Investors will soon own smaller portions of stocks and government bonds after regulators approved the introduction of the model that allows what is technically known as fractional ownership of securities.
Kenyan start-up Hisa Technologies and Faida Investment Bank have got the nod from the Capital Markets Authority (CMA) and the Nairobi Securities Exchange (NSE) to allow fractional investing.
This model lets investors buy less than a whole share of a stock or security, but the dividends earned will be proportionate to how much of the share is owned.
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At the NSE, one needs to buy a minimum of 100 shares per transaction.
For example, an investor buying into British American Tobacco (BAT) Kenya would need Sh42,950 based on its yesterday’s share price of Sh429.50.
The amount excludes transaction charges.
“We have received joint approval as Hisa and Faida from NSE and CMA to apply fractional investing after we met the requirements and we will soon introduce that,” said Erick Asuma, co-founder and CEO of Hisa.
“Hisa has come to make it easier to invest in companies like Amazon through fractional ownership. There is also work behind the scenes to enable fractional investing in government bonds,” added Bob Karina, founder and chairman of Faida Investment Bank.
The model is commonly used in US stock markets and allows brokers to pool money from several investors, relieving individuals of the need to stack huge amounts of capital.
It is expected to attract more retail investors to NSE.
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This means local investors will be able to own “high-priced” stocks like BAT Kenya, Limuru Tea, Standard Chartered Bank, Jubilee Holdings and East African Breweries Plc (EABL), and invest in Treasury bonds whose minimum investment is Sh50,000.
Hisa has been offering fractional investing in US stocks and ETFs listed on the New York Stock Exchange and the NASDAQ through US-based global brokerage infrastructure DriveWealth LLC to locals through mobile phones.
Retailers invest as little as $5 (Sh610.63) in the US stock portions. Some of the US stocks available include Amazon, Apple, Alibaba and Tesla.
The tech company has extended the trading of shares to local stocks on the app through a partnership with Faida as the licensed stockbroker.
Creation of the Central Depository System (CDS) account has been automated with the opening of the account after downloading the app and verifying.
The move is expected to increase retail participation at NSE at a time the average foreign investors' participation in the three months to September dropped to 45.55 per cent compared to 61.54 per cent in the quarter that ended June.
→ekivuva@ke.nationmedia.com
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