One day, cellphone owners will buy T-Bonds and revolutionise banking

Soon, anybody owning a mobile telephone in this country will be able to take part in the market for Treasury bills and bonds.

I predict there will come a time when all that the man and woman on the street will be required to do is to open a CDS account at the Nairobi Securities Exchange, acquire a payments bill number at the Central Bank of Kenya, and start transacting.

The mitumba trader, the mama mboga and chairperson of a chama will only be targeting the non-competitive bids to make sure they do not miss out on allocations.

If you can buy Treasury bills through M-Pesa, why would you keep money in a bank where you are paid 1.5 per cent for your hard- earned savings when you could earn 8.6 per cent?
The mobile telephone is going to be the biggest catalyst of radical change in our financial systems.

M-Pesa is how we will manage to rescue the market for government paper from capture by commercial banks.

This is how the commercial banking system will be induced into starting developmental lending.

Part of our problem is that policy-makers always think that every problem can be resolved through new legislation. Everywhere you turn, you hear about new legal frameworks and new laws.

Yet we all know that things like greed and pursuit of higher profits cannot just be legislated out of existence. You have to work out how to induce and precipitate disintermediation in your financial systems.

Right now, commercial banks maintain a stranglehold over the system, with 53 per cent of bills and bonds in their hands. Yet we all know that our banks are wired only to support existing businesses through overdrafts.

Banks here are not wired to provide long-term money for expansion, investments and creation of new and decent jobs.

A major disintermediation needs to take place in this economy so that our savings can flow to wealth-creating sectors.

We had hopes that the Capital Markets Authority would, through better regulation, gradually induce companies to start relying on capital markets instead of going for expensive overdrafts from commercial banks.

It did not happen. Today, the road a company looking for money for expansion has to tread before being allowed to issue a corporate bond or a commercial paper is long and tortuous.
In the DNA of the CMA is engraved the word “control” – not “growth”.

I am convinced that the mobile phone is what will save the small saver from the tyranny of commercial banks.

OPTIMISM

Why do I have so much faith in the mobile telephone? Am I engaging in a pipe dream?

My optimism is based on the speed and short-time frame within which the mobile telephone has become a player from the time M-Pesa came into being.

It started as a simple payments and money transfer system. Today, mobile phone technology allows the small man and woman to borrow and save money through the M-shwari service.
M-Pesa has conquered money transfers, borrowing, and saving.

The logical progression is to venture into investment: introducing technology to enable Wanjiku to invest in Treasury bills and bonds.

I predict a time when small investors will move in droves to participate in the lucrative market for government paper.

And, if you allow the small man and woman to start purchasing Treasury bills and bonds through their mobile phones, the ramifications in terms of disintermediation in the financial system will be major.

Accuse me of dreaming. But I even foresee a time when regulation will allow cash-rich mobile telephone companies to play directly in the government securities market as primary dealers.

Next week, the government will be coming in the market to borrow Sh15 billion by issuing an infrastructure bond.

How I long for the time when the thriving chamas – the mushrooming merry-go-rounds – and the saccos will be allowed to directly take part in infrastructure bonds issued by the government.

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