KENYA, APR 23 — The Nairobi Securities Exchange has said it learnt a lot during the first issue of Kenya’s mobile phone-based bond-M-Akiba last year, and is ready to improve trading around the product for higher returns.
Among the biggest challenge the bond face was the traditional reluctance among people in embracing new products, the NSE has said, which led to a slow uptake by Kenyans.
The world’s first mobile-traded retail bond which debuted in March last year failed to hit its target of Ksh1 billion, raising a paltry Ksh247.7 million.
The government had offered Kenyan’s an opportunity to invest in the bond market with a minimum investment of Ksh3, 000 through Safaricom’s M-Pesa and Airtel Money, with a return of 10 per cent which is tax-free payable after six months.
This is about 17 times lower than the traditional minimum amount of Ksh50,000 required to buy Government-issued bonds, only enjoyed by banks, pension funds and deep-pocketed individuals.
Speaking at the just concluded 7th Building African Financial Markets (BAFM) seminar in Nairobi, NSE head of Information Technology Irungu Waggema said most Kenyans doubt new products during their initial introduction stage, but embrace them later after they prove to be working.
“It was also an election year and many people were holding on to their money because of the uncertainty in business that usually comes with the period,” Waggema noted.
NSE has conducted two studies- an independent and internal, to find out where the bond failed and ways to improve it going forward.
“We have lessons learnt,” Waggema told delegates at the forum, saying trading around the product will be further improved and its uptake is expected to surge in future.
Among key measures which have been put in place include firming up cyber security to curb cheats and an automated broker system which aligns with M-Akiba’s auction rule of first come first serve.
NSE also plans to conduct an extensive public awareness campaign to educate masses on the bond and how it works.
Investors in the bond have already received their first 10 per cent interest, paid by treasury in the first quarter of this year.
“People were reluctant but now they know it works. We expect going forward it will gain momentum and we are likely to see Kenya become a country of bond holders,” Waggema said.
NSE chief executive Geoffrey Odundo said the bourse will continue with product innovations, while expanding the capital markets which play a key role in funding development projects.
“We appreciate the fact that we need to do more and we are working on that, to strengthen structural governance and accelerate capital markets,” Odundo said.
The government introduced the mobile-based bond last year aimed at borrowing from the public to fund infrastructural development.
The National Treasury first tested the market with a Ksh150 million pilot sale that was launched on March 23, which excited the market with an oversubscription.
The bond’s main sale however failed to impress forcing Treasury to extend its sale by close to two months.
Treasury Cabinet Secretary Henry Rotich announced a seven weeks extension of the bond’s sale on July 22, pushing its closure to September 11.
NSE said it expects a vibrant market for M-Akiba when it comes back into the market.
According to Waggema, there is a huge opportunity for pension funds where people can invest using the M-Akiba platform.
“We might even in future introduce M-Akiba to shares and derivatives,” Waggema said.
Other entities backing M-Akiba include the Central Bank of Kenya (CBK), Central Depository and Settlement Corporation (CDSC) as well as service providers Safaricom and Airtel.