Government of Kenya to proceed with the roll-out of M-Akiba

This was said by the Cabinet Secretary, National Treasury, Henry Rotich as he presented the 2016/2017 budget at the Parliament Chambers. The 2016/2017 budget is the fourth Budget Statement under the Administration of His Excellency President Uhuru Kenyatta. The Kshs. 2.3 trillion worth budget was themed , “Consolidating Gains for a Prosperous Kenya.”

The M-Akiba Bond is the first-ever Government bond that will be offered exclusively via mobile phone, pointing to the growing relevance of mobile money solutions in the evolving payments space. The solution will be delivered via a number of Mobile Network Operators to continue a push to deepen access for retail bond trading, which was previously only accessible to commercial banks or traders.

As part of this effort, the Treasury recently lowered the cost of Government bonds from Kshs. 50,000 to just Kshs. 3,000. Through the mobile-phone based M-AKiba solution, trades can reach an upper limit of Kshs. 140,000 per day until the bond offering period closes.

Previously, it took an average of two days to buy a government bond in a process that required customers to apply for a bond CDS Account, take forms to Central Bank of Kenya, and deposit funds with a broker. M-Akiba however makes the process instantaneous.

The M-Akiba bond is also aimed at enhancing the savings culture by Kenyans. Kenyan savings are at 11% of GDP while countries like Qatar are at 60%, while Rwanda and Uganda are at 22% each.

The bond was a brainchild of NSE, stockbrokers, Capital Markets Authority, investment banks and Central Depository and Settlement Corporation. Other players involved were ICT Authority of Kenya and National Treasury.

The idea was first made public in parliament on June 11, 2015 by Treasury CS Henry Rotich but it failed to take off in October last year as planned due to volatile interest rates, which had risen to 22 per cent for short-term government papers. In January this year, the government had put March as the deadline but it also failed to introduce the bond.

In addition to this, Mr. Rotich also pointed out that the Government is enhancing oversight of commercial banks IT systems while at the same time improving the skills of Central Bank supervisory staff on ICT and forensic audits. In addition, the Central Bank is in the process of recruiting skilled IT staff to strengthen its technical capacity.

The Government is also looking into introducing electronic bond auctions which will spare investors from the current manual process of submitting paper bids.