Low T-bill returns to spur M-Akiba, say analysts

The ongoing sale of a Sh250 million mobile-based infrastructure bond M-Akiba is likely to be snapped up by Friday, analysts say, citing attractive returns compared with prevailing investment options such as Treasury bills.

The Treasury on Monday last week reopened the retail infrastructure bond, giving the public an opportunity to earn a 10 per cent return on savings from Sh3,000 after every six months.

The sale of the reopened bond, which matures later in 2020, is on sale for 10 days through Friday.

This means investors who buy the security exclusively sold on phone will redeem their cash just after one and a half years, offering them a better return than alternative products with a similar tenor.

“If you look across the Treasury bills, they are all subpar 10 per cent levels and even for other securities in the market in that duration, the yield has been quite low. From a purely yield perspective, it (M-Akiba) is quite attractive,” Churchill Ogutu, a research analyst at Genghis Capital, said via telephone.

Returns on Treasury bills that mature after a year fell further last week to an average 9.48 per cent from 9.49 per cent the previous week, lows last seen in July 2013.

Average yields on the benchmark three-month Treasury bills declined to 6.89 per cent from 6.96 per cent a week earlier, while the return on six-month T-bills averaged 8.32 from 8.38 per cent.

Commercial banks have also slashed interest on savings to below six per cent after lawmakers last September voted to remove the floor on deposit, which had in September been capped at 70 per cent of the prevailing Central Bank Rate.

Kenya became the first country in the world to raise cash for budgetary support from her citizens through a mobile platform in March 2017. This was in a bid to enhance national savings, which have hugely underperformed the target of 30 per cent of the gross domestic product (GDP) — a measure of national wealth — under the country’s long-term development blueprint.

Snapped up

The two-week pilot M-Akiba bond sale that targeted Sh150 million in March last year was snapped up two days to the closure.

However, the subsequent sale that targeted up to Sh4.85 billion — comprising a Sh1 billion offering with a green shoe option of up to Sh3.85 billion — hugely underperformed, raising Sh247.47 million. Some 303,534 investors showed interest in the bond by registering, but only about 5,980 sunk their cash in the bond sold exclusively on mobile phone, helping the Treasury raise a cumulative Sh397.47 million out of the Sh5 billion it had targeted.

Analysts said the flop in the last sale of the tax-free mobile bond — sold via Safaricom’s M-Pesa, Airtel Money and the interbank mobile payment channel PesaLink — was largely due to low investment sentiment related to elections and poor marketing.

The Nairobi Securities Exchange (NSE) and the Central Depository and Settlement Corporation (CDSC), which the Treasury has mandated to market the bond at a small fee, last week pledged to conduct media campaigns this week.

Analysts said marketing should have kicked off so that the investing public, the main targets, buy into it and drive the national savings.

“That (inadequate marketing) is where they shoot themselves in the foot because at 10 per cent yield the bond is really attractive. It’s something, if they can … successfully pitch to mama mboga, the masses will resonate with,” Mr Ogutu said.

“You should look at it as a saving rather than an investment product, which means there’s no risk whatsoever in holding M-Akiba.”

The units sold through the re-opened bond will be listed on the NSE next Tuesday, opening a window for investors to either buy in or opt out.

Secondary trading in the bond on the Nairobi Securities Exchange was largely characterised by net sales in the first year, a pointer that investors were looking at shorter gains common with retail investors.

Between April 2017 and mid-June 2018, a total of 19,078, 291 M-Akiba units had been sold by 1,033 investors against 9,655,012 bought by 1,251 investors, according to a report by the NSE at the time.

Salaried and degreed

Treasury Secretary Henry Rotich said in June last year that there was considering issuing M-Akiba bonds that mature in less than three years to “cater for investors who prefer the short end of the market while providing for the long investment demand”.

“The National Treasury is considering a programme-based model of issuing multiple tenors of the M-Akiba products to cater for the diverse demands of retail investors,” Mr Rotich said in a speech. “We are looking forward to implementing these changes in the next fiscal year if the market conditions remain favourable.”

The findings of a survey by the UK government-backed Financial Sector Deepening (FSD) Africa shows that 51 per cent of the 5,692 investors from 45 counties who bought M-Akiba were from Nairobi.

Samburu and Isiolo were the only counties that did not register any buyer.

The survey, based on feedback from 1,029 persons who either registered or bought the M-Akiba bond, suggests that 61.40 per cent of those who bought the bond were salaried persons while 58.82 per cent of them had at least a university degree.

Based on the success of the current M-Akiba issue, the Treasury plans other offerings in May, July and August, each targeting Sh250 million, bringing the targeted amount to Sh1 billion this year.