Why M-Akiba is a game-changer

Treasury CS Henry Rotich (left) and his Principal Secretary Kamau Thugge during the launch of M-Akiba at Treasury building in Nairobi on March 23, 2017.  PHOTO | SALATON NJAU | NMG
Treasury CS Henry Rotich (left) and his Principal Secretary Kamau Thugge during the launch of M-Akiba at the Treasury building in Nairobi on March 23, 2017. PHOTO | SALATON NJAU | NMG 

Major game-changers are usually not heralded by pomp and fanfare such as gun salutes, the police band, traditional dancers and fireworks displays.

It therefore did not come as a surprise Thursday that M-Akiba - the platform that will make it possible for ordinary retailers and savers to invest in government paper - was launched at a low key event at the Treasury building.

Like a thief in the night, game-changing policies and disruptive reforms tend to sneak in the night.

Indeed, M-Akiba has put us on the brink of witnessing one of the biggest game-changers of our time. Every Kenyan who owns a mobile phone will now be empowered to invest in Treasury bills and bonds using a mobile phone.

I predict the return of the excitement and feverish activity last witnessed in the capital markets in the days of the KenGen and Safaricom IPOs in 2007 when thousands of ordinary wananchi queued to get a piece of the action.

Indeed, the excitement of that time brought to the marketplace an unprecedented number of retailers and speculators. But they gradually fled following the collapse of Francis Thuo, Discount Securities and Nyaga Stockbrokers.

Expect the money markets to be hit by a new wave of impulsive behaviour by retailers- especially since this time around- the punter does not have to queue in front of the offices of a stockbroker.

You just open a CDS account with the Central Bank of Kenya from your phone, subscribe - and just in case you don’t get an allocation- your money will be sent back to your mobile money account.

In as far as borrowing activity by the government is concerned, the transition offers tantalizing possibilities. For example, if just one million of the 25 million M-Pesa account holders put in Sh 3,000 in the paper, you are talking about Sh3 billion.

The possibilities got me reflecting on how the authoritarian-minded Egyptian President Abdel Fattah el-Sisi managed to circumvent international capital markets three years ago to raise money from the domestic markets to expand the Suez Canal. The investment certificates were oversubscribed by 6.6 per cent with $8.5 billion being raised in a record eight days.

If the M-Akiba experiment works, the implications for commercial banks will be far reaching.

In the first place, the money the retailers will be putting in government paper will be coming from deposits sitting in banks. The new circumstances will open a new fight between banks and the government for retail deposits.

I see the government out-competing them in the race to mop-up retail deposits.

Of greater significance, the opening up of the government securities markets to retailers is bound to gradually loosen the monopoly that commercial banks have hitherto enjoyed over Treasury bills and bond auctions.

Indeed, such has been the monopoly and stranglehold that commercial banks have over government paper that five CEOs of the top commercial banks can today decide on the golf course to quietly orchestrate a boycott of a specific Treasury bill or bond auction when they don’t agree with the prices on offer.

Commercial banks have over the years more or less captured the market for government securities, allowing them to dictate terms.

A thriving retail market for government paper will exert competitive pressure on government debt securities and start influencing interest rates downwards.

And, when as predicted- interest rates on government paper start gradually sliding downwards, we will be in a position to start forcing banks to start lending money to businesses instead of relying on lending to the government.

M-Akiba will pay investors a tax-free interest of 10 per cent, with individuals allowed to invest a minimum of Sh3,000 and any additional amounts in multiples of Sh100.

And the bond is open to all mobile phone users registered with Safaricom and Airtel, with interest payable every six months.

The three-year bond will be the first in the world to be sold on a mobile money platform. Investors will receive details of amounts invested via text messages upon making payment via mobile money.