M-Akiba seen as a solution to savings culture challenge

Tuesday May 16 2017

National Treasury CS Henry Rotich(left) and his Principal Secretary Kamau Thugge during the launch of the M-Akiba at Treasury building in Nairobi. FILE PHOTO | NMG

National Treasury CS Henry Rotich(left) and his Principal Secretary Kamau Thugge during the launch of the M-Akiba at Treasury building in Nairobi. FILE PHOTO | NMG  

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The government will next month be seeking nearly Sh5 billion from Kenyans through M-Akiba after the success of the initial issue of the mobile phone based bond system.

After two years of blowing hot and cold, M-Akiba, which enables those with little cash to participate was finally launched on March 23, 2017.

The issue, which was offered as a Special Limited Offer (SLO), coincided with the 10th anniversary of the globally renowned M-Pesa.

The objective was to deepen access to government debt allowing users to save and invest, through an affordable minimum subscription fee of Sh3,000. This was by fully leveraging on mobile phone penetration rate, which stands at 88 per cent.

The initial offer meant to run until April 10 hit the targeted Sh150 million before due date, and even though it encountered a few teething problems was successful.

The government intends to issue an additional Sh4.85 billion next month and it will be crucial to ensure broader access by the common man across the country through a longer offer period, aggressive sensitisation campaigns, smoother on-boarding process and seamless clearing and settlement mechanism.

Treasury Cabinet Secretary Henry Rotich while officially opening Capital Markets Open Day in Nairobi last week said the government is extremely confident that M-Akiba will finally provide a long-term solution to the savings culture challenge.

Kenya is widely regarded as a society where most of its citizens lack a saving culture, living every day as it comes.

The country is trying to realise the 30 per cent annual Gross National Savings to Gross Domestic Product (GDP) rate necessary to spur economic growth rate to the 10 per cent per annum that is crucial to realising Kenya’s ambition to be a Middle-Middle Income Economy by 2030.

In 2015 the International Monetary Fund data showed that the Gross National Savings rate was at 12.7 per cent of GDP and forecast that last year the rate would hit 16.1 per cent.
It is yet to release the updated statistics.

“While many Kenyans may see M-Akiba as just another of Kenya’s innovations, it portends a tectonic shift in global political and socio-economic thinking, as already manifested by the excitement created around it by the international media,” said Mr Rotich.

The Capital Markets Authority (CMA) is formulating a policy on innovations in the financial technology (FinTech) as part of deepening technology use in the market

“Kenya is renowned as the global pacesetter in FinTech innovations and will in the next quarter issue a consultative paper on the policy and guiding framework to support and nurture FinTech innovations under a ‘regulatory sandbox’ model to market stakeholders,” said CMA in its first quarter Capital Markets Soundness Report.

A regulatory sandbox is a constructed well-defined space, within which companies can experiment with innovative FinTech products in a relaxed regulatory environment.

This is done with support from a national regulator for a limited time while they validate and test their business model.

It allows innovators to experiment and develop FinTech solutions in a safe environment.

CMA chief executive Paul Muthaura said already the authority has proactively engaged other regulators and players in the FinTech space by seeking co-operation and liaison.

Stamp of confidence
This is with organisations and regulators with experience in FinTech to benchmark on their strategy and approach.

Mr Muthaura said the ultimate aim is to support FinTech and foster innovation and participation in capital markets.

This comes at a time when as at March 2017, the stock exchange had 13,047 shareholders with 12,301 of these being local individual investors and 616 being local institutional investors.

According to the Treasury foreign investors have given securities market a stamp of confidence as evidenced by their 45.6 per cent stake.

Recently, an amendment to the Capital Markets Act was signed into law granting the authority powers to oversee and support implementation of reports of the Task Force on establishment of commodities Exchange in Kenya.

Other reports are the Coffee Reform Implementation Committee, and the Northern Corridor Integration Projects – COMEX cluster initiatives.

All these are aimed at providing a solution to the perennial losses incurred by farmers and other community producers, due to volatility of commodity prices and poor outputs occasioned by unstructured intermediation by unscrupulous brokers.