The Capital Markets Authority (CMA) has called for a revival of the M-Akiba mobile bond programme, saying it will enable more Kenyans to access the returns on offer from government bonds at a time other asset classes are offering low or negative returns.
The markets regulator also sees the bonds market as offering a safe haven option for local investors in a time of investment volatility, similar to the role the US bonds market is playing on a global scale for investors.
One of the accessibility hurdles for the local bonds market is the relatively high entry requirement for investors, who need to invest a minimum of Sh50,000 for normal bonds and Sh100,000 for infrastructure bonds at the monthly auction.
On the other hand, the M-Akiba bond, which was piloted in April 2017, allowed a minimum investment of just Sh3,000, with the ease of purchase through mobile phones further enhancing its accessibility to retail investors.
The mobile bond was also mooted as a tool for enhancing national savings, and a revival is seen as one of the ways in which the government can meet its goal of encouraging Kenyans to boost the amounts set aside for future use.
“Amidst the fears of a global economic slowdown looming, investors still find Treasury Bonds safe portending sustained activity, especially for frontier markets in the medium to long-term,” said the CMA in its market soundness report for the third quarter of the year.
“Under the Kenya Government’s Bottom-Up Economic Transformation Plan, (CMA) management recommends the revitalisation of the M-Akiba savings bond program to democratise investments in Treasury bonds through FinTech to further boost the fixed income market.”
The government raised Sh1.04 billion from five M-Akiba issues from 2017, which attracted a total of 582,572 registrations. The retail bond paid a coupon rate of 10 percent, with buyers enjoying a tax-free status in line with other infrastructure bonds.
The awareness created by the issuance among Kenyans previously oblivious to government bond investments has partly reflected in the increase in the share of government debt held by retail investors, who include individuals, Saccos, listed and private companies, self-help groups, educational institutions, and religious institutions.
This class of investors now holds 6.26 percent of the government’s total domestic debt, equivalent to Sh274.4 billion.
Three years ago, their share stood at 4.7 percent, equivalent to Sh163 billion.
A new issuance of the M-Akiba bond will however need to address some of the redemption hitches encountered by the Treasury and the Central Depository and Settlement Corporation, which handled the bond sale.
