In 2017, the government of Kenya launched the revolutionary bond called M-Akiba. The T-bill was offered and fulfilled entirely through mobile money technology such as M-Pesa, Airtel Money, and interbank transfer platform Pesalink.
M-Akiba was the result of many iterations and years of effort from many partners. The first of its kind in the world, its goal is to make bonds available to the common citizen. Previously, such lucrative bonds were the purview of moneyed foreigners, bureaucrats, and corporates.
M-Akiba started as a three-year bond available for as little as 3,000 Kenyan shillings/30USD. Needless to say, it has been massively popular. In 2020, it was renewed for more investors, and neighboring Uganda is also working on a similar product based on Kenya’s framework.
M-Akiba – The Government’s Savings Vehicle for the Masses
The World Bank reported that the savings of Kenyans stand at 5.3226% of the GDP against a global average of 22.36%. This worrying trend has been in observation since the 1960s.
Clearly, Kenyans don’t have a very good savings culture. If they do, they must be doing it in cash reserves, not in bank accounts. The government was trying to change this mindset by offering this treasury bill.
What You Need to Know About M-Akiba
As a T-Bill, M-Akiba is one of the safest ways to save money because it is fully guaranteed by the government. With a very attractive interest rate of 10% over a 3-year maturity period, it has great incentive even to the common worker earning minimum wages.
While M-Akiba will grow your money, it was primarily meant to be a savings vehicle while raising money for government expenditure. The 10% interest rate is fixed, to be paid semi-annually (twice a year) through mobile money platforms. Upon maturity, the principal invested would be refunded.
Treasury bills like M-Akiba are, in essence, loans in which the citizens who buy into the bond collectively form the lending body. The government uses this money for capital expenditure and pays interest at agreed intervals.
Funding Infrastructure with M-Akiba
In the case of M-Akiba, the government of Kenya was aiming to raise money for infrastructure and development. The pilot program raised a total of 150 million shillings/1.413 million USD within 12 days.
A second offering targeting 4.85 billion/45 million USD did not do as well. It only raised about sh247.47 million, which went toward funding infrastructure projects such as roads around the country.
The second offering of the bond is likely to have flopped due to poor marketing. Given that it was mainly targeted to middle and low-income earners, there wasn’t enough sensitization for the masses.
Facts About M-Akiba
M-Akiba is a word derived from the Swahili word ‘Akiba’ or savings. Since it was meant to promote financial inclusion and fund infrastructure projects, it is an interesting investment opportunity with unique features.
Here are a few facts about M-Akiba:
- The bond was offered by the National Treasury of Kenya through the Central Bank (CBK.)
- Regulatory oversight for the bond is provided by the Capital Markets Authority (CMA), an independent regulating body established in 1990 to supervise capital market activities and intermediaries.
- The register of bondholders, as well as the regular payment of interest coupons, are both delegated to the Central Depository and Settlement Corporation of Kenya (CDSC). It facilitates the transfer of value, especially for electronically held shares and bonds such as M-Akiba.
- The Kenya Association of Stockbrokers and Investment Banks (KASIB) is responsible for assigning accounts to brokers for purchases and sales.
- Mobile money platforms M-Pesa and Airtel Money, from carriers Safaricom and Airtel respectively, enable bondholders/customers to open accounts, make payments, and receive their money electronically. An interbank money transfer platform called Pesalink was also added to the list to enable more convenient purchase.
- Online trading of the bonds occurs through the Nairobi Securities Exchange. NSE also provides customer support for M-Akiba.
- The Commercial Bank of Africa (CBA) guarantees and facilitates the secondary trading of M-Akiba bonds.
That M-Akiba is a solid saving and/or investment plan is not in question. The underlying framework is impressive, forming one of the most stable and rewarding opportunities available to the people.
Why Save With the Government
As with government bonds in other countries, M-Akiba is not an opportunity you should pass by lightly. It offers massive advantages and very few disadvantages, if any.
Benefits of Saving With M-Akiba
For the right person, M-Akiba is almost the perfect savings plan. It offers high returns within a relatively short period.
The advantages of saving your money in M-Akiba treasury bills outweigh simply having the money in a bank account or, even worse, cash in your house.
- High returns – M-Akiba earns you interest at a constant rate of 10%. This rate shields your money from inflation through the period of the bond, preserving and even increasing the potential buying power.
- Secure – M-Akiba has no risk involved because it is secured by the government of Kenya. You are getting your money back.
- Convenience – registration, payment, and coupon payments are all made through mobile money platforms. No matter where you are in Kenya, you can easily and effortlessly invest in M-Akiba.
- Low minimum investments – With as little as KES 3000/30 USD, you can invest in the bond. Previously, you needed a minimum investment of Ksh 50,000 for government bonds.
- You will contribute directly toward building important infrastructure in the country.
- Freedom – most bonds have longer maturity periods, but M-Akiba matures in 3 years. In between, you can trade your bonds at the NSE, buy additional ones, or sell at will.
- Tax-free – the 10% fixed income coupon is tax-free, making it one of the most tax-efficient investments available.
Among all other fixed-income investment and saving opportunities, government bonds are among the safest. By having a high rate of return, M-Akiba is outstanding.
Are There Risks Involved with M-Akiba?
Yes, even government bonds carry some level of inherent risk. However, even if the government were to become unstable or even get into some kind of crisis, there would still be ways of recovering your money afterwards.
Image credit: Sammie Vasquez, courtesy of Unsplash
The risk of losing your money in totality is almost negligible, even for an unstable economy like Kenya. However, there are also a few other disadvantages of buying M-Akiba bonds.
- Your cash is ‘locked’ until the bond matures. If you want to raise emergency cash before then, you will be forced to sell the bonds or take a loan on their security, which is inconvenient compared to savings in the bank.
- Inflation – the interest rates for T-Bills such as M-Akiba is fixed, making it a poor choice for long-term investment where inflation is rising fast. However, since M-Akiba is short term and has good returns, this doesn’t apply.
- Uninsured – If you buy bonds from a bondholder instead of the issuer, you are not protected from market changes compared to a first-party holder.
M-Akiba Verdict: Should You Invest?
At the time of writing, it’s been three years since M-Akiba was floated. The government and some private bodies ran a post-issue survey, especially given the low uptake despite its potential.
FSD Kenya commissioned BFA Africa to carry out the survey. Some statistics revealed that 59% of those who purchased the bonds are university graduates, 71% are in formal salaried employment, and 51% are urban dwellers.
The bond was also shown to be a big success, at least in one of its key goals of inclusivity. Eighty-five per cent of those who bought it have never bought a bond before. Of all these, 84% were very pleased with it and it’s performance and are likely to recommend it to someone else.
So far, despite the prevailing general lack of knowledge about the massive potential offered by M-Akiba, it remains one of the best savings and investments opportunities for individuals. If you haven’t invested already, it’s time to do so.
How to Register and Invest in M-Akiba
All you need to invest in M-Akiba is to be a Kenyan citizen, 18 years of age or older, holding a valid and active mobile money account. To invest:
- Dial *889# on your Safaricom line.
- Enter your pin, or input 0 to set a new one.
- Enter your national ID number.
- Follow the prompt to register, input 1 to do this. Read through the terms and conditions, then click yes.
- You will then receive a confirmation message confirming successful registration with your M-Akiba account number, name, activation time, and date.
- Dial *889# to start trading on the platform.
- When will I get back my money?
M-Akiba has a three-year maturity period. That means you will get back your principal and last coupon payment exactly three years from the date of purchase. However, you will be getting half of the yearly interest every six months.
- What is the M-Akiba interest rate?
M-Akiba has a fixed interest rate of 10% per year. That means that if you invest Ksh 100,000/USD1000, you can expect Ksh5000 every six months and Ksh 105000 on the last coupon payment.
- Who can buy M-Akiba?
Any citizen of Kenya can buy M-Akiba, so long as they have a valid ID and a working mobile money account. It is not open to businesses and corporations.
- Can I sell my bond before maturity?
Yes. If you need money before the actual maturity date, you can trade your bonds through the Nairobi Securities Exchange.
- How much money can I make from M-Akiba?
Every six months, you will be receiving 5% of the principal in your mobile money account. The more money you invest in M-Akiba, the higher the interest paid. However, you should think of it more as a savings plan.
- Is there a maximum limit with M-Akiba?
The maximum daily limits on mobile money transfer apply to M-Akiba as well, which are Ksh 140,000 daily. Pesalink allows up to Ksh 999,999 daily within the stipulated issuance period.