SBG Securities Limited. At the close of March 2023, CIS Managers had a total of UGX 1,757 billion in Assets Under Management (AUM). The total number of active CIS accounts at the end of March 2023 were 44,434.
The SC Shilingi Funds invests mainly in Government of Uganda treasury bills, bonds, and bank fixed deposits. The current annual net interest is about 12%. The fund is denominated in Uganda Shillings.
There are several benefits to investing in SC Shilingi Funds. First, it’s a very simple investment vehicle to understand for a small retail investor. It’s very easy to sign up for existing Stanchart customers with the bank app with no paperwork involved. Investing in SC Shilingi Funds is done 100% digitally on SC Mobile App. The SC Shilingi Funds require a minimum deposit of only ugx 20k and the maximum transaction amount is ugx 120m. There is no active management by the investor. It’s really a passive form of investment. So it’s ideal for working people who don’t have the time or energy to run side hustles or businesses.
Second, the fund is quite flexible. You can deposit and withdraw cash at any time through the Stanchat app. You can also easily set up a weekly or monthly standing order which automatically deducts cash from your Stanchart account into the Shilingi account. This flexibility provides a truly liquid investment.
Third, the interest is moderate given the low-risk nature of unit trusts. The fund yields about 12% net per year in interest income. Most of the underlying assets are regulated assets like treasury bonds and bills. You can also benefit from the compounding effect by leaving your funds intact for some time. SC Shilingi Funds charges a one-time arrangement fee of 1% of the amount you are investing. The fund manager also charges an annual management fee of 1.5%. You will also pay withholding taxes on the interest you earn on your income similar to a fixed deposit. With-holding taxes are deducted by the fund manager. Thus, you will be credited with the net interest after all with-holding tax deductions.
Finally, the fund is regulated by the CMA. There is also a governance structure around it. The actual assets are held by a custodian who is Standard Chartered Bank Uganda. Stanchart also serves as the trustee of the fund and hence oversees the whole operation. The fund manager is Sanlam who actually does the fund management and investment. The auditor is PWC Uganda. Because of this regulation, unit trusts are fairly safe compared to other investments.
From my experience, the best approach to investing in unit trusts has been to first identify my investment goal. In this case I will be using the SC Shilingi Funds to build some liquidity for my daughters’ school fees. I have started small by setting up a weekly standing order of ugx 50k. Automating this savings decision will ensure that I actually follow through with my initial intentions. This simple practice will enable me to accumulate some liquid cash that I can use to meet my school fees obligations.
In conclusion, the SC Shilingi Funds is fairly safe, passive, generates moderate returns, is flexible, quite liquid and is another welcome innovation in the Uganda Capital Markets. Recall that Stanchart also recently launched an offshore dollar denominated mutual fund. Standard Chartered Bank should be applauded for leading the field in digital innovation and I am sure other banks will follow suit.
I would definitely recommend anyone to check it out.
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