First M-Akiba Bond Sells Out Ahead Of Deadline As Kenyans Raise Sh150 million

The inaugural mobile-based bond, M-Akiba, has been closed after the entire Sh150 million on offer was taken by investors ahead of close of sale of the three-year paper tomorrow (Friday).

As of 2pm Wednesday, the retail infrastructure bond had registered total buys worth Sh. 150,039,874. Bids worth Sh. 6.01 million were placed.

The bond attracted 102,632 investors who registered to invest. However, 5,000 people bought the government paper for as little as Sh. 3,000, constituting of about 5% actually made purchases of the bond thus causing the mobile system to freeze during the initial days.

Day six had the highest number of registrations, at 11,500 while the day with the lowest registrations was day two with 3,200 registrations.

Out of the 13 days of the bond issue, the day that registered the highest buys was day 11 with Sh. 14 million.

However, investors can participate in the secondary from April 11, setting the stage for raising of the remainder Sh4.85 billion in June.

“This new savings innovation is the first of its kind in the world, and to give it the full weight it deserves, the President will launch the main M-Akiba bond with an offer of Sh4.85 billion in June 2017,” Rotich told Parliament last week when he delivered the budget statement for the 2017/18 financial year.

M-Akiba, the first of its kind in the world was seeking to raise Sh150 million at an average return of a tax-free 10% interest paid every six months for the three-year tenure.

Investors are allowed to invest a maximum of Sh. 140,000 per day – the limit set by CBK for mobile money transactions. Individual investors bought the bond in different chunks ranging from Sh. 3,000 to Sh1.13 million, the Treasury said, signaling that the sale was mainly dominated by big buyers and not the small mass market buyers it was meant to serve.

The mobile phone-based way of lending to the Government is opening up to retail investors what has previously been a preserve of a few investors that new their way around the market and could also mobilise a relatively huge amount of money at a go. The Government is testing the waters with the current offer and aims at promoting a savings and investment culture by Kenyans with a minimum investment amount of Sh. 3,000.

Mobile money platforms, M-PESA and Airtel Money, are the transaction agents getting a commission of 0.1% per actual allocation. Bonds offered through these two platforms got bids valued at Sh373, 600 within 15 minutes on its launch last month.

Safaricom’s M-PESA platform handled Sh. 142 million of the total amount while Airtel money sold Sh. 8 million, underlining Safaricom’s dominance of the mobile money business.

Treasury is banking on M-Akiba to expand its revenue sources from the traditional pool of banks and high net-worth individuals as it prepares to fill its Sh500 billion budget deficit and retire old debts in the next financial year. It expects to use the mobile-based bond to mobilise funds for infrastructure development, easing pressure on external borrowing through crowd funding.

“This will not substitute high amounts being done by banks but will add up to the domestic borrowing,” Treasury CS Henry Rotich said during the launch.

The bond offers a three percentage points advantage over banks, currently giving interest rates at seven per cent after the capping of interest rates on September last year.

“This product will dramatically change the savings culture and increase products available for saving,” Central Bank of Kenya Governor Patrick Njoroge said.