Treasury Bills for Short-Term Cash: A SACCO Treasurer's Story

Grace is an illustration, not a real person. She is the treasurer of a SACCO that holds members' savings. Some of that money must be ready for loans and withdrawals during the year, so it cannot be locked away for long. Here is how she thinks about Treasury bills.

Why bills fit short-term cash

• Bills last 35, 91, 182 or 364 days, so money comes back within a year.

• They are Government securities, and the full face value is paid at maturity.

• The minimum in the latest bill notice is TZS 500,000, in steps of TZS 10,000 (notice), so they suit small and large amounts.

Step 1: She lists when the SACCO needs cash

Grace writes down the dates when money is needed: loan disbursements in three months, a dividend payment in six months, and a reserve the SACCO keeps for the whole year.

Step 2: She matches tenors to those dates

• Money needed in about three months goes into 91-day bills.

• Money needed in six months goes into 182-day bills.

• The yearly reserve goes into 364-day bills.

This is sometimes called laddering: spreading money across several maturities so some is always coming back. It also means not all the money is reinvested at the same yield.

Step 3: She works out the return

Bills are bought below face value. The price per 100 is 100 ÷ (1 + yield × days ÷ 365), the convention that reproduces BoT's published prices. Example (illustration): for TZS 10,000,000 of 182-day bills at an 8% yield, the price is about 96.16, so the cost is about TZS 9,616,000 and the difference of about TZS 384,000 is the interest, before the 10% withholding tax stated in recent notices.

Step 4: She keeps records the board can read

• The auction date, tenor, amount, price and yield of each purchase.

• The maturity date of each bill.

• The source: the BoT result for that auction.

On UCHUMIKA the Treasury bills dashboard shows recent yields and demand by tenor, and the Start investing guide estimates cost and return for any amount.

This article is for education only and is not investment advice. Examples marked as illustrations are not current rates. Confirm terms in the official Bank of Tanzania notice and speak to a licensed adviser before you invest.