The National Treasury is working to introduce a new version of the retail bond programme that will allow Kenyans to invest as little as Sh500, in what it sees as a bid to deepen the domestic debt market and reduce reliance on more expensive commercial loans from international markets.
This will be a revised version of the botched M-Akiba bond, which failed nine years ago and had a minimum investment threshold of Sh3,000.
In the standard Treasury market, investors currently need a minimum of Sh50,000 to buy either a Treasury bill or bond. The new retail bond programme is expected to kick off in July 2027, opening access for small investors to a market with fixed returns currently ranging between 12 percent and 14 percent.
A source at the Central Bank of Kenya (CBK) involved in the ongoing overhaul of the failed M-Akiba bond told Business Daily that the new version will see investors’ mobile money accounts linked to the online DhowCSD system, allowing them to buy bonds directly.
“It (the new retail bond programme) will be incorporated into the DhowCSD. So it is part and parcel of the infrastructure. So, you see, the DhowCSD is the central securities depository — everything that has to do with bonds has to interface and link into that. As we develop the solution, it would be a core part of the DhowCSD offering,” said the source.
“We are yet to finish the full framework for it, but obviously, it aims to significantly improve on where M-Akiba left off.”
Efforts to get comments from National Treasury Cabinet Secretary John Mbadi, Principal Secretary Chris Kiptoo and the Director General of the Public Debt Management Office (PDMO), Raphael Owino, proved futile as calls and text messages to their mobile phones went unanswered.
A person investing Sh500 to buy a bond with an interest, or coupon, of 12 percent would earn Sh60 per annum, assuming no withholding taxes.
The plan, however, faces several hurdles, including low-income households’ need for liquidity, competition from products such as money market funds, and better returns in the informal sector’s services and merchandising businesses.
The M-Akiba bond was launched by the government in June 2017 but flopped partly due to poor timing, low understanding of the product and weak customer care.
Although more Kenyans were expected to participate by investing the reduced minimum of Sh3,000, the auctions suffered massive undersubscription.
Business Daily has learnt that the new retail bond offering will be given a new name to distance it from the troubled M-Akiba.
“M-Akiba was a bond, the product is the same, but maybe we would look at the name just to make it relevant for today’s day and age. So the lessons from M-Akiba that we can build and improve on would be factored in now into the new offering through the DhowCSD,” the source said.
The National Treasury said, through its draft medium-term debt management strategy, that it will explore innovative financing options to fund its budget deficit and manage public debt.
These include issuing domestic retail digital bonds via mobile money, diaspora bonds, debt swaps, Samurai bonds, Panda bonds, and green and sustainability-linked bonds (SLBs).
