Kenya to launch Sh3,000 ‘mwananchi’ bond mid next month

Cabinet secretary for National Treasury, Henry Rotich (left) and the Chairman of Nairobi Securities Exchange, Eddy Njoroge (right), are taken through the process of buying the new M-Akiba bond during a media briefing at Kenyatta International Conference Centre, Nairobi.

NAIROBI: Ordinary citizens will now be able to lend the government money after the State yesterday announce plans to rollout M-Akiba bond, Kenya’s first mobile-based Treasury bond that targets small investors.

According to National Treasury Cabinet Secretary, Henry Rotich, Kenyans could take part in a Sh5 billion borrowing programme by the State to be unveiled by President Uhuru Kenyatta by mid next month.

Rotich said the mobile phone-based Treasury bond with a minimum investment capital of Sh3,000 is expected to attract millions of Kenyans.

Kenyans will be able to open Central Bank depository accounts from their phones without visiting a bank or broker, and can then buy government paper for as little as Sh3,000 shillings, Texplained Rotich.

Previous government debt issues have largely been taken up by foreign and institutional investors mainly because the process has been complex and costly and the minimum investment amount stood at a high Sh50,000.

“Over the years, 98 per cent uptake in government bonds has been by institutional investors,” Mr Rotich said after unveiling the borrowing programme dubbed M-Akiba. However, investors will need to be on the Safaricom platform to participate the new lending programme, for a return that is yet to be determined.

Rotich said the funds raised would be directed to finance infrastructure projects, and as a sweetener, the interest payments realised from M-Akiba would not attract taxes. Under the current Treasury bonds on offer, Interest payments are made every six months through the life of the five-year bond.

M-Akiba was developed by Nairobi Stock Exchange (NSE), Capital Markets Authority, Central Bank of Kenya, the Kenya Association of Stockbrokers and investment banks, the Central Depository and Settlement Corporation, the Nairobi International Financial Centre Authority, the ICT Authority and the National Treasury.

President Uhuru is expected to launch the bond on October 16, at the Nairobi Securities Exchange. It will be the first time that investors are able to participate in a loaning programme from their mobile phones. Ordinarily, the process of investing in government bonds involved paperwork and actual opening of an account at the Central Bank, a hustle that has been eliminated in the mobile-based lending platform that is also instant.

Rotich had first talked about the product in his Budget Speech read in June, before the actual development and the three-week roadshow, which started yesterday. Marketing of the bond would culminate in its launch when investors can actually buy into the bond.

The CS said broadening the access to government securities through the mobile-based bond would significantly cut reliance on the Government’s traditional sources of funding such as taxes.

“It is no longer sustainable to over-rely on traditional sources of financing including taxation, external borrowing and donor aid to finance development programmes,” he said.

NSE chairman Eddy Njoroge said the mobile-based bond issue would help in diversifying the investor base from the institutions and fund management firms to the mama mboga. Rose Mambo, the chief executive of the Central Depository and Settlement Corporation, said the M-Akiba would allow ordinary citizens earn returns from the risk-free government loans.

“The upside potential of a product like M-Akiba and the impact it is likely to have on increasing the number of investors in the market is significant...this product will give ordinary Kenyans an opportunity to participate in the capital markets in an easy and affordable manner,” explained Mambo.

Accelerated capital investment in huge projects such as the Sh350 billion worth Standard Gauge Railway has seen government expenditure increase, prompting the need for new fundraising avenues. Just last year, Kenya was able to raise about $2 billion from the international markets through the issuance of a Euro bond.

Last week, the Central Bank of Kenya Governor Patrick Njoroge said the government was considering floating a Samurai bond – a Japanese yen-denominated borrowing issued in Tokyo by a foreign entity or government.