M-Akiba has increased competition for savings owing to its relatively higher returns and risk-free profile.
The deposit-taking saccos have continued to increase returns on savings in recent years, underlining rising competition for deposits.
Deposit-taking savings and credit co-operative societies (DT-Saccos) are likely to face stiffer competition for retail deposits from the government-backed mobile phone-based infrastructure bond, M-Akiba, the regulator has warned.
The Sacco Societies Regulatory Authority (Sasra) says M-Akiba has increased competition for savings owing to its relatively higher returns and risk-free profile.
“The introduction and roll out of the government-backed M-Akiba tax-free bond in 2017…may be viewed favourably as a more secure and profitable investment destination by retail depositors,” Sasra says in the Sacco Supervision Annual Report 2016 released last Thursday.
The Treasury has offered an annual return of 10 per cent, payable after every six months, for the three-year Sh5 billion retail bond, which is being issued in phases.
Some 303,534 investors have registered on the M-Akiba platform since its launch on March 23.
The deposit-taking saccos have continued to increase returns on savings in recent years, underlining rising competition for deposits.
The average return paid by the country’s 175 saccos as at December 2016 was 9.70 per cent, a steady rise from 8.08 per cent in 2015 and 6.60 per cent in 2014, industry data shows.
Competition is also coming from commercial banks, thanks to the Banking (Amendment) Act, 2016. The rate capping law, enforced in September 2016, requires banks to pay a minimum return on term deposits equivalent to 70 per cent of the Central Bank Rate, presently at 10 per cent.
This saw average interest paid by banks shoot to an average of 6.37 per cent in 2016 from 1.58 per cent in 2015, despite the floor on the interest being in force for only three and a half months in 2016.
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