The Government has cut the minimum investment level on the M-Akiba bond from KShs. 50,000 to KShs. 3,000 in a bid to attract more Kenyans as well as offer a new infrastructure bond exclusively via mobile phones.
The bond which is the first sale of its kind in the world – is tax-free and is likely to earn a higher interest than fixed deposit accounts at commercial banks, although a precise interest rate has yet to be announced.
The decision comes on the heels of a public bond offering by neighboring Ethiopia, which saw denominations as low as $1.22 and rose approximately $341.5M.
The government has moved away from its traditional focus on institutional investors – who accounted for 98% of uptake in earlier rounds of public fundraising – to target individual retail investors, signaling its intent to reach a broader investor base via a lower entry threshold for investment.
The National Treasury hopes to raise KShs.5 Billion from the five-year M-Akiba bond, which will be used to finance road works, alongside a raft of energy, water and telecoms projects..
“The industry generally sees this as a positive development, as it will bring more Kenyans into the government bond market and increase their financial participation. However, it is difficult to predict the viability of a secondary market for these bonds, as they will be issued in such small denominations,” said Patrick Ndonye, Managing Director of Kingdom Securities, a local brokerage.
Expanding the range of financial services available via mobile devices is seen as a particularly viable strategy in Kenya, building on the success of mobile money transfer platforms.
According to the latest sector report from the Communications Authority of Kenya, mobile phone penetration stood at 83.9% as of the fourth quarter of FY 2014/15, with subscriptions climbing 3.6% quarter-on-quarter to reach 36.1M for a population of 43 million.
Meanwhile, mobile money subscriptions rose by 3.5% to 27.7M.
Kenya also ranks as the most-banked country in sub-Saharan Africa, with approximately 75% of the population holding bank accounts. The figure, which includes both mobile money and conventional bank accounts, is above the global average of 62%, according to the World Bank Report, and ahead of Ghana (40%), Nigeria (44%) and South Africa (70%).
Kenya’s strong mobile money culture has had a direct impact on financial inclusion, particularly among populations that typically have difficulty accessing such services in other countries.