Wealthy families have stockpiled Sh434.5 billion in government bonds, taking advantage of the Central Bank of Kenya (CBK) digital platform that allowed retail investors to shift their savings to the attractive risk-free securities from the comfort of their homes and offices.
Latest disclosures by the CBK show household investments in government papers have surged in the past three years, coinciding with a period of high interest rates amid volatile returns from other asset classes such as equities and property.
This is the first time the CBK is disclosing how much households, retail foreign investors, non-financial companies and non-profit organisations (NGOs) had lent to the government through Treasury bonds.
Purchase of the bonds digitally or through mobile phones under the digital platform, DhowCSD, has made it easier for investors to buy the government paper electronically.
Before the introduction DhowCSD in 2023, investors had to visit CBK offices, banks or stockbrokerage offices to bid for the bonds and later queue for payment of the securities.
At Sh434.5 billion, the holdings by households now account for 6.57 percent of the government’s domestic debt, which stood at Sh6.612 trillion at the end of last week. At the end of June 2025, they held Sh409.3 billion of domestic debt, the CBK numbers show.
Foreigners hold Sh309.5 billion (4.7 percent), non-financial corporations Sh138.9 billion (Sh2.1 percent) and non-profit organisations Sh56.2 billion (0.85 percent).
Previously, the CBK lumped non-financial sector holders of government debt under a single category known as ‘other investors’, making it difficult to track the direct holdings of families, savings and credit co-operative societies (saccos), listed and private companies, self-help groups, educational institutions and religious institutions.
“This trend of increased investment in bonds by individuals has been growing since the rate cap days, when we started seeing high-net-worth individuals breaking fixed deposit accounts and moving their funds to government securities. Government has also been offering better returns, pulling in investors to its securities,” said AIB-AXYS Africa senior associate for debt and equity Kenneth Minjire.
“The DhowCSD platform has also helped by improving access to the market, opening it to new investors who were previously locked out. We therefore expect the volumes to keep growing.”
The appetite for bonds among retail investors has also been driven by stable double-digit interest rates at a time when returns from other assets like equities and property have been volatile.
Bonds issued over the past two years have offered interest rates of between 12 percent and 18.5 percent, with the most lucrative being tax-free infrastructure bonds that are popular with retail and foreign investors.
The equities market, for instance, moved from a loss of Sh550 billion or 27.5 percent in investor wealth in 2023 to a gain of Sh500 billion (34 percent) last year.
In the year-to-date, the market has added a further Sh807 billion in investor wealth to hit Sh2.78 trillion, highlighting the volatile nature of equities.
In the property market, annualised land price growth in Nairobi’s suburbs and satellite towns stood at 6.7 percent and 8.9 percent, respectively, as at June, while property sales prices across the city rose by 7.8 percent.
In its bulletin, the CBK said it is now able to identify the ultimate owners of the securities through its DhowCSD digital bonds platform, which went live in June 2023.
Some of the retail investors of bonds were previously classified under banks because their investments were made through custodial accounts domiciled with the lenders and fund managers.
This had the effect of inflating the debt held by the banks, who under the new classification have seen their share drop to 35.6 percent or Sh2.35 trillion worth of domestic government debt from 44.8 percent or Sh2.96 trillion under the previous grouping.
“The new classification leverages the Dhow Central Securities Depository (DhowCSD) system, which can identify the ultimate holders of government securities.
“The new classification also captures information on any transfer of government securities that takes place in the secondary market,” said the CBK in its latest weekly bulletin.
Similarly, the CBK is now reporting the direct bond holdings of pension funds as opposed to the previous disclosurs that also captured investments made by fund managers on behalf of the pensioners.
As a result, the debt in the hands of the pension funds has dropped to Sh952.3 billion or 14.4 percent of the Treasury bonds from Sh1.9 trillion or 28.7 percent under the old classification system.
At the same time, Sh1.03 trillion worth of bonds is reported under other financial institutions, which include the fund managers and collective investment schemes.
The CBK reckons that it reclassified the debt holder categories in order to align with global best practices, including Government Finance Statistics Manual (GFSM) 2014, Public Sector Debt Statistics 2014 Manual, System of National Accounts (SNA) 2008, and Monetary and Financial Statistics (MFS) 2016.
Overall, financial institutions—banks, insurance firms and pension funds—hold 78.5 percent of the government’s domestic debt, or Sh5.19 trillion, underlining their high exposure to sovereign risk.
The government’s recent appetite for borrowing from the domestic market to fill an ever-expanding fiscal deficit has watered the market for retail investors and high-net-worth investors like banks, pension funds and insurers.
In the 2024/2025 fiscal year that ended on June 30, the Treasury borrowed a net of Sh854.5 billion from the domestic market towards filling a budget deficit of Sh1.034 trillion, with the remaining Sh179.7 billion borrowed from the external market.
In the current fiscal year, the State has a budget deficit of Sh901 billion, which will be filled by domestic borrowing of Sh613.5 billion and external borrowing of Sh287.4 billion—signalling continued appetite for cash from domestic bond buyers.
