Investor education still a bug to M-Akiba uptake
- The bond’s first re-opening which closed on March 10, 2019 for instance attracted a total of Ksh.197 million against the initial target of Ksh.250 million to raise feasibility concerns as was the case during the bond’s previous issue.
- The issue did however bring with it 82,829 new registrations to bring the total number of M-Akiba bond CDS accounts to 459,586.
Experts have largely identified insufficient investor knowledge as the prevailing and underlying challenge to topping the uptake of the mobile phone traded government bond-M-Akiba.
The bond’s first re-opening which closed on March 10, 2019 for instance attracted a total of Ksh.197 million against the initial target of Ksh.250 million to raise feasibility concerns as was the case during the bond’s previous issue.
According to AIB Capital Head of Research Sarah Wanga, the retail sector who make the majority of the bond’s target are yet to be fully educated on the benefits and opportunities occurring from fixed-income investments which raises concerns on the country’s own financial awareness.
“Quite a number of Kenyans still keep their deposits in banks to earn a meager interest compared to what they would gain from putting their money in a 10 percent tax free instrument if aware of the opportunities” she said.
John Mutua an economist at the Institute of Economic Affairs (IEA) who himself walked back on a decision to sink some of his cash into the issue still finds gap into the bonds marketing.
Mr. Mutua lobbies for the continuous marketing of the bond in between subsequent issues to ensure the bond offering resonates with the masses at all times.
“This M-Akiba issue needs to be in people’s faces. The bond can leverage on the potential created in mass media, especially the social platforms,” he said.
The experts’ remarks mirrors similar sentiments from the performance of the first bond where Treasury’s initiated survey through the British backed Financial Sector Deepening Africa trust identified similar hurdles to uptake.
According to the firm’s report released in June 2018, half of the bond’s up takers at the time were largely composed of urban dwellers that had at least a university degree and worked in the formal sector.
The report further made an assessment of conditions that could not be immediately assessed on the re-opened issue to include the impact of an electioneering year which tends to bring a long a constrained economic environment.
The performance of the re-opened issue does not however account for an all out failure of the bond as the offering managed to grow in part, the number of M-Akiba registered accounts under the Central Depository and Settlement Corporation (CDSC).
The issue did for instance bring with it 82,829 new registrations to bring the total number of M-Akiba bond CDS accounts to 459,586.
Sterling Capital research analyst Justina Vuku assessed the growth in number of transaction accounts as representation of of greater reach by the mobile traded bond.
“The fact that the accounts increased means the bond was able to reach more people. It could be that retail clients are unwilling to invest a lot and hence the low numbers,” she said.
However, a growth in number of bond accounts without a surge in subscription could also be a pointer to a major pull-out of investors from the original M-Akiba issue.
Queried on the performance of the bond, the Nairobi Securities Exchange (NSE) made a positive valuation of the numbers to forecast the possibility of a full uptake in the bond’s subsequent openings which are set for May and July.
“Kenyans are very excited about the bonds market given the increased registration and trading in the secondary market. This to us ascertains the success of the program’s proof of concept and we should continue to issue the bond periodically,” NSE Chief Executive Officer Geoffrey Odundo told Citizen Digital.
It is however important to note that the positive 79 percent success rate attained this time was against the lowering of the target to Ksh.250 million from the original Ksh.1 billion ambition.
The M-Akiba bond has since its premiere in 2017 raised a total of Ksh.594 while paying out an interest totaling Ksh.59.7 million as of March 11, 2019.
The bond’s retailers—the CDSC, NSE and the National Treasury remain keen on leveraging the platform to raise a total of Ksh.3.7 billion to fund government expenditure in the near term.
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