Two thirds of all government bond investors on the M-Akiba platform are taking up less than Sh20,000 worth, indicating the large number of Kenyans who were previously locked out of such investments by a high entry barrier.
Statistics from the Central Depository & Settlement Corporation (CDSC) show that the CDSC hosts over 513,000 M-Akiba CDS accounts through which the government has raised Sh782 million from offers worth Sh1.65 billion.
The M-Akiba bond allows a minimum subscription of Sh3,000, unlike normal Treasury bonds which have a minimum investment floor of Sh50, 000. Secondary trading is also in multiples of Sh50,000.
Infrastructure bonds, which are tax free like M-Akiba, require a minimum initial investment of Sh100,000.
“The structure of M-Akiba uptake has about 68 percent of Kenyans taking up bonds worth between Sh3,000 and Sh20,000, while 24 percent of the investors bought bonds worth between Sh20,001 to Sh100,000, and the remaining eight percent invested above Sh100,000,” said CDSC.
The minimum requirement of at least Sh50,000 for ordinary bonds has seen this investment being left to high networth individuals and institutional investors. This has in turn hurt the efforts to grow the savings culture among Kenyans, while also denying others a chance to earn the decent, risk-free return the government paper offers.
The M-Akiba volumes are from the first four sales done between 2017 and 2019. These include the Sh150 million pilot offer in March 2017, the debut sale of Sh1 billion in 2017, and two re-openings of Sh250 million each this year.
Treasury currently has in the market the third reopening of the bond, seeking to raise Sh500 million. The sale opened on Monday, August 19, and will run until September 6.
The bond pays investors a tax-free 10 percent interest, which is higher than the 9.24 percent paid by the one-year Treasury bill that on top also attracts a withholding tax on the interest.
Analysts have, however, pointed at poor public education on the bond as the reason why it has been unable to hit full subscription on any of the sale apart from the pilot, while the general elections also affected the performance of the Sh1 billion debut offer in June 2017.