Treasury moves to open up bond trading on mobile phone system

Money Markets

The Treasury has started the search for a consultant to design and develop a mobile phone based system for trading bond. |Reuters  Reuters

By David Mugwe

In Summary

• Data from the banking regulator as at November 2 shows commercial banks controlled 50.8 per cent of government securities while insurance companies controlled 10.7 per cent.
• Pension funds controlled 21.5 per cent, parastatals five per cent while other investors controlled 12 per cent.
• If successful, it is expected that individuals in remote areas where the Central Bank does have branches will be able to participate in bond issues and this will help drive up demand for government securities.

The Treasury has started the search for a consultant to design and develop a mobile phone based system for trading bond.

The move is expected to ease small investors’ access to the government securities market and enable buying and selling of treasury bonds and bills using mobile phones.

“The objective of the consultancy is to analyse, design, develop and implement the Treasury Mobile Direct (TMD) Middleware software,” notes Treasury in a notice.

Investing in treasury securities has been viewed as a preserve of wealthy investors and sophisticated fund managers mainly due to little information and inaccessibility of the bonds market to small investors.

Those who buy bonds and bills through fund managers part with management fees, reducing their net earnings from the investment.

The firm that wins the tender will be expected to design the prototype for the TMD Middleware software application and ensure that it is functioning correctly.

It will also be required to carry out comprehensive testing and come up with training schedule for all users of the system.

In November last year, John Murugu, head of the debt management department at the Ministry of Finance told an African bond markets workshop in Nairobi that a proposal to have retail investors participate in the fixed-income markets through the cellphone was part of the reforms being undertaken by the government.

This is expected to deepen the market by allowing more people to access the debt market while help in raising funds for infrastructure and meet other government financing needs.

“It is for retail investors and I think it may first apply to primary issues because the Central Bank of Kenya does not have many branches,” said Samuel Wachira, general manager of Francis Drummond and Company.

Data from the banking regulator as at November 2 shows commercial banks controlled 50.8 per cent of government securities while insurance companies controlled 10.7 per cent. Pension funds controlled 21.5 per cent, parastatals five per cent while other investors controlled 12 per cent.

If successful, it is expected that individuals in remote areas where the Central Bank does have branches will be able to participate in bond issues and this will help drive up demand for government securities.