Electronic buying of T-bills with as little as Sh3,000 set for launch

Money Markets

A Nairobi Securities Exchange staff on the trading floor. PHOTO | SALATON NJAU 

By GEORGE NGIGI

In Summary

• The system dubbed Treasury Mobile Direct (TMD) is set to help the government raise cash even from individuals in remote areas where the Central Bank does not have branches.

Electronic investment in government securities with as little as Sh3,000 is expected to be launched this week according to the National Treasury.

The system dubbed Treasury Mobile Direct (TMD) is set to help the government raise cash even from individuals in remote areas where the Central Bank does not have branches.

The system enables the public to trade in government securities including through mobile phones driving up demand for government securities and pushing down the price.

“We expect to launch in about two days and it will help us also raise the Sh219 billion that we target,” said National Treasury secretary Henry Rotich last week.

The government is currently struggling to source cheap funds following rise in domestic interest rates after Central Bank’s efforts to support a weak shilling which also made dollar-denominated loans unattractive.

Currently, an individual requires a minimum of Sh50,000 to participate in a Treasury bond and Sh100,000 to buy the short-term T-bills. Further investments are done in multiples of Sh50,000.

READ: Sh3,000 is all you need to buy T-bills by mobile

The system will give the public an alternative investment to low-paying bank savings accounts.  Currently, government securities are offering a return of up to 14 per cent compared to fixed deposit rates of 6.3 per cent by commercial banks.

The minimum amount accepted by the banks for fixed deposit accounts is Sh20,000 with amounts lower than this being held in savings accounts whose average return rate is currently 1.3 per cent.

Low return on deposit has been a key contributor to commercial banks posting high profits and has also been cited as a factor of poor savings culture in the country.

The transaction system was advertised in 2012 and initially expected to go live late last year. It is set to open up Treasury bills and bonds investment to thousands of Kenyans unlike in the past when it was a preserve of banks, pension funds and insurance companies.

Banks hold 57.2 per cent of issued government securities with pension funds holding 25.3 per cent and insurers 8.8 per cent. Issued government securities total Sh1.3 trillion.

President Uhuru Kenyatta opened the door for the implementation of the TMD system without any legal hurdles after he declined to assent to amendments to the Central Bank Act sponsored by Mukurweini MP Kabando wa Kabando, noting that payment through electronic means was facilitated through the National Payment System Act and the Kenya Information and Communications (Amendment) Act, 2013.