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Kenya tests the waters with first ever mobile-traded bond

National Treasury Cabinet Secretary Henry Rotich.

The National Treasury will tomorrow launch the first ever mobile-traded bond, ending over 17 months of waiting.

However, according to the prospectus of the M-Akiba bond dubbed “special edition”, the Government has scaled down its ambitions of issuing a five-year bond of Sh5 billion to a three-year bond of just Sh150 million.

This is just three per cent of the initial figure, even though National Treasury indicated this will mainly serve to test the systems.

The prospectus further says that the bond could be reopened at a future date.

The bond, with a coupon rate of 10 per cent, will allow low-end investors to lend to the Government as little as Sh3,000 and make top-ups in multiples of Sh100.

The initial bond offer had been planned to take off in October 2015, but erratic conditions In the market scuttled the plan.

Since it is a straight bond, it will be paying interest at regular intervals – twice a year – and pay back the principal upon maturity in 2020.

According to the prospectus, two mobile operators – Safaricom and Airtel – have been chosen to act as placing agents and will be paid commission at the rate of 0.1 per cent of actual sales (at cost), net five per cent withholding tax.

Interested investors will have until 10 April, or until the bond value is reached, whichever comes first. The prospectus indicates that allotment will be on first come, first served basis.

The development is welcome news for many Kenyans, who can now participate in the Government’s risk-free paper, giving them a feel of what it is like to lend to the Government.

Once the special bond is in full course, individuals will be able to bid up to a maximum of Sh140,000 per day for the income tax-free bond.

Government bonds have for a long time been viewed as a preserve of high-net-worth individuals since it requires a minimum investment of Sh50,000.

But even with the lowered minimum requirement, there is still a possibility that cash-rich individuals may still take it up at the expense of their poorer counterparts, depending on the level of investor awareness and perceived returns.

The Government had kept the market waiting since September 2015 when it announced the plan to launch the bond that is expected to make Kenya the first country in the world to do so.

The idea was first made public in Parliament on June 11, 2015 by Treasury Cabinet Secretary Henry Rotich, but it failed to take off in October due to volatile interest rates. That time, interest rates had risen to 22 per cent for short-term Government papers.

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