State re-examines mobile bond market in new Ksh. 250M issue

The government has reopened its highly-publicized mobile bond issue to members of public, staying in touch with its ambition of tapping onto the domestic lending market in the medium-term to ward off risks associated with gobbling up foreign debt.

Dubbed M-Akiba, the bond is targeted on raising a total of Ksh. 3.7 billion with the first tranche of Ksh. 250 million going on sale between Monday, February 25 and March 8, 2019 before opening up to secondary listing on the Nairobi Securities Exchange (NSE) floor from March 12, 2019.

Cognizant of the notable under-subscription during the premier-issue which saw bids totaling Ksh. 247 million against a Ksh. 1 billion target, the National Treasury has set the target for the second offering at a mere Ksh.250 million, signaling caution at the State’s second bite at the cherry.

“Based on experience we wanted to have a base amount to re-open the offer. We would be delighted to have an over-subscription and would correspond to the greater demand with follow-up issuance’s opening at higher amounts,” NSE Chief Executive Officer Geoffrey Odundo said.

The Central Depository and Settlement Corporation (CSDC) which sits as the principal transaction partner has alongside the NSE and Treasury deepened its engagement with members of public to ensure a greater participation this time round.

This after taking into consideration a self-commissioned report through the British-backed Financial Sector Deepening (FSD) Africa which sought to identify challenges to the massive under subscription recorded during the bond’s first issue.

The survey showed a participation rate of only 3.8 percent of the registered 303,534 potential investors despite a successful pilot program which saw Ksh. 150 million scooped up in two-weeks.

Blurred knowledge on the government fixed income instrument by potential investors was blamed for the uptake mishap to add to reduced investor sentiment during the election year and poor customer care service which led to the low conversion of rate.

According to CDSC Chief Executive Officer Rose Mambo, the multi-agency team comprising of the depository, Treasury and the NSE has adopted some of the proposed recommendations assuring of better coverage during the renewed issue.

“We are trying to implement several of the suggestions including the simplification of the customer user interface. We are also improving outreach to effectively use facilities such as the Huduma Centres in getting to potential investors,” she said.

NSE’s Geoffrey Odundo is upbeat of re-writing the under-subscription script this time round, buoyed by a returning conducive environment for investments in the country in 2019.

According to the bourse’s boss, central to arriving at improved levels of uptake will be tapping onto the already existing pool of over 300,000 registered investors to the M-Akiba program to drive up acceptance.

The second issue has a tenure spanning three years with an option to redeem the principal amount invested after 18 months. The bond will pay out dividends at six-month intervals with the first yield going out to investors on September 9, 2019.

National Treasury will consequently open up new issuance’s to the bond with proceeds earned going into infrastructure investments.