State mulls making another stab at M-Akiba

CS for National Treasury Henry Rotich (second left) lead in launching the World First Mobile Traded Bond at Nairobi Securities Exchange (NSE) offices he is accompanied by Rose Mambo of Central Depository, Rita Okuthe of Safaricom and Paul Murithi Muthaura Chief Executive Capital Markets Authority on Friday, June 30, 2017. [Jonah Onyango/Standard]

Still smarting from an underwhelming performance of the first-ever mobile-based government bond last year, the National Treasury is ready to go back to the market.   

According to sources involved in ongoing consultations on the matter, the Government will issue an M-Akiba bond in the last quarter of this year.

“There was agreement that last year’s issue was bungled, but lessons have been learnt and plans are underway to make this issue a success,” said a source who requested anonymity.

According to documents seen by The Standard, Treasury has set aside a Sh250 million kitty to ensure the success of the bond. It has also made elaborate changes in how the exercise will be run after last year’s failed bid.

For instance, the Government might create a mobile application to improve user experience.

The use of USSD codes last year was said to have had confusing language and long procedures that caused some would-be subscribers to opt out before making purchases.

“The USSD failed in rural areas and we noticed that the long registration and purchase process made investors drop out half-way,” said the highly placed source.

The bond may also be broken down into a series of issues instead of one block offer.

Last year Treasury offered Sh1 billion infrastructure bond with a Sh4 billion Greenshoe but only managed to get Sh247 million from the market.

Ordinary Kenyans

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

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 first and was aimed at expanding the pool of investors as the Government sought money for infrastructure projects.

It was also aimed at ensuring the participation of many ordinary Kenyans who do not have a bank account. 

In the new proposed model, Kenyans will be able to buy the bond using their passports, unlike last year when one could only use their identity card.

The new bond will also change the target audiences, with the focus now shifting to the middle class rather than low-income earners.

The timing will also be set to avoid back-to-school periods and take advantage of tea farmers’ bonus season, investment groups, popularly known as chama, will also be a key target for the issue.

The last issue was timed to be launched around the campaign period by President Uhuru Kenyatta, which caused several postponements and the eventual cancellation of his involvement. With a marketing budget of Sh305 million in cash and kind, the second M-Akiba issue was dogged by organisational problems.

Unlike the test offer, no public relations firm was hired to manage the process and this could have affected its marketing strategy.

Played hardball

Agents were reduced from 210 to 50 and promotional materials were delayed, being delivered after the bond had closed. Some banks played hardball and were not available on the M-Akiba PesaLink platform and little was done to take investors through the option, prompting them to give up altogether.