M-Akiba might be put to more functions than buying bond

Opinion & Analysis

Treasury CS Henry Rotich (left) and his Principal Secretary Kamau Thugge during the launch of M-Akiba at the Treasury building in Nairobi on March 23, 2017. PHOTO | SALATON NJAU | NMG 

By CAROL MUSYOKA

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Summary

• The product is beautiful in its simplicity.
• Dial a number, register, place Sh3,000 for three years and earn tax-free interest twice a year.
• Almost half of those adults use savings for meeting ordinary day-to-day needs, a third save for education and 40 per cent also save for medical emergencies and burial expenses.
• M-Akiba has the potential to pull funds sitting tied in a knot in the corner of a leso or under the cooking hearth into the formal economy.
• Just like how M-Pesa was launched as a money transfer system but ended up being a virtual repository of cash, M-Akiba might not be used for what its creators envisaged it for.

Last week, my General Manager Domestic Affairs (aka GMDA) decided to change her bank provider. GMDA came home that evening gushing praises about how the new Bank X had told her that she could set aside Sh1,000 every month to save for school fees and it would be automatically deducted from her salary account.

No bank had ever taken an interest in her life, or in providing her with an automated way of saving for this critical aspect of her children’s security As GMDA was talking, a news item appeared on the television about the uptake of the M-Akiba bond. I turned up the volume, as this could potentially be an option I could provide to my the-savings-scales-have-fallen-from-my-eyes GMDA.

The product is beautiful in its simplicity. Dial a number, register, place Sh3,000 for three years and earn tax-free interest twice a year.

In my view, someone in government is finally using data the way it’s supposed to be done: not to gather dust in shelves at the bureau of statistics but to drive behaviour and economic growth.

And nowhere is there more rich data than in the Financial Access Household Survey issued February 2016 by FSD Kenya working in collaboration with the Central Bank of Kenya and the Kenya National Bureau of Statistics.

The report finds that 75.3 per cent of Kenyans are now formally included, with the giant leap being taken by women where formal inclusion leapt between 2009 and 2013 driven by the spread of mobile financial services.

Formal inclusion is defined as use of banks, mobile financial services, saccos and microfinance institutions. Why would there be such a quantum leap in the growth of women users? I daresay that the convenience and the absolute privacy that mobile financial services provide make it a key attraction for women. Not having to make a trip into a commercial centre to deposit or withdraw from a bank and not having a debit card or statement lying around that can generate heated arguments as to “hidden resources” is a major draw.

While the FSD report doesn’t go into the abominable aspects of betting, it does delve into it’s divine counterparty: savings. The FSD report finds that the number of Kenyans using at least one savings or deposit instrument continues to rise and at least 66.4 per cent of the adults sampled have a savings instrument.

Experience downtime

Almost half of those adults use savings for meeting ordinary day-to-day needs, a third save for education and 40 per cent also save for medical emergencies and burial expenses.

One more critical finding: 42.6 per cent of business owners and 87.7 per cent of farmers rely heavily on their savings to finance their livelihoods.

It is on the back of this data that we should critically look at the potential of M-Akiba to provide a viable savings platform. M-Akiba has the potential to pull funds sitting tied in a knot in the corner of a leso or under the cooking hearth into the formal economy, especially since the FSD report finds that the top two most valued storage places for Kenyans are their mobile financial services accounts and saving in a secret place.

Meanwhile, I tried registering for M-Akiba, so that I could sell it to GMDA. After jumping through several hoops, I ended up feeling like a hamster on a wheel so I jumped off. I called the number provided online and a lovely lady called Brenda answered on the third ring, telling me the system was experiencing downtime.

By the time of submitting this piece it wasn’t yet up. I trust that the developers of M-Akiba will make this an iterative product, tweaking it as they get more and more customer usage data to determine how and why Kenyans are using it.

Just like how M-Pesa was launched as a money transfer system but ended up being a virtual repository of cash, M-Akiba might not be used for what its creators envisaged it for. Customers use your product to do a job. Time will tell what the true job of M-Akiba will be, but the ultimate winner will be the government with a new, and far less interest rate demanding investor in its securities.