Kenya’s revolutionary mobile phone M-Akiba bond debuts

With a new innovative Treasury Mobile Direct, Kenya’s National Treasury will float a KES5 billion ($48.6 million) M-Akiba bond next month. It will only be purchased through mobile-phone platforms.

The innovative Treasury Mobile Direct (TMD) platform means individuals will buy the bonds instantly instead of the previous 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.
The new bond will only be available to Kenyans, who currently make up two per cent of investors into bonds listed on the Nairobi Securities Exchange (NSE).

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). Previously the minimum investment possible in a Treasury bond was KES50,000.

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 per cent 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 per cent at the auction for value dated 5 October, up from 18.607 per cent on 28 Sept according to the CBK and 182-day paper on 28 Sept was 14.5 per cent.

The Government’s one-year KES30billion bond sold at a record rate of 19.062 per cent, offering the biggest returns for investors in three years. Kenya’s inflation in Sept 2015 was 5.97 per cent, up from 5.84 per cent the previous month and above expectations, according to www.tradingeconomics.com.
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.

According to the National Bureau of Statistics, 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.”