Introduction
Kenya has done it yet again. First, it was the M-Pesa innovation (somehow disputed). Now it is the M-Akiba bond innovation!
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(Photo by Waka)
These two financial technology innovations have done the country proud. Kenya country is going places.
What is M-Akiba?
M-Akiba is a mobile phone-based bond. The Kenya government launched a three-year M-Akiba bond this week on 23rd of March 2017 which will close on 10th April 2017. However, this is on a trial basis. This is the first government mobile phone-based bond anywhere in the world. The money to be raised through the bond is for infrastructure projects and other development.
The bond will enable the government to borrow money from the domestic market instead of the international market. Previously, not every Kenyan was able to lend money to the government because the bonds were in high denominations and many people could not afford them. The bond was received with a lot of excitement in the country.
Why the excitement?
There are sixteen (16) reasons to be excited about M-Akiba bond as a Kenyan.
- It is a tax-free- bearer bond. There are very few investments that are tax-free in this country. No dealings with KRA.
- An investor only requires a mobile phone and money to invest in government bonds.
- For the initial investment, it is a direct transaction between a Kenyan and his/her government. There are no brokers and no transaction fees.
- The bond is a bearer bond to be transacted at the Nairobi Securities Exchange (NSE) at a later date.
- It is a bearer bond and the bearer does not have to wait till its maturity.
- The investment interest on the bond will be given bi-annually for three years.
- The M-Akiba bond investment is accessible to many Kenyans since the lowest initial amount of investments is kshs 3,000.00.
- The interest is at 10 % per annum, higher than that offered by the commercial banks.
- Ordinary Kenyans will now be able to fund their country’s government investments (mobilize local credit).
- More Kenyans will now be keen on government projects – they will ask questions about what the government is doing with the money they have providing (create awareness).
- Many Kenyans will be able to save in an instrument that is not easily available to dispose of, a good instrument for the keen savers (promote savings culture).
- The bond is for three years which means that unless an investor sells the bond at the NSE, they will have to wait for three years to get back their initial investments. It will cost the investor’s transaction money to sell it at the NSE, hence the three years wait is worthwhile.
- The interest paid on the M-Akiba bond will be put back into the Kenyan economy instead of being spirited out of the country by foreign commercial lenders.
- Many Kenyans will now be aware of the available government investments (financial literacy).
- There is the possibility of increasing the M-Pesa cash limit per day to over kshs 140,000.00.
- More Kenyans will be able to invest in government instruments (financial inclusion).
The government launched the first initial offer of the bond hoping to raise kshs 150 million. There will be another similar M-Akiba bond in June 2017 to raise kshs 4.85 billion. Kenyans can now start walking on the road towards economic freedom of the country.
Feel free to send us questions or topics on tax and investments in Kenya that you would wish to be covered in this Website.
Disclaimer
This post is for general overview and guidance and does not in any way amount to professional advice. Consequently, www.taxkenya.com, it’s owner or associates do not take any responsibility for results of any action taken on the basis of the information in this post or for any errors or omissions. Kenyan taxpayers must always rely on the most current information from KRA. Tax industry in Kenya is very dynamic.
©Wakaguyu Wa Kiburi
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