By OTIATO GUGUYU
In Summary
Treasury Secretary Henry Rotich has said the
government will launch the much awaited mobile-traded government
securities, M-Akiba bonds, in a months’ time offering an alternative
savings option to retail investors.
Mr Rotich told the Business Daily that experts were putting final touches on the platform on which M-Akiba will run.
It will be operated by the Nairobi Securities
Exchange (NSE), the Central Depository and Settlement Corporation
(CDSC), the Central Bank of Kenya (CBK) and mobile service providers.
“Once they are ready we will set the launching date. I understand they
need about two weeks for primary dealership infrastructure and another
two weeks for secondary trading infrastructure,” Mr Rotich wrote in
reply to our questions.
With M-Akiba, banks will come under increased
competition for deposits as any Kenyan with a mobile phone and as
little as Sh3,000 will be able to invest in government securities. The
move comes at a time interest-earning deposit rates are legally
attracting 70 per cent of the loan rate.
When launched, individuals will be able to start
bidding for the five-year income tax-free bond. Investors will, however,
be able to bid up to Sh140,000 daily — the maximum cap for mobile money
transfers — during the week it goes on auction.
The government is stepping up to challenge for
deposits even as banks rush to reclassify deposit accounts to avoid
paying huge interest on client money.
M-Akiba may be lucrative with the current rates at which the Treasury is selling the three month-Treasury bills and bonds at, which are much higher than that offered under the deposit rate in the new banking law.
M-Akiba may be lucrative with the current rates at which the Treasury is selling the three month-Treasury bills and bonds at, which are much higher than that offered under the deposit rate in the new banking law.
Also read: Why M-Akiba is set to be a game changer
Currently, small savers are forced to put their
money in illiquid savings such as chamas where they have to wait for
months on end before being paid a lumpsum sometimes without interest.
The Treasury has delayed the mobile phone-based
bond for over a year since President Uhuru Kenyatta agreed to a law
guiding the sale of the Sh5 billion mini-securities.
Volatile interest rates
Mr Rotich in January said the government would
introduce the five-year bond by the end of March, after the planned sale
in October last year was derailed by volatile interest rates.
During the latter period, the rate for short-term
government paper rose to 22 per cent. However, the Treasury did not shy
away from borrowing from banks and pension funds, which are the biggest
consumers of government securities.
The timing will be crucial for President Kenyatta
who wants to see the cap on interest rates work even as banks threaten
to turn to government securities, which are considered less risky than
lending to the private sector.
M-Akiba will offer Mr Kenyatta a perfect avenue for
liberalising the government paper market and making the process
competitive so that treasuries do not continue crowding out private
borrowers from banks.
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