State makes third stab at M-Akiba with Sh250m offer

National Treasury Cabinet Secretary Henry Rotich rings the bell at the launch of the world's first mobile-traded bond at the Nairobi Securities Exchange in June 2017. The latest issue will start trading on the bourse on March 12. [File, Standard]

The Government is set to give banks a run for their money again as the National Treasury seeks to borrow directly from the public to plug the gaping budget deficit.

Treasury yesterday reopened the mobile-based M-Akiba infrastructure bond targeting Sh250 million for the security that matures in the next one and a half years.

The bond offers a return of 10 per cent without taxes and can be purchased for as low as Sh3,000 via the mobile phone.

It will be on sale up to March 8 and will be listed at the Nairobi Securities Exchange (NSE) four days later on March 12.

The latest bond issue is expected to attract depositors who have been earning peanuts on their deposits from banks. Lenders had been adjusting their rates on savings downwards even before Parliament removed the floor on the lending rates, allowing banks to pay less for depositors’ cash which they use to do business.

Central Depository and Settlement Corporation Chief Executive Rose Mambo said they are hopeful the new issue will exorcise the ghosts of the last issue that flopped badly.

“We have identified a lot of areas of improvement, including publicity and marketing,” said Ms Mambo at the launch in Nairobi.

When Treasury first tested the waters with an issue of a Sh150 million M-Akiba bond, it got 100 per cent uptake. The issue was a world’s first and was aimed at expanding the pool of investors as the Government sought money for infrastructure projects.

However, a subsequent Sh1 billion infrastructure bond with a Sh4 billion Greenshoe raised only Sh247 million from the market.

A Greenshoe is an option allowing the underwriter to sell more shares to investors than were originally agreed.

NSE Chief Geoffrey Odundo said they intend to issue the rest of the programme (Sh4.6 billion) in four tranches depending on the performance on the current issue.

“If we get this one successfully, we will probably go for a bigger tranche,” said Mr Odundo.

If the mobile bond programme picks, it may challenge lenders who are not giving any returns on small deposits especially after the 70 per cent charge specified in the rate cap law was removed.

Sterling Capital researchers said banks took steps to reduce their credit expense once interest rate floors were introduced.

Among the steps was a reclassification of interest-earning accounts that did not require a new minimum into non-interest bearing transactional accounts.

In addition, banks, especially top tier banks, took the deliberate action of looking for current as opposed to savings and fixed deposit accounts, with some rejecting expensive interest-earning accounts altogether.