Kenya has been showing the World the way forward with it's highly successful mobile money platform M - pesa for ten years. Now this week Kenya with another first, is launching the World’s first mobile phone based Government Bond selling platform. “M – Akiba.” Kenya’s National Treasury CS Henry Rotich on Tuesday sent an invite to media houses announcing the launch.
After several delayed launches in 2015, and 2016, Kenya will be the first country in the world to offer sale of Government Bonds via mobile phones. The M-Akiba bond launch will be on Thursday 23rd March 2017 at 12:00 noon, at the Kenya National Treasury building. The Mobile phone based Bonds plans were first made public in the Kenyans parliament on June 11, 2015, but later failed take off due to volatile interest rates, and clearance issues. The bond will be listed on the Nairobi Securities Exchange (NSE) and is valid for three years, with an interest rate of 10% per annum. The Central Depository and Settlement Corporation (CDSC) will be the selling agent.
The M-Akiba bond launch is labelled “special edition”, for the purpose of testing waters. The Kenyan Treasury is initially expected to auction just Kenya Shillings 150 Million ($1.46 million) worth of the bond. The Kenyan Government has scaled down its initial target of issuing a five-year bond of Kenya Shillings 5 billion ($47.7 million), to a three-year bond of just KSh150 million ($1.46 million.) This is just three per cent of the initial figure. The Kenya National Treasury has indicated that this lauch will be used mainly to test the systems. The three-year bond is modelled as infrastructure bond .
The Kenyan Treasury is expected to issue the rest of the bond of KSh4.85 billion in the second or third quarter of the year.
The bond is open to all mobile users registered with Safaricom and Airtel. The bond prospectus also stated that the bond could be reopened at a future date.
Akiba means “Savings” in Swahili, the M stands for “Mobile”, so M - Akiba translates to mobile savings in English. M – Akiba’s is being launched courtesy of the hardwork, and research done by the Nairobi Securities Exchange, the Capital Markets Authority (CMA), the National Treasury, stockbrokers, investment banks, Central Depository and Settlement Corporation, ICT Authority of Kenya and Nairobi International Financial Centre Authority.
Kenya is the World’s leader in mobile money through it’s “M Pesa” mobile money platform offered by Safaricom. M-Pesa, is also Africa’s biggest mobile money network. M-Pesa, is already used in 96 percent of Kenyan households.
The M – Akiba platform is meant to give ordinary Kenyans access to the country’s capital markets. They will now be able to lend their Government through the bond amounts of as little as Kenya Shillings 3,000 ( 26.9 Euro, or 29.1 US $) through their mobile phone money transfer service( Mpesa, or Airtel). and any additional amounts in multiples of KShs 100. Previously, the minimum investment threshold for a Kenyan government bond was 50,000 Kenyan shillings ($477).
What’s needed in order to Invest
- A valid ID
- Be a registered mobile money user
- Be a subscriber of either Safaricom or Airtel. These are the only participating Mobile Network Operators (MNO).
Trading in government securities will now be available to anyone via their mobile phone. Investors will also be able buy and sell the bonds via their phones. Payments will be paid directly to their phones. The platform will rapidly increase transaction time. Trades that previously took an average of two days will now happen instantly via their mobile phones.
Currently, all Kenyan infrastructure bonds are tax-free to encourage their uptake. Individual investors (common Kenyans) however only account for only 2 % of all government bond traded. Large companies and institutional investors account for the remaining 98 %. Overall, savings by Kenyans stand at 11 per cent of the Gross Domestic Product (GDP) against a target of 30 per cent by 2030.
Kenya recently passed a law capping the interest rates that, banks are required to pay clients to a minimum of seven per cent interest on all money kept in deposit-earning accounts.
How M-Akiba will work
- To register, you will only need to dial *889# and follow the prompts to open a central depository accoun( CDS) account. “To purchase the bond, investors will open central depository accounts via their mobile phones without engaging in physical documentation.
- One does not need to have a smart phone to register. Text based simple phones can be used to register by following text prompts. One is not allowed to register twice. One CDS account is connected to one registered mobile money transfer number.
- After successful registration, the user is prompted to load their phones with a minimum of Kenya shillings 3,000 in order to trade.
- Users will be allowed to trade a maximum of Kenya shillings 140, 000 a day once the special bond is in full course.
- Interests earned will be paid out every 6 months. Upon maturity of the bond, the principal amount you invested plus the interest you have earned from the bond will be paid through your mobile phone. Payments will be wired direct to users M – Pesa or Airtel mobile money accounts. M Akiba will attract a 10% coupon rate / interest. Interest income on M-Akiba shall be tax-free. The two mobile operators ( Safaricom and Airtel ) have been selected as the test bond placing agents . They will be paid commission at the rate of 0.1 percent of actual sales (at cost), net five per cent withholding tax.
- Investors, who miss out on the bond in the primary issue will have the option of buying it in the secondary market at the Nairobi Stock Exchange(NSE). Purchase of the bond in the secondary market will be determined by the market forces. “The interest rate (on the bond) will be higher than the interest rates payable on small deposits by commercial banks and other investment channels, and as an infrastructure bond, interest payments to investors will be tax free.
- The current daily limit that you can bid is set at 140,000 during the auction week. This is based on the daily maximum cap for mobile money transfers.
Benefits
- "This will allow Kenyans to enjoy significantly higher interest rates on government securities compared to what they normally get on bank deposits, and savings. A tax-free interest of 10 per cent. This launch opens a brand new investment channel for small time investors (mostly common folks) with small amounts of cash to lend to the government, instead of keeping money in the bank.
- The mobile based platform with a low entry threshold, will be accessible to millions of users who already use M –Pesa, and Airtel. This will create a new pool of investors into government securities.
- It will also encourage savings among Kenyans. By buying Govt bonds Kenyans will also be able to lend their government money repayable within specified periods. They will earn more money compared to interest rates currently offered by banks. Local banks currently offer between two and seven per cent for funds in fixed deposit and savings accounts. This means that 3,000 Kenya Shillings will currently earn you just 60 Kenya Shillings at savings account at two per cent interest rate. At 10 per cent rate, an investment of Sh3,000 is set to give investors a return of KSh150 every six months and KSh300 at the end of the year.
- M-Pesa is estimated in an MIT study to have helped lift two percent of Kenyan households out of poverty.
The bond, valued at Kenya Shillings 150 Million ($1.46 million), will be available for purchase in Kenya from Thursday 23rd March 2017 at 12:00 noon until 10 April, 2017 by 12 midnight ,or until the maximum bond value is reached, whichever comes first. Allotment will be on first come, first served basis and will be issued by the Central Depository and Settlement Corporation Limited (CDSC).
According to Nairobi Securities Exchange chairman Mr Eddy Njoroge, the bond “ will allow the Kenyan government to develop a yield curve that will provide a pricing benchmark for various banking products.” If the bond aucton is succesfull, the Kenyan Government wil be expected to use the new tool to raise funds domestically from the new wider range of investors. Investors, the Government, and analysts will be keenly watching the new mobile based bond issue to gauge its performance. Expectations are high due to the well know perfomance, and penetration of M-pesa in the Kenyan market. Also since Kenyan banks offer very little returns on deposits, and savings mobile savvy Kenyans are expected to easily utilize the new investment tool, and test waters.
Many Kenyans also currently deposit money in their M-Pesa, and Airtel mobile wallets, earning no interest on the savings. These folks are expected to move these funds to the better paying Government bonds, thus affecting the pricing of deposits among different players in the Kenyan money markets.
Since the start of the Kenyan government’s bond programme in 2000, over 1 trillion Kenya Shillings has been raised. The M – Akiba Bond slogan is “Save money. Make money. Build Kenya.”
Kenya's Treasury hopes to raise 5 billion Kenyan shillings ($47.7 million) through bond sale to finance large scale infrastructure projects, and the upcoming national elections. The platform is also meant to be a savings alternative for all Kenyans.
Africa Team