How to Buy Shares in the Kenyan Stock Market

Photo by Adeolu Eletu / Unsplash

Contrary to popular belief, the process of buying shares in Kenya is easy, simple, and straightforward.

In all, there are 3 ways you can use to start buying shares at the Nairobi Securities Exchange: directly through a stockbroker, through an app, or through a unit trust or mutual fund.

This article will focus on how to buy shares through a stockbroker in Kenya. We'll cover the steps involved from choosing a stockbroker to taking full ownership of the shares in your own account.

Let's get started.

How to buy shares in Kenya for Beginners

Buying shares directly at the Nairobi Securities Exchange involves 5 steps:

  • Find a stockbroker
  • Open up a CDS account
  • Deposit money into your CDS account
  • Make an order with the broker
  • The broker buys and delivers your stocks to your CDS account

1. Find a stockbroker

The first thing you will need to do is to find a licensed stockbroker. This is important because you can’t buy stocks directly from the stock exchange - you need a broker for that.

All brokers must be licensed by the Capital Markets Authority and the Nairobi Securities Exchange provides a complete list of all licensed brokers.

To choose the best broker, consider factors like:

  • Convenience - can you access your account online or communicate effectively through email?
  • Regulation - is the stockbroker licensed by the CMA?
  • Cost - what are the brokerage fees, transaction fees, and commissions?

All brokers charge a standard fee/ commission that is regulated by the CMA. However, it’s important to consider how all the 3 factors compare so that you settle on a broker who is affordable, responsive, and legally regulated.

Finding a stockbroker first is also important because of one other critical step: setting up a CDS account.

2. Open a CDS account

What is a CDS account and why is it important?

A CDS account holds all your shares and securities. In the same way that you use your bank account to keep your money, your CDS account will keep your stocks and bonds.

All your transactions in the NSE will be carried out from it. Therefore you cannot start buying or selling shares without it.

Opening a CDS account is simple. Your stockbroker can do it for you free of charge and in less than 5 minutes.

To open your CDS account you will need to provide:

  • A copy of your original ID or passport (for identification)
  • A copy of your KRA pin (for tax purposes) and;
  • 2 recent passport-sized photos

Once you provide all these documents, you will be required to fill in a CDS 1 form (your stockbroker will provide this) and the account will be activated instantly.

You’ll also need to provide your bank account details for linking with your CDS account. This is necessary because industry regulations require that profits (i.e. dividends) be deposited into a bank account and not the trading account.

At this point, you are ready to begin buying.

3. Deposit the money and make the order

It's important to do your research and understand your objective before you start buying shares.

Ask the fundamental questions: Which investment do you want to own? How much do you have to invest? How long do you plan to invest? Consider everything you need to achieve before you begin.

After you’ve identified what to buy, deposit funds into your brokerage account and direct your broker (usually through email) to buy the shares.

Once the broker receives your funds, your order will be executed, and the shares you’ve bought will reflect in your CDS account immediately. The broker will charge you a small commission which will be deducted from your account.

When you sell any of your holdings, the funds you earn will be deposited into your linked bank account.

How much money do I need to buy shares in Kenya?

The minimum number of shares you can buy is 100 so the amount varies depending on two things:

  • the cost of the specific stock you want to buy, and;
  • the number of shares you intend to buy (keeping in mind that the minimum is 100).

For example, the share price for KQ as of June 2021 was 3.00/=. Therefore, you would need just KES 300 to get started if you wanted to get these shares.

On the other hand, a Safaricom share goes for about 40/= as of June 2021. Going by the minimum regulation, to buy Safaricom shares you need around KES 4,000 for 100 shares.

Other ways to buy shares at the NSE

1. Mutual Funds and Unit TrustsMutual funds and unit trusts work by pooling together money from different investors, then using it to hire a professional money manager.

The biggest benefit here is that you’ll get to enjoy the services of a professional. So this is the best option if you are just starting out but you’re not sure which stocks to invest in.

The manager is expected to buy shares on behalf of the investors. The objective is to generate good returns for the fund, which will be distributed among all the investors who pooled their money together.

Joining a mutual fund doesn’t cost much. With as little as 500/=, you can open an account with any of the several mutual funds available in Kenya.

Recommended reading: The Complete Guide to Mutual Funds in Kenya

2. Through mobile app accounts — this option is also fast and simple: download the app, sign up, load money into your account and you’re good to go.

Apps like Abacus and Hisa App allow you to create an account and start buying any company listed on the NSE.

The app holds all the shares, so you won’t need to open up a CDS account. But while that might seem convenient, it’ll cost you more in fees when you need to sell your holdings later.

So keep this in mind when you choose an app as your option to buy shares in Kenya.

Over to you...

As you can see, it’s not that hard to buy shares in Kenya.

What’s important is to settle on the option that works for you, follow the process required, and start buying your preferred shares.

That’s all for this post. If you’ve got any questions, let us know in the comments.