The Treasury earned Sh13.1 billion in five years from buying government paper using cash that investors have failed to claim in bank accounts, dividends and mobile money wallets such as M-Pesa.
The Unclaimed Financial Assets Authority (UFAA)—an agency under the Treasury—says it invested unclaimed cash worth Sh22.3 billion in buying Treasury bonds and bills between 2019 and 2024.
This earned it a cumulative return of 58.7 percent or Sh13.1 billion, with the cash being kept in a bank because there is no policy to guide the use of the earnings.
Unclaimed assets include money in bank accounts and dividends which have been dormant for more than five years, bankers’ cheques not cashed and contents in safe deposit boxes unclaimed for more than two years.
Insurance policies that remain uncollected for two years and cash sitting in mobile telephony wallets for the same period should be transferred to UFAA.
Unclaimed cash, shares and dividends surrendered to UFAA crossed the Sh75 billion mark in November last year, reflecting the difficulty in reuniting the idle wealth as investors, including tycoons, show disinterest in reclaiming the assets.
The law directs UFAA to invest half the unclaimed cash in Treasury bonds, 45 percent in Treasury bills and retain five percent as cash.
UFAA used Sh3.4 billion or a quarter of the income generated to finance its operations and kept Sh9.6 billion in cash despite the cash crunch in government.
“This implied that the Authority was able to safeguard the unclaimed financial assets received from holders and, at the same time, make returns on investment. A portion of the returns from the investments was used to finance the Authority’s operations,” said the Auditor-General in a report on UFAA.
UFAA’s reliance on the investment income to fund its operations more than doubled in the five years to Sh761.3 million last year, up from Sh354.6 million in 2019. There was no breakdown on how the UFAA used the amount.
“The absence of such a policy may pose the risk of the country losing out on public investment opportunities that could uplift the economy,” said the Auditor-General.
“For instance, the amount of Sh9.6 billion in the Trust Fund account is a substantial amount to construct and equip a medical facility equivalent to the Kenyatta University Teaching and Referral Hospital, which cost approximately Sh10 billion,” added the Auditor-General.
UFAA is holding on to the cash at a time the Treasury is battling a cash crunch in the wake of revenue shortfalls and mounting public debt that has cut the appetite for borrowing.
The State has been reluctant to introduce new taxes following the 2024 Gen Z protests that forced the withdrawal of the Finance Bill with Sh345 billion in new levies.
UFAA’s returns rode on the back of double-digit yields from government paper as the Treasury tapped the local debt market to plug budget shortfalls.
Last year, Treasury bonds offered returns as high as 18.5 percent while the average yield on Treasury bills was between 9.89 percent and 16.99 percent.
Government securities offered average returns of 13.64 percent in 2023 and 12.83 percent in 2022, ranking them among the best-performing asset classes at a time when the stock market was facing headwinds and real estate was yet to recover from the effects of Covid-19.
Returns from government securities have since dropped as the State races to cut its borrowing costs in line with the Central Bank of Kenya’s cuts on its benchmark rate.
Treasury bills have dropped to 7.82 percent and bonds to a range of between 12.65 percent to 13.53 percent.
Many Kenyans, said UFAA, remain uninterested in pursuing funds legally belonging to them or their families.
The authority reckons it had received Sh36.09 billion in cash in local and foreign currencies from Sh23.2 billion in 2021.
Billionaire businessmen, former powerful government officials and prominent politicians are in the long list of individuals with shares worth Sh39.4 billion that have been surrendered to the Treasury, up from Sh30 billion in 2021 and Sh16.42 billion in 2017.
The shares surrendered to the authority remained idle as UFAA did not have a mechanism to receive and manage non-cash assets.
UFAA is not allowed under the law to operate a Central Depository and Settlement Corporation (CDSC) account, which is necessary for facilitating the transfer of unclaimed shares.
Surrendered safe boxes that are believed to contain jewelry, title deeds, share certificates and Treasury bills rose to 3,737 units from 1,953 in June. Over 9.87 million unit trusts whose values were not disclosed are also part of the idle assets.
The money is largely held by insurance companies, banks, pension schemes, legal firms, mobile phone money wallets and saccos, among others.
So far, the authority has reunited less than 10 percent of the billions worth of shares and cash with beneficiaries, representing 1.9 percent of the unclaimed assets.
Kenyans have failed to claim Sh3.2 billion lying idle in M-Pesa wallets, with Airtel and Telkom Kenya subscribers having Sh114.3 million and Sh7 million, respectively.
Some of the unclaimed assets are linked to the deceased having kept their wealth secret and the absence of Wills.
