Bond market rise bodes well for Kenyan economy

The launch of the Central Bank of Kenya (CBK) DhowCSD System puts Kenya on the cusp of yet another transformative moment in the country's financial history.

This innovative platform represents a significant leap forward in democratising access to government securities.

Government securities have been essential to helping Kenya fund several economic development projects. One key area where government bonds have played a vital role is in infrastructure development.

Kenya's rapid urbanisation and population increase have made it necessary to upgrade its public facilities, energy infrastructure, and transportation systems.

The inception of Treasury bonds in Kenya can be traced back to the early 1980s. These financial instruments were introduced as a means to raise capital and manage its domestic debt more effectively.

As expected with new and forward-looking initiatives, this initial introduction faced various challenges that hindered the growth of the bond market.

In 2001, Kenya witnessed a significant shift in its debt management strategy. The government, recognising the need for stable, long-term sources of income, made a deliberate effort to transition towards long-term debt instruments.

This marked a pivotal moment in the development of the bond market in Kenya.

Successful development of the bond market in Kenya hinged on several critical conditions, including the presence of a developed money market, favourable macroeconomic policies, active market participation, a robust legal and regulatory framework and most critically an appropriate trading system.

The M-Akiba bond is a great example of a government bond easily recognisable. This retail infrastructure bond was a result of collaboration for financial inclusion between the government and capital market players to offer the first retail bond that traded exclusively on the mobile phone.

M-Akiba is a testament to what we can achieve as a country when we put our focus on automation, transparency and financial inclusion.

This journey leads us today to the CBK DhowCSD and there is a lot to say. Its impact is poised to be profound, touching the lives of every Kenyan, regardless of their financial background or expertise.

It is a leap away from the era of cumbersome paperwork and manual transactions.

Our future as a country is bright when we bring bond-investing knowledge and infrastructure to every citizen through technology.

There is significant work at the counties to finance water and sanitation development. For example, stockbrokers and investment banks are working hard together with the Eldoret Water and Sanitation Company to pioneer bond financing.

The capital markets should therefore train investors to ensure a smooth transition and widespread adoption of this cutting-edge system.

The goal is to reach out to investors and empower every Kenyan to navigate the platform with confidence and make informed investment decisions.

We should embrace this journey.

The writer is a financial literacy associate at the Kenya Association of Stockbrokers and Investment Banks.