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Capital Markets

Launch of mobile-traded securities platform put off again

Dr Kamau Thugge, the Treasury Principal Secretary. PHOTO | FILE
Dr Kamau Thugge, the Treasury Principal Secretary. PHOTO | FILE 

The National Treasury has for the umpteenth time rescheduled the launch of the much-awaited mobile-traded government securities platform dubbed M-Akiba that has suffered multiple false starts.

Principal secretary Kamau Thugge said retail investors will by the end of November begin buying Treasury bills and government bonds directly through mobile money platforms such as M-Pesa.

The roll out of the inaugural Sh5 billion mobile-based bond was initially slated for October 2015 but the National Treasury has multiple times postponed the date — the last being by end of October — due to technical hitches and high interest rates in the market.

IT and market intermediaries are currently putting final touches on the secondary trading function of the app before it goes live, Dr Thugge told the Business Daily.

“We have finished the primary market. We are now working on the mechanism of the secondary market – how to trade the securities since someone may buy today and want to dispose of before maturity,” he said in an interview. “I see it being ready by end of November.”

Dr Thugge said the framework will provide for stockbrokers, banks and other market intermediaries to discount bonds already issued and trading.

The M-Akiba app runs on a software christened Treasury Mobile Direct, which interlinks the Nairobi Securities Exchange, Central Depository and Settlement Corporation, Central Bank of Kenya (CBK) and mobile money service providers.

Retail investors will sign up via their mobile phones, place bids capped at Sh140,000 daily — the maximum cap for mobile money transfers — and, on maturity day, CBK will deposit the maturing amount in the mobile money accounts of investors.

President Uhuru Kenyatta is banking on retail investors purchasing tax-free government papers from as low as Sh3,000 to cut the dominance of banks. The lenders have flexed their financial muscle to quote high rates in lending to the State.

The current minimum amount for buying a T-bill from CBK is Sh50,000 while Sh100,000 is the minimum to purchase a T-bond.

“It will support democratisation access to public debt –increase access by retail investors and broaden use of mobile technology as distribution channel for savings products,” says the World Bank in a research note.

Kenya is set to be the first country globally to launch an m-bond app. The project is partly backed by the Bretton Woods lender through the global emerging markets local currency (Gemloc) bond programme.

M-Akiba will effectively turn Kenya’s 31.3 million mobile money users into potential investors and offers variety beyond term deposits, savings accounts.

The platform is projected to significantly increase the volumes transacted on mobile money and will be a boon to players such as Safaricom, Airtel Money, Orange Money, Tangaza, and Equitel.

Banks controlled 54.9 per cent of the total treasury papers worth Sh1.82 trillion as at October 7, 2016, according to latest data from CBK.

It means banks may now have to develop new strategies rather than crowd out players in the securities market.

Pension funds make up 26.7 per cent of total T-bills and T-bonds uptake, followed by insurance firms (7.4 per cent), high net-worth investors (5.6 per cent) and parastatals at 5.5 per cent.

With M-Akiba, banks will come under increased competition for deposits as retail investors will chase the attractive rates offered by government papers, compared to the current set base deposit rate of 70 per cent of Central Bank Rate that translates to seven per cent per annum.

The latest 91-Day T-Bill sold for 7.696 per cent per annum, with last week’s Sh30 billion infrastructure bond being sold at 13.17 per cent per annum.

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