Retail investor appetite for government securities, boosted by the introduction of the DhowCSD platform and high yields has driven the increased usage of bank branches where they pay for T-bills and bonds.
Access to banks, including mobile banking applications, rose to 52.5 percent this year from 44.1 percent in 2021 according to findings from the 2024 FinAccess Report published on Tuesday.
The usage of commercial bank branches as a standalone has also rebounded to 28.7 percent from 23.8 percent three years ago.
The Central Bank of Kenya (CBK) has attributed interest in government securities as the largest driver to the usage of the bank’s brick-and-mortar infrastructure.
“We have seen a huge increase in bank usage. Quite a good number of people have gone back to the bank branches, people are patronising the bank branches and agency banks which could be on account of a number of factors on including the huge interest in government securities,” said Dr Isaac Mwangi, the lead to the technical coordination team behind the new survey and a member of CBK’s research department.
DhowCSD, the modernised securities depository allowing investors to purchase Treasury bills and bonds has enabled investments in government securities by a wider pool of investors through their smartphones.
Investors can view and submit bids on the securities via smartphones but are required to visit their bank branches to pay for winning bids.
Payments for securities whose bids have been placed via the DhowCSD platform have mostly been undertaken under the real-time gross settlement (RTGS) system, requiring individuals to visit their branches in person to make the instructions to their banks.
Only a handful of commercial banks, including Standard Chartered have automated the payments on winning bids.
Individual investors control more than three-quarters of government bond trading accounts, according to additional CBK data.
Individual investors held 73,585 DhowCSD accounts or 79.4 percent of the total 92,677 accounts open as of September 6, 2024.
The number of bond trading accounts has grown from 41,125 since the launch of DhowCSD on July 31, 2023.
The entry of DhowCSD has helped increase investment in securities along with improved returns on money markets.
“Shares and stocks, Treasury bills and bonds, are the main investment option at 2.14 percent. This preference indicates that traditional financial instruments remain a core focus for investors,” notes the FinAccess Survey report.
The share of surveyed households using investments rose to 3.1 percent in 2024 from 2.3 percent previously with the investments being measured by respondents reporting holdings of equities and bonds.
Higher interest rates on Treasury bills and bonds over the past year have also helped galvanise interest in the securities.
The rebounding prominence of bank branches has been further mirrored by lenders’ network expansion this year where banks including DTB, NCBA, I&M and Family Bank have increased their number of outlets/halls amid the rise of digital.
“We have also seen the expansion of banking infrastructure which is visible in our neighbourhoods. Today, we are seeing more branches coming to us and that has also led to an increase in the branch usage,” added Dr Mwangi.
