Why investors flock to collective schemes and corporate bonds

The number of investors in CIS nearly doubled to 420,682, while those in government securities jumped by more than 70 percent to 19,049. Corporate bonds, traditionally a niche space, recorded an even sharper climb from 2,339 to almost 10,000 in just two years.

By contrast, equities — still the largest single class with more than 610,000 participants — expanded by a modest seven percent.

According to the advisory and research manager at Zan Securities Mr Isaac Lubeja, the exodus from savings accounts is being driven by basic arithmetic.

“Ordinary savings accounts offer very small interest, often barely enough to keep up with inflation. CIS, on the other hand, has opened doors for savers to enjoy double-digit annualized returns, in some cases from as little as Sh50,000,” he says.

The appeal is twofold: higher returns and lower entry barriers. Investors who once needed millions to buy into bonds or equities can now contribute modest amounts and still enjoy access to professionally managed portfolios.

Mr Lubeja said: “Unlike keeping money in a single account, CIS pool investors fund and spread them across different asset classes, from treasury bonds and corporate debt to shares of listed companies”.

With equities posting solid gains this year, many CIS participants have reaped benefits without the stress of direct trading.

For financial analyst Christopher Makombe, the surge in CIS is the product of both structural reforms and clever innovation.

“Growing financial literacy initiatives by CMSA, banks, and fund managers have made ordinary Tanzanians more aware of CIS,” he notes.

He said, Technology has amplified the effect. Mobile money integration through platforms such as M-Pesa, as well as online investment portals, has turned investing into a process as simple as buying airtime.

“Product innovation is another factor. Instead of a one-size-fits-all approach, the market now offers a spectrum of CIS products, from balanced funds and equity-focused portfolios to fixed-income and money market funds,” he said.

According to him, the regulatory support is another pillar. The CMSA has actively promoted CIS to deepen the capital markets. Low bank deposit rates are pushing investors to seek higher-yielding options.

Chief executive officer of Exodus Advisory, Mr Ramadhani Kagwandi, sees the increase as a positive harbinger for the national economy.

It indicates people have more disposable income to invest, he believes, which is a key marker of a healthy economy as it suggests rising living standards, enabling a transition from mere consumption to wealth creation.

“It also signifies that people who previously lacked awareness about investment now have an opportunity to participate in the market,” he said.

According to Mr. Kagwandi, CISs reduce the risks for individual investors by allowing them to pool their funds.

For example, it enables them to invest in a bond with a higher minimum investment threshold that would be unattainable on their own. This democratisation of investment is crucial for broadening financial inclusion.

Financial literacy and awareness programmes have been pivotal in this, he adds, while technology has lowered barriers of geography and class.

Bonds in the spotlight

While CIS dominate the narrative, bonds are gaining ground as stable alternatives. Government securities, backed by state credibility, have attracted investors seeking predictability, with numbers rising sharply.

Corporate bonds, though from a smaller base, signal confidence in private sector expansion, as companies issue debt for growth.

This tilt towards bonds aligns with risk aversion, offering fixed returns in an uncertain world.

As Mr Kagwandi is quick to note an underlying psychology. Investors are flocking to low-risk or “risk-free” options.

He explained, “This is not a major challenge. It is simply human behavior. People are risk-averse, and CIS cater to that by pooling funds into safer assets such as government securities.”

Demand and supply dynamics

Chief executive of SSC Capital and seasoned investment banker, Mr Salum Awadh, frames the rise of CIS not just as a demand story, but also a supply one.

On the demand side, he notes, Tanzanians’ limited financial literacy and inherent risk aversion push them toward relatively safer, more accessible products.

With markets offering mainly stocks and bonds, CIS emerges as a viable alternative. He anticipates more options, noting an ETF on the horizon.

That horizon arrived in August 2025, when Vertex International Securities launched Tanzania's first ETF, the VIS ETF, on the DSE, alongside a new bond fund targeting Sh10 billion.

On the supply side, fund managers see CIS as easy to structure and market. Oversubscription of previous launches has provided proof of concept.

Mr Awadhi, “It appears to be an easy product to structure and launch by fund managers. They see that other CIS IPOs previously launched were all oversubscribed.”

In his view, fund managers are capitalizing on a product that sits neatly between investor demand for safety and their own search for manageable, scalable offerings.

Potential risks

The popularity of CIS has undeniable benefits. Analysts highlight their role in deepening capital markets, mobilising resources for development, and reducing the dominance of informal savings channels.

They also provide investor protection under the watchful eye of regulators. Yet there are risks.

Mr Makombe warns of market concentration risk: if CIS overly favours government securities—as current trends suggest—equity development may stall.

The concentration of pooled funds in government securities, while safe, may stifle equity market development in the long run.

Liquidity pressures can also emerge when large numbers of investors seek to redeem their funds at the same time, particularly if portfolios are concentrated in illiquid assets.

Mr Makombe said, “In times of high redemption demand, fund managers may struggle with liquidity, especially in funds heavily invested in less liquid assets”.

He said, “The trend is positive for capital market deepening and inclusion. But its long-term success and wider impact will depend on diversification beyond government securities, sustained investor education, and strong regulations.”

As Tanzania eyes a $1 trillion economy, private investment must step up, with capital markets pivotal.

This investor flock to CIS and bonds isn't fleeting—it's the foundation of a more inclusive, dynamic financial ecosystem, where savers become stakeholders in national prosperity.

The challenge will be ensuring that this momentum translates into broader economic impact. For CIS to deliver long-term value, it must expand beyond government securities and nurture the equity market.

For regulators, sustaining investor confidence will require continued oversight, transparent reporting, and proactive education campaigns.