Treasury makes third stab at M-Akiba bond

M-Akiba is largely a savings vehicle, with the Government hoping that its uptake will help mobilise savings among Kenyans. [Courtesy]
Treasury intends to borrow Sh500 million from ordinary Kenyans after it re-opened the mobile-based M-Akiba infrastructure bond.

It will be the third time the Government is going for the retail bond that has had mixed results since being unveiled in June 2017.

Depositors will be paid interest of 10 per cent on the value of the bond they purchase every year, with the payments being made bi-annually. This being an infrastructure bond, there will be tax charges.

The bond will be listed on the Nairobi Securities Exchange (NSE), with secondary trading being done via mobile phones.

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By Friday, the first M-Akiba bond issue was trading at an average yield of 8.21 per cent. The two-year bond is set to mature on September 23 this year. There was no trading in the second bond.

The bond market has been going through headwinds, with the trading activity in the domestic secondary bond market declining by 37.1 per cent during the week ending August 15, according to Central Bank of Kenya’s (CBK) weekly bulletin.

M-Akiba is largely a savings vehicle, with the Government hoping that its uptake will help mobilise savings among Kenyans.

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“As a way of ensuring financial inclusion and cultivate the saving culture in the economy, the Government will continue issuing retail products targeting the small retail investors as a way of providing an opportunity to invest and save in building the economy,” said Treasury. 

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. The 10 per cent return is better than commercial banks’ saving rate of 4.71 per cent.

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Treasury in February 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 initial idea of selling Kenyan government investments over a mobile phone was mooted in 2011 under the leadership of the National Treasury and the CBK. 

Financial Sector Deepening (FSD), a financial inclusion programme, noted that in an analytical report that before M-Akiba, the minimum investment amount for a bond was Sh50,000 and required a cumbersome process to open up an investment account.

“There were only 10,000 retail investors in government bonds, accounting for only two per cent of the outstanding holdings of bonds. M-Akiba had the potential to reach over 30 million registered mobile money account holders,” noted FSD.

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.

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TreasuryM-AkibaNairobi Securities ExchangeFinancial Sector Deepening