Kenya: CBK to unveil Treasury bonds and bills for ‘hustlers’

The Central Bank of Kenya will establish a new ‘hustlers’ bond platform that will enable Kenyans acquire government securities for as little as $5 (Sh664).

This is targeted at opening up the market for retail and small-scale investors to Treasury securities.

The Capital Markets Authority said that CBK has solicited offers for consulting services for the pre- and post-implementation examination of the intended platform known as the “hustler bond system”.

The banking regulator has set aside funds in its budget toward the cost of Request For Proposals (RFPs) for provision of consultancy services for hustler bond post-implementation review.

“The introduction of the hustler bond system by the Central Bank of Kenya to lower the entry barrier for retail investors into Treasury securities is expected to enhance market growth and stability by broadening investor participation and increasing demand for Government bonds and bills,” CMA said it its latest Soundness Report.

The establishment of the bond comes amid the states push for a lower entry level for ordinary investors in Treasury bills and bonds.

Treasury bonds, including infrastructure bonds, have a minimum investment requirement of Sh50,000.

The bonds are long-term debt securities issued by the Treasury to help finance government spending.

Treasury bills on the other hand are short term investment instruments and need a minimum of Sh100,000.

“This followed a Directive by the His Excellency President William Ruto that sought the CBK to decrease the threshold for investing in Government securities to accommodate a larger pool of private investors,” states the report.

Despite high yields issued by government on its long term instruments they have failed to record increased numbers, reflecting investor concerns about Kenya’s economic stability and fiscal health​ or its ability to meet its debt obligations.

For instance, the government had sought to raise Sh20 billion in its July re-opened issue sale but only got Sh487.5 million with investors preferring to put their money into short-term treasury bills, on expectations that interest rates will go up offering them better returns.

In the new plan the Central Bank is also plans to reactivate the M-Akiba program.

In June, the Treasury made changes to M-Akiba, the mobile-based bond purchase platform that ensured that it will no longer be traded on the secondary market.

This was among the new changes as the Treasury revamps the product to eliminate windy transactions and commission- chasing brokers long blamed for its dismal performance.

The Treasury said a study commissioned by FSD Africa recommended a review of the M-Akiba trading platform to boost efficiency and eliminate costs such as broker fees.

“The National Treasury is currently undertaking M-Akiba issuance re-engineering process with the support of E-citizen Directorate to further deepen the Government securities at the retail level,” the Treasury said.

The soundness report further showed that over a million dormant share accounts on the NSE, that were frozen in 2019 to prevent fraud, have been reactivated, benefiting dividend-focused investors.

This policy change aims to enhance market fairness by allowing all accounts to trade, thereby boosting trading activity and revenue for the NSE, CDSC, and brokers.

Source: the-star.co.ke