Treasury will float a Sh5 billion bond next month which will only be traded on mobile phone platforms targeting ordinary Kenyans.
The five year infrastructure bond will go on the market on October 21 at a rate to be set by the National Treasury and the Central Bank of Kenya. Individuals can bid with as little as Sh3,000 and a maximum of Sh140,000 for the income tax free bond.
“We set the maximum at Sh140,000 because that is the much mobile phone companies are allowed by Central Bank but you can put in the figure daily until the auction closes,” Central Depository Settlement Corporation CEO Rose Mambo said.
The product will only be available to Kenyans who currently make up two per cent of the Nairobi Securities Exchange (NSE) Bond market portfolio.
The mobile platform will see over 23 million Kenyans potentially participate in the bond. Individuals will also enjoy instantaneous purchase of Government bonds as opposed to the previous two day process.
To invest in the new automated system called ‘Save Money, Make Money, Build Kenya” bond, potential customers will only need to have a valid ID, dial *889# and follow the prompts.
M-Akiba is yet another innovative application that will help more people save and invest, while making it faster for the government to raise funds.
There is genuine need to enhancing the savings culture among Kenyans. 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%,” said Safaricom corporate affairs director Stephen Chege.
“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,” NSE chairman Eddy Njoroge said during the launch of the marketing campaign in Kenyatta International Convention Centre Monday.
Treasury and the Central Bank of Kenya will set the rates at which individual investors will earn from the Sh5 billion bond to be floated next month.
Finance Cabinet Secretary Henry Rotich said the rate will be higher than those offered by commercial banks but he did not indicate the government proposals. Banks currently give only 1.37 per cent for the money kept in savings accounts.
Government officials say it will be set in the prospectus to be released earliest October 16 for the paper that will go on sale on October 21.
The rate is however expected to be lower than the market rate which hit 18.6 per cent for the 91 day bill on Thursday’s auction while the 182 day paper went for 14.5 per cent.
The government’s one year Sh30 billion bond also sold at a record rate of 19.062 offering the biggest returns for investors in three years.
“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,” Central Depository Settlement Corporation (CDSC) CEO Rose Mambo said.
MINIMUM AMOUNT REDUCED
The M-Akiba bond will be more accessible to ordinary Kenyans given the minimum amount will be reduced from Sh50,000 to Sh3,000.
M-Akiba will be offered through the Treasury Mobile Direct (TMD) platform. Potential investors will only need 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.
Treasury will pay the coupons every six months through Safaricom mobile transfer service M-Pesa. According to the Kenya National Bureau of Statistics the rate of savings has stagnated and remains far below the medium term targets.
Banks and statutory bodies in Kenya take up the most of government and corporate debt meaning that the level of individual engagement with growing the economy is rather low.
In the successful Eurobond issued on 16 June 2014 to support infrastructural developments in road, railway and healthcare, there was a strong participation by global investors, with over-subscription of about 340 per cent.
Foreign banks especially from the United States invested 68 per cent in the country, according to figures posted by Ecobank. This was followed by UK-based investors at 25 per cent, other European investors at 4 per cent, Asian-based investors at 2 per cent, and African-based investors at 1 per cent.