Kenya’s National Treasury will float a KES5 billion ($48.6 million) M-Akiba bond which will only be purchased through mobile-phone platforms. The minimum investment will be KES3,000 ($29.13) and the maximum KES140,000, which is the maximum allowed in a single mobile-money transaction (it can be increased by making more applications).
The 5-year infrastructure bond will float on 21 October. The National Treasury and Central Bank of Kenya will set the rate, which will be free of income tax. Finance Cabinet Secretary Henry Rotich said the rate will be higher than rates offered by commercial banks (currently 1.37% on cash in savings accounts) but did not give more details.
It is unlikely to be as high as the soaring rates in local money markets – a 91-day treasury bill was at 20.637% at the auction for value dated 5 Oct, up from 18.607% on 28 Sept according to the CBK and 182-day paper on 28 Sept was 14.5%. The Government’s 1-year KES30bn bond sold at a record rate of 19.062%, offering the biggest returns for investors in 3 years. Kenya’s inflation in Sept 2015 was 5.97%, up from 5.84% the previous month and above expectations, according to www.tradingeconomics.com.
The new bond will only be available to Kenyans, who currently make up 2% of investors into bonds listed on the Nairobi Securities Exchange (NSE).
Innovative mobile money tech
The innovative Treasury Mobile Direct (TMD) platform means individuals will buy the bonds instantly instead of the previous 2-day process. Potential customers will only need to have a mobile phone line and subscription to a mobile-money transfer service, which will enable telcos to open an electronic account with the CDSC on their behalf, as well as a valid ID. They will dial *889# and follow the prompts. Treasury will pay the coupons every six months through Safaricom mobile transfer service M-Pesa.
M-Akiba aims to help more people save and invest and make it easier for the Government to raise funds and diversifying their investor base. Stephen Chege, corporate affairs director of mobile phone company Safaricom, was quoted in this news story in Nation as saying it would help build a savings culture: “Currently, only 11% of Kenyans save on a regular basis as compared to 22% in Rwanda and Uganda, while in Qatar this figure stands at 60%.” Up to 23m Kenyans could participate. The National Bureau of Statistics says the rate of savings has stagnated and remains far below the medium-term targets.
The bond was launched on 28 September, and NSE chairman Eddy Njoroge said: “Our bond market is currently dominated by foreign and local institutional investors, M-Akiba is in line with NSE’s strategy of enhancing financial inclusion by driving retail investor participation.”
The prospectus will be released on or after 16 October.
Rose Mambo, CEO of the Central Depository Settlement Corporation (CDSC) was reported as saying: “This will be a vanilla bond attracting a fixed rate of interest and redeemable in full on maturity which will not be affected by changes in the market interest rates and the principal is secure.”
Previously the minimum investment possible in a Treasury bond was KES50,000.
Mobile money reach
Mobile money bond investments will be a technology revolution for world capital markets.
According to CNBC, mobile penetration across Kenya was last recorded at 83.9% for the period between April and June 2015, according to the Communications Authority of Kenya. The mobile money service M-Pesa has become a formidable competitor for local banks since it was launched by Safaricom in 2007 and last recorded a total of 23.3m customers, more than half of the country’s near 44m population. Statistics from digital finance researcher Financial Inclusion Insights show over 62% of Kenyans actively managed money on their mobile phones in 2013, compared to 21% who held bank accounts.
