Kenya’s National Treasury has shifted the issuance of its mobile-based government bond program, known as M-Akiba, to the central bank, away from the Nairobi Securities Exchange and the Central Depository and Settlement Corporation.
This came after the failure of the initial personal loan due to poor timing, lack of understanding of the product, and poor customer support practices that resulted in a signature.
The latest policy change is aimed at reducing the performance of. revive the debt instrument launched in June 2017 to deepen the government bond market and promote financial inclusion.
“We want M-Akiba to be led by our fiscal agent, which is really our intention is. We want you to be the main emitter of this instrument. The Central Bank of Kenya (CBK) has better infrastructure, better capabilities, and fits well in the context of financial inclusion, which the bank also supports, ”Haron Sirima, Treasury’s director of public debt, told The EastAfrican last week in an interview.
“We haven’t given up, but we’ve learned a number of lessons. CBK would be the most appropriate place to speak as the main issuer of government bonds, ”he added.
Under the original agreement, the Central Depository and Settlement Corporation ( CDSC) was hired to act as the issuing and paying agent for M-Akiba on behalf of the government, while the NSE was responsible for facilitating online trading of the bonds through their systems and supporting customer service through a helpline.
“M-Akiba was issued by NSE and CDSC on a pilot basis. Given the positive feedback we received from this instrument, we thought it most appropriate to issue it from the CBK, ”said Sirma.
The Treasury Department pays CBK 1.5 percent, or up to 3 billion Ksh ($ 27.27). Millions) in fees for every amount of debt borrowed from the domestic market through Treasury bills and bonds. When the bond was launched, the goal was for the Ksh 1 billion ($ 9.09 million) on offer to be sold out. It even enabled a green shoe option to expand to Ksh 3.8 billion ($ 34.54 million).
Although the M -Akiba platform registered, only 5,988 bought the bonds. Ksh 247.75 million (USD 2.25 million) total, less than a quarter of the offer.
“The goal of this debt instrument is to deepen financial inclusion. So you don’t look at success in terms of the amount of money you raise, but in terms of coverage or the number of people who have subscribed to the instrument, “said Sirma.
More Kenyans are likely to participate in government bonds by investing a minimum of Ksh 3,000 ($ 27), which is significantly less than the Ksh 50,000 ($ 454.54) required to invest in other Treasury bills and bonds.
The Cost of buying and selling a government bond on the secondary market on a phone is estimated at 0.335% of the transaction value, excluding the mobile money transfer fees for loading or withdrawing money from the mobile wallet.
In comparison , the cost of trading the conventional government bond is 0.0384 percent of the transaction value. This is made up of broker commission (0.024 percent), CDSC bond levy (0.002 percent), capital market supervisory bond levy (0.0015 percent), investor compensation fund bond levy (0.004 percent), NSE bond levy (0.0035 percent) and VAT on brokerage commission (0.00336%).
At the regional level, the Dar es Salaam Stock Exchange is trying to entrust the Ministry of Finance and Planning with the development of micro-savings products.
2019 Uganda announced that the Cabinet has approved the trading of government bonds over cell phones in order to stimulate citizens’ savings and investment and stimulate economic growth.
Kenya’s National Treasury has decided to postpone the issuance of its mobile-based government bond program popularly known as M. -Akiba known to the Central Bank, apart from the Nairobi Securities Exchange (NSE) and the Central Depository and Settlement Corporation (CDSC).
This is after the initial flop, This was mainly triggered by poor timing, poor product understanding and poor customer care practices, which led to a massive signing of the first retail bond.
The East African learned that the most recent change in course affected the performance of the June 2017 with a. We want M-Akiba to be led by our Fiscal Agent (CBK), which is really our intention. We want you to be the main emitter of this instrument. CBK has better infrastructure, better capabilities, and fits well into the financial inclusion context, which the bank supports, ”said Haron Sirima, a director in charge of public debt management at National Treasury The EastAfrican, in an interview last week.
“We haven’t given up, but we’ve learned a number of lessons and I think CBK really would be the most appropriate place to be as the main issuer of. to speak of government bonds, “added Dr. Sirma added.
Under the original agreement, CDSC was tasked with acting as the issuing and paying agent for M-Akiba bonds on behalf of the government, while the NSE facilitating online trading for Er of bonds through its systems and also provides customer service support through a helpline.
“M-Akiba was issued by the NSE and CDSC on a pilot basis and received the positive feedback we received for this tool we thought was best suitable it is issued by the CBK as the main issuer of government bonds, “said Sirma
The National Treasury pays the CBK 1.5 percent or up to 3 billion Ksh (27.27 million home market through Treasury bills and bonds.
According to a survey by Financial Sector Deepening (FSD) Kenya, the number of retail customers buying M-Akiba bonds, despite the great excitement and interest, when the bond was piloted and released on Aug. June 2017.
The bond was issued launched with much fanfare and high hopes that the Ksh 1 billion (US $ 9.09 million) on offer would also be sold out and even a green shoe option enabled Ksh 3.8 billion (US $ 34.54 million) ), depending on investor demand.
Although over 300,000 people were registered on the M-Akiba platform, only 5,988 bought the bonds during the official launch, totaling Ksh 247.75 million ($ 2.25). Million), less than a quarter of the Ksh 1 billion ($ 9.09 million) on offer.
However, the primary goal of the M Akiba bond is not necessarily to raise funds, according to the National Treasury for budget support, but promoting a national culture of savings and strengthening financial inclusion.
“The aim of this debt instrument is really to deepen financial inclusion so that its success is not in terms of the amount of money look at the one you are soliciting, but more on the coverage or the number of people who have drawn the instrument. This is how we measure its success rate, ”said Sirma
The idea of the mobile-traded government bond was discussed by both the National Treasury and the Central Bank in 2011 to improve financial inclusion through the use of increased penetration of mobile phones to access to democratize formal financial systems for savings and investment.
More Kenyans were expected to get involved in government bonds by investing at least Ksh 3,000.00, compared to the Ksh 50,000 minimum (454, 54 US dollars) is significantly lower) required to invest in other Treasury bills and bonds.
Last year (2020) the National Treasury announced that it would review the cost of trading government bonds to reduce the Inclusion of government bonds as savings and investments after poor M Akiba bond performance.
Yes, these (cost elements) are some of the things we need to look at, but you can see that You cannot consider M-Akiba bonds independently of the conventional bond because it is definitely one and the same thing. They are all government bonds, “Sirima told The EastAfrican last year (2020).
” You know the Public Finance Management Act (PFM) does this when procuring Borrowing resources must take into account both the cost and risk elements. Therefore, it is not appropriate to consider only the cost element independently of the risk. ”
The total cost of buying and selling a government bond on the secondary market over the phone has been reduced to 0.335% of its value. estimated the transaction excluding the normal mobile money transfer fees for topping up or withdrawing money from the mobile wallet.
On the other hand, the total cost for an investor to trade traditional government bonds is 0.0384% of the. Estimated value of the transaction.
This includes brokerage commission (0.024 percent), CDSC bond fee (0.002 percent), capital market regulator bond fee (0.0015 percent), investor compensation fund bond fee (0.004 percent), NSE bond fee (0 , 0035%) and Value Added Tax (VAT) on brokerage commissions (0.00336%)
At the regional level, the Dar es Salaam Stock Exchange (DSE) is trying to get the Ministry of Finance and Planning (MOFP) for the development of micro-savings products popularly known as “M” Akiba Bonds as part of its five-year growth and development plan (2018-2022).
In 2019, the Ugandan government announced that the Cabinet has approved government securities trading via cell phones to increase savings and stimulate investment among ordinary Ugandans and economic growth.