NAIROBI, Kenya, Mar 30 – The revolutionary M-AKIBA Bond that is going to open government securities trading to the lower income group is finally here.
After two years of testing, and crafting and back and forth, the National Treasury launched M-Akiba bond this morning at Treasury’s boardroom.
It will first be offered as a Special Limited Offer (SLO).
Honchos from the Central Bank, the Capital Market Authority, The Nairobi Securities Exchange, The Central Depository and Settlements Corporation, Safaricom, Airtel, Kenya Association of Stockbrokers and Investment bankers were present at Treasury to witness the momentous occasion.
It has been a long two-year journey. Many initiatives are dropped after such a long period. But the team stuck it through. The team stuck it through because of the potential of the initiative.
First, with the launch of M-AKIBA, Kenya becomes the first country in the world to offer a mobile platform for her lower income citizens to trade in government securities.
In most countries, including those that got ‘civilized’ way before Kenya have not been able to do this. As you are reading this, several countries are watching from the sidelines ready to borrow the team that actualized M-AKIBA to replicate the same in their countries.
After MPESA, we will soon be exporting M-AKIBA to the world.
But why is it so revolutionary?
It is because of what it does.
Trading in government securities has for a long time been a preserve of high net worth individuals who can afford minimum tranches running into ‘hundreds of thousands.’ With MAKIBA bond, that has been reduced to Sh3, 000 and at the comfort of your mobile phone.
Anyone even in the remotest part of Kenya can now trade in a government bond.
A few years ago, you had to have Sh1, 000,000 and above to trade in government securities. Also, you had to travel long distances to Nairobi and a few other major towns to be physically present to initiate trade in government securities or follow up on payments at CBK.
So, what is M-Akiba and how does it work?
M-Akiba is the first of its kind retail bond on mother earth where anyone who is a Kenyan armed with a minimum of Sh3, 000, the basics of handsets and has a mobile payment system will be able to buy a treasury bond to save and to earn returns.
M-Akiba has an easy to use ‘customer journey’ that includes dialing *889# on their keypad and following simple steps to open a CDS account. The process is such that one will be directed on the registration process and all the necessary Central Bank of Kenya guidelines of Know Your Customer (KYC) verified in three or less simple steps.
Contrary to common belief, one does not need to have a smart phone to register. The inter-phase has been designed such that even phones with limited screen display such as a ‘kabambe,’ ‘kaduda’ or a ‘mulika mwizi’ works just fine. One thing to note, an individual is not allowed to register twice. One CDS account, one registered mobile money transfer number.
Once the registration is done and upon going live, an individual will be required to load their phones with at least Sh3, 000 to trade. In M-Akiba there are no lots like in other bond issues. Any individual will be allowed to trade a maximum of Sh140, 000 a day in line with central Bank guidelines on Mobile Network Operators (MNOs) money transfer platforms.
M-AKIBA will attract a 10% coupon rate also known as interest.
Payments of interest or coupon on M-AKIBA will be made twice a year and directly to MPESA or Airtel money.
M-Akiba is a straight bond. A straight bond is a bond that pays interest at regular intervals, and at maturity pays back the principal that was originally invested. Straight bonds are debt instruments because they are essentially loaning money (creating debt) to an entity.
M-AKIBA will also not attract price variations. An individual will be able to buy or sell an M-AKIBA anytime—day or night–through market makers (brokers, investment banks fund managers among others). Any secondary buying or selling will be subject to availability of the same.
M-AKIBA has been designed to be a product that Wanjiku would understand—any individual who wishes to off-load M-AKIBA upon purchase will find a ready market and will incur mobile money transaction costs only.
How will this be beneficial to the economy?
First of all, it will encourage savings—as people save with the government to earn interest and the principal at the end of the three-year period when it matures. An increase in savings serves as a lead to increase in investments.
Number two, M-AKIBA Bond will ensure that the level of financial inclusion rises. When the level of financial inclusion—which is a term used to explain that feeling when almost or everyone in a given country is in the formal financial system—rises, it becomes easy to transmit government policies such as to tame inflation or reign in on the unstable shilling and so on.
This is because whatever monetary policy CBK/MPC decide to pick on to address the imbalances is transmitted throughout the economy.
When that happens, the intended results is almost instantaneous over a given period of time as they had approximated.
Finally, the advent M-AKIBA Bond ensures that everyone who wishes to participate in government securities can now do so with ease and at the comfort of their mobile handsets. It is now no longer a preserve of the rich. Before this, institutional investors bullied all of us around.
VERDICT: This is great progress. Forget the politics of government debt.
Go out and buy in.
By Morris Aron @morris_aron