Kenya launched its first government bond to be offered exclusively through mobile phones, taking advantage of the country’s booming mobile money market.
The MAkiba (“Akiba” swahili translation of “savings”) infrastructure bond will be on sale for as little as 3,000 Kenyan shillings ($28) and offered on the widely-used money transfer platform MPesa. Previously, the minimum investment threshold for a government bond was 50,000 Kenyan shillings ($477).
The Kenyan government first outlined plans for the “Akiba” bond in its national budget back in June, and was sparked by government fears over high lending rates that have restrained credit uptake.
“This will allow Kenyans to enjoy significantly higher interest rates on government securities compared to bank deposits, through a convenient platform and with a low entry threshold,” the budget document stated.
The MAkiba will also swiftly increase transaction time, with trades that previously took an average of two days made instantly via mobile.
Kenya’s Treasury hopes to raise 5 billion Kenyan shillings ($47.7 million) through the bond sale.
Individual retail investors previously only accounted for 2 percent of government bond uptake, with the remaining 98 percent bought up by institutional investors, according to the government press release. But the popularity of the MAkiba bond could be high if mobile user rates are any guiding measure.
Mobile penetration across Kenya was last recorded at 83.9 percent for the period between April and June 2015, according to the Communications Authority of Kenya.
MPesa has become a formidable competitor for local banks since it was launched by Safaricom in 2007 and last recorded a total of 23.3 million customers — that’s more than half of the country’s near 44 million population.
Statistics from digital finance researcher Financial Inclusion Insights show over 62 percent of Kenyans actively managed money on their mobile phones in 2013. That’s compared to 21 percent who held bank accounts during the same period.
The Central Bank of Kenya last week held interest rates at 11.5 percent, as month-on-month inflation fell to 5.8 percent in August from 6.6 percent in June.
It’s not yet clear what interest rate will be set for the MAkiba bond.