NAIROBI, Kenya – The versatility of mobile phone technology in Kenya has been given another boost by plans to allow the public to buy government bonds using their phones.
“In three weeks over 32 million Kenyans will have the potential to participate in a Ksh 5 billion (nearly $47 million) Government bond. This historical development is testament of our commitment to embrace innovation to democratize the uptake of government securities,” Henry Rotich, Cabinet Secretary, National Treasury said last week.
A bond is an instrument of indebtedness of the bond issuer to the holders or simply an IOU. According to a statement, the Treasury has announced plans to float the first-ever Government bond that will be offered exclusively via mobile phone, pointing to the growing relevance of mobile money solutions in the evolving payments space.
The Treasury recently lowered the cost of government bonds from Ksh50,000 (just over $460) to just Ksh3,000 ($28).
The solution, known as M-AKiba, will be delivered via a number of Mobile Network Operators to continue a push to deepen access for retail bond trading, which was previously only accessible to commercial banks or traders.
Rita Okuthe, Director – Enterprise Business at Kenya’s leading network, Safaricom, said: “This development signals the continuing transformation that mobile money can deliver to boost efficiency in Government revenue collection while providing more access for Kenyans. M-Akiba is yet another innovative application that will help more people save and invest, while make it faster for the government to raise funds.”
Rotich said, “Over the years, 98% uptake in government bonds has been by institutional investors, with only two percent going to individual investors- and this has left out many Kenyans from participating in raising funds for nation building”.
To invest in the upcoming Ksh5 billion ‘Save Money, Make Money, Build Kenya’ bond, potential customers will only need to have a valid ID, dial *889# and follow the prompts. Upon maturity of the bond, the principle amount and coupons (interest from the bond) will be paid through M-PESA.
Previously, it took an average of two days to buy a government bond in a process that required customers to apply for a bond CDS Account, take forms to Central Bank of Kenya, and deposit funds with a broker. M-Akiba however makes the process instantaneous.
Speaking at the launch, Nairobi Securities Exchange (NSE), Chairman, Mr. Eddy Njoroge said: “Our Bonds Market is currently dominated by foreign and local institutional investors with a retail participation of only 2 percent.
“The unveiling of the M-Akiba Treasury Bond is in line with the NSE’s strategy of enhancing financial inclusion by driving retail investor’s participation in our Bond Market at a low entry level of Kshs 3,000.”
NSE Chief Executive, Geoffrey Odundo said: “The launch of M-Akiba Bond marks the beginning of a new frontier in the evolution of the Capital Markets and Mobile Technology.
“M-Akiba underpins NSE’s position as a world leader in innovation, while adding value to our shareholders and transforming the lives and livelihoods of Kenyans by encouraging a saving and investment culture,” he said.
The M-Akiba bond is also aimed at enhancing the savings culture by Kenyans. According to the statement, Kenyan savings are at 11% of GDP while countries like Qatar are at 60%, while Rwanda and Uganda are at 22% each.