Frequently Asked Questions About Umba MFB’s 16% Savings Account

EDITOR’S NOTE: This article is part of our Money254 Partner Series produced in partnership with Umba to celebrate the launch of their fixed deposit savings account.

Umba Microfinance Bank offers a competitive 16% annual interest rate on savings deposited in their fixed deposit account that are locked for a period of 12 months. This is higher than Kenya's annual inflation rate, which as of October 2023 stood at 6.92%. 

This rate of return is higher than the average for Sacco deposits, Money Market Funds and compares favourably with Treasury Bills and Bonds. Below are some of the Frequently Asked Questions about Umba MFB and its deposit accounts to help you decide if this is the right place to keep your savings. 

FAQs About Umba MFB

What is Umba, and what services does it offer in Kenya?

• Answer: Umba is a CBK-licensed digital microfinance bank that provides a range of financial services in Kenya, including current accounts, interest-bearing savings accounts, fixed deposit accounts, lending, and payments.

Is Umba a legitimate bank in Kenya?

• Answer: Yes, Umba is a legitimate digital microfinance bank operating in Kenya. In July 2022, Umba acquired a majority shareholding in Daraja Microfinance Bank, allowing it to offer full banking services, including accounts insured by the Kenya Deposit Insurance Corporation (KDIC).

Is Umba Microfinance Bank regulated?

• Answer: Yes, Umba Microfinance Bank is regulated by the Central Bank of Kenya (CBK). Regulation ensures that the bank adheres to industry standards and practices, providing a level of oversight to protect the interests of depositors.

Are Deposits to the Umba Microfinance Bank protected?

• Answer: Umba Microfinance Bank is licensed by the Central Bank of Kenya (CBK), and deposits are insured by the Kenya Deposit Insurance Corporation (KDIC) as mandated by Kenyan law. This ensures that your deposits are protected up to a certain limit.

What is the guarantee that Umba Bank can afford a 16% interest rate on fixed deposits?

• Answer: Umba Bank is licensed by the Central Bank of Kenya and operates within the regulatory framework. The 16% interest rate is sustained through the bank's revenue streams, including interest earned from various loan products it offers. Deposits are protected by law through the Kenya Deposit Insurance Corporation (KDIC).

Does Umba only operate in Kenya, or does it have a presence in other countries?

• Answer: Umba has also built a thriving business in Nigeria, providing a foundation for its successful entrance into the Kenyan market. This positions Umba as a pan-African digital microfinance bank.

A digital Bank? What sets Umba apart from traditional brick-and-mortar banks in Kenya?

• Answer: Umba operates without the need for an expensive branch network, offering cost-effective financial services. Additionally, the bank develops its own technology in-house, eliminating the need for large licensing fees typically passed on to customers by traditional banks.

FAQs About Umba Fixed Deposit Accounts

What is the Umba Fixed Deposit Savings Account?

• Answer: The Umba Fixed Deposit Savings Account is a high-yield savings product offered by Umba, a digital bank in Kenya. It provides an opportunity to earn passive income through interest on deposits.

How does the Umba Fixed Deposit Savings Account work?

• Answer: The Umba Fixed Deposit Account offers a predetermined interest rate of up to 16% per annum when you lock your savings for specific periods (1, 3, 6, 9, or 12 months). The minimum deposit for this account is Ksh5,000.

What are the different lock periods available for the Umba Fixed Deposit Savings Account, and how do they affect the interest rates?

• Answer: The Umba Fixed Deposit Account offers lock periods of 1, 3, 6, 9, and 12 months. The interest rates vary, with a higher rate of 16% for a 12-month lock period, and decreasing rates for shorter durations (15% for 9 months, 14% for 6 months, 13% for 3 months, and 12% for 1 month).

Can I withdraw from the Umba Fixed Deposit Account before the maturity date?

• Answer: Yes, the Umba Fixed Deposit Account allows free withdrawals without penalties in the event of an emergency. You will earn the interest accrued up to the point of withdrawal.

Is there a penalty for early withdrawal from the Umba Fixed Deposit Account?

• Answer: No, there is no penalty for early withdrawal in the event of an emergency. You can withdraw your funds without losing the accrued interest up to that point.

Does Umba have a standard Savings Account and what interest does it offer?

• Answer: The standard Umba Savings Account offers a 5% interest rate per annum on deposits, paid out monthly. There is no minimum balance requirement or limitations on withdrawals for this account.

What happens if I miss a monthly deposit into the standard Umba Savings Account?

• Answer: There is no obligation for monthly deposits, and missing one does not incur penalties. The account remains active, and you continue to earn interest on your existing balance.

Can I have multiple Umba Savings Accounts for different savings goals?

• Answer: Yes, you can create multiple standard Umba Savings Accounts for different goals, naming each account based on the specific purpose, and track them separately.

Are there any hidden fees or maintenance charges associated with the Umba Savings Accounts?

• Answer: No, both the Umba Fixed Deposit Account and the standard Umba Savings Account have no maintenance charges, allowing you to save without worrying about hidden fees.

FAQs About Differentiating Factors of Umba Deposit Accounts

What are the benefits of the Umba Fixed Deposit Account for wealth preservation?

• Answer: The account offers up to 16% in annual interest rate, higher than the inflation rate, providing a hedge against inflation and preserving the purchasing power of your money.

What sets the Umba Fixed Deposit Account apart from other investment options in Kenya?

• Answer: The Umba Fixed Deposit Account stands out with a competitive 12% to 16% annual interest rate, providing an attractive alternative to other investment options like real estate, stocks, and bonds. Also, deposits to the CBK-regulated Umba Microfinance Bank are protected by the Kenya Deposit Insurance Corporation (KDIC). 

FAQ About Umba Deposit Accounts’ Use Cases

How does the Umba Fixed Deposit Account support emergency funds?

• Answer: While requiring a lock-in period, the Umba Fixed Deposit Account offers extra liquidity with free withdrawals during emergencies, ensuring accessibility to funds when needed.

Can the Umba Savings Account be used for goal-based savings?

• Answer: Yes, the Umba Savings Account is suitable for goal-based savings. You can save for specific goals, and the interest earned can accelerate your progress toward achieving those goals.

How is passive income earned with the Umba Fixed Deposit Account?

• Answer: By depositing a certain amount and locking it for a specific period, you earn interest, providing a source of passive income. For example, a Ksh500,000 deposit locked for a year could yield Ksh80,000. You could lock different amounts for different periods creating concurrent maturity periods such as monthly, quarterly or biannually too. 

Is the Umba Fixed Deposit Account suitable for retirement planning?

• Answer: Yes, the Umba Fixed Deposit Account can be part of retirement planning, offering a low-risk option for earning steady income during retirement with a predetermined interest rate. Utilising the different lock periods can ensure you get payouts several times in a year.

FAQs on Umba Deposit Accounts’ Opening Process and Terms

Can I open an account with Umba through its app, and what services are available within the app?

• Answer: Yes, Umba offers a seamless account opening process within its app. The app provides access to a range of banking services, including current accounts, savings accounts, fixed deposit accounts, and customer support.

What is the process for topping up the Umba Current Account ("Wallet")?

• Answer: You can top up your Umba current account through M-Pesa. Go to Lipa Na Mpesa, select Paybill, enter 264130 as the Business Number, use your phone number as the Account Number, enter the desired amount, and confirm the payment. Once the amount. You can also top up via the Umba app by entering the amount you want to transfer to your Umba wallet and an M-Pesa prompt will be sent to your mobile device.
• Once the Wallet is funded, you can proceed to open either a standard Umba savings account (5% per annum) by clicking on  “Savings Stash”
• or an Umba Fixed Deposit Account by clicking on “Locked Savings” and choosing your preferred lock period. 

Are there any hidden fees or maintenance charges associated with the Umba Savings Accounts?

• Answer: No, both the Umba Fixed Deposit Account and the standard Umba Savings Account have no maintenance charges, allowing you to save without worrying about hidden fees.

Is the interest earned on the Umba Fixed Deposit Account subject to taxation?

• Answer: Yes,under Kenyan law, all interest on bank deposits is subject to a 15% withholding tax. 

How Can I Check my Umba Savings Account balance and track transactions?

• Answer: The Umba app allows you to check balances, track deposits, and view interest earned conveniently from your mobile device, providing easy access to your account information.

Is there a penalty for early withdrawal from the Umba Fixed Deposit Account?

• Answer: No, there is no penalty for early withdrawal in the event of an emergency. You can withdraw your funds without losing the accrued interest up to that point.

Why is a live selfie required during the account verification process?

• Answer: The live selfie is a digital alternative to the traditional physical passport photo that you would have been needed to submit at a physical bank Branch. It is required to verify that the person opening the account matches the details on the provided ID number, enhancing the security and authenticity of the account.

Is the selfie requirement mandatory for opening an Umba Fixed and Standard Deposit Account, and how is it processed?

• Answer: Yes, the selfie requirement is mandatory for account verification. It is processed by reviewing the submitted selfie to ensure that the face matches the details on the provided ID card copy you upload. This digital process replaces the need for a physical passport photo traditionally required by banks.

Want to try Umba out? Download the Umba MFB App from here.