In a world first, unbanked Kenyans to trade government bonds from their mobile phones

About 11% of Kenyans save on a regular basis compared with 22% in neighbouring Uganda and Rwanda.

KENYANS will soon be able to buy fixed-income government bonds from their mobile phones, a move that will deepen access to financial services in east Africa’s biggest economy while also giving Treasury a cheaper source of funding.

Residents will be able to open central bank depository accounts from their phones without visiting a bank or broker, and can then buy government paper for as little as 3,000 shillings ($28), Treasury Secretary Henry Rotich said in an e-mailed statement. Investors could previously spend a minimum of 50,000 shillings.

The product named M-Akiba, derived from the Swahili word for savings, will run on Kenya’s biggest mobile phone company’s mobile-money platform. 

Safaricom’s M-pesa product, which is a global pioneer in mobile money, enabled cash transfers of 4.18 trillion shillings ($39.8 billion) in the year through to end March 2015.

A 5-billion shilling infrastructure bond to be opened on Oct. 21 will be the inaugural M-Akiba offer, Safaricom said in an e-mailed statement.

Kenya’s most recent infrastructure bond was a 12-year paper issued in October 2014 for 15.8 billion shillings. Accepted bids had an average rate of 11.26%.

“M-Akiba is a one-of-a-kind initiative and the first such product anywhere in the world,” Treasury Secretary Rotich said.

Deeper markets

Investors buying bonds through M-Akiba can spend as much as 140,000 shillings and can check statements from their phones. Interest will be paid directly to their mobile wallets semi-annually and secondary trading can take place at the Nairobi Securities Exchange, Rotich said.

“This initiative will increase liquidity and deepen the secondary bond market,” Fred Moturi, head of fixed-income trading at Sterling Capital Ltd. in Nairobi, said by phone. “If the government picks the lower end of yields it could lower the market average.”

Over the years, 98% of government bonds are traded by institutional investors and only 2% by individual investors. About 11% of Kenyans save on a regular basis compared with 22% in neighbouring Uganda and Rwanda, Safaricom said in its statement.

“It is a matter of trying to make it easier for the common man to access the market without having a bank account,” Alexander Muiruri, head of fixed-income trading at Nairobi-based Kestrel Capital Ltd., said by phone. “It is likely to help bring down rates.”


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