M-AKIBA: A Savings and Investment Option to Consider

Written by Wellington Ayugi

Recently, the National Treasury launched a government bond, to be traded exclusively on mobile phones making it the first of its kind in the world. M-AKIBA as a retail bond will use financial technology to increase opportunities for small investors.

The product which is being rolled out by telecommunication providers, Safaricom and Airtel, went live on 23 March 2017 and garnered subscriptions worth Ksh. 1 million, within its first one hour. Since then over 17,000 Kenyans have registered for the 150 million bond, which will run for 3 weeks and is expected to increase participation in the bond markets.

“We are using it as one of the avenues for local borrowing but this is one way to allow as many Kenyans as possible to participate in Treasury Bills, promote financial inclusion and boost our infrastructure financing. The returns are better than even the current deposit rates and it is convenient to participate in using your mobile phone from wherever you are,” – Henry Rotich, Treasury Cabinet Secretary

With a secondary offering of close to Ksh. 5 billion being issued in June, once the pilot phase is done, it is important for the ordinary ‘mwananchi’ to understand what the mobile traded bond is all about. In this article will explore M-AKIBA in detail, highlighting the features, requirements, application process and benefits to investors.

M-AKIBA Features

Before we mention the features it is important we know what is meant by a bond. Basically, a bond is a loan between a borrower and a lender. The borrower agrees to repay the lender the principal amount plus the interest accrued, after the agreed period of time. Usually, a bond takes longer than a year to mature and is issued by the borrower to raise money for a specific goal.

That being said, M-AKIBA is a 3 year bond with a coupon rate of 10% p.a. The minimum you can invest in is Ksh. 3,000, and afterward you can buy bonds in the multiples of Ksh. 500. The transactions will exclusively be through MPESA and Airtel Money mobile money platforms, by use of USSD code. The maximum you can invest in is Ksh. 140,000 per day.

Compared to government-backed bonds which require a minimum investment of Ksh. 50,000, M-AKIBA is affordable to retail investors who can expect to be paid interest bi-annually. Investors will receive SMS alerts showing the amounts they have invested once payments are made via mobile money platforms.

Under the new arrangement, the Central Depository & Settlement Corporation (CDSC) will be the selling agent for the bond, unlike previous bonds that were handled by the Central Bank of Kenya. With this information, the next step is to look at the registration procedure and the process of investing through mobile money platforms.

How to invest in M-AKIBA

For this article, we will pick one of the telecommunication providers and go through their registration process. My pick would be Safaricom since they are the market leaders and M-PESA is a leading mobile money transfer service in the country. The process includes:

  • To begin, dial the USSD code *899# on your Safaricom line.
  • Next input your PIN (put in ‘0’ to set a new PIN)
  • Proceed to enter your National ID number
  • Once you have entered your ID number, you will be prompted to sign up by dialing 1
  • View the terms and conditions and click yes if you agree
  • You will receive a confirmation message showing your registration was successful
  • Your Name, M-AKIBA Account Number and the activation date and time of your account will be displayed on the confirmation message.
  • To go on trading, dial *889# and follow the instructions

The requirements to buy the bond are quite simple. First and foremost only Kenyans are illegible to purchase the M-AKIBA bond. Also, you need to have registered your number with either M-PESA or Airtel Money. In addition, you need to open a Central Depository Account(CDS) which is free. You could be trying to figure out how to go about opening your CDS account, well you need not worry. Once you register by dialing *899# you will receive your CDS account number on the confirmation message.

How do I buy and sell on M-AKIBA

Similar to the registration phase buying into the bond is easy,  just a simple matter of loading at least Ksh. 3,000 into your mobile wallet. Remember to factor mobile money transaction costs before you place a buy order. Dial *899# and proceed with the prompts.

Currently, the minimum amount you can invest in is Ksh. 3,000 and multiples of Ksh. 500 thereafter, there are no restrictions on how much an investor can buy in the secondary market. As it is, the maximum you can trade in a day is Ksh. 140,000, though that depends on from one service provider to the other. If you want to buy more than the minimum limit per day, you can repeat the same process daily for the duration of the bond until you reach your investment target.

For the primary offer, the cost of buying the bond will be the respective MNO fees (Mobile Network Operators) and you can check the discounted rates on the M-AKIBA website. However, for the secondary market, the total cost of the buy will be 0.535% for both purchase and sell options.

You can sell your bonds on the NSE (Nairobi Securities Exchange) once the initial offering is closed. You just dial *899# and select the “sell” option. From there it’s a matter of following the prompts and executing the order. The process is also the same when it comes to buying bonds, once the primary market is closed, the only variation being selecting “buy” on the prompt menu.

What are the benefits of investing in M-AKIBA

M-AKIBA has a number of advantages key among them being the bi-annual payment of interest and it being risk-free. So, for example, let’s say you buy the minimum bond for Ksh. 3,000. At 10% interest paid twice in a year, you will receive Ksh. 150 for the first 6 months. Your total amount will now add up to Ksh. 3,150 for that period. At the end of the first year, you will end up with Ksh. 3,300, not a bad return if saving money is your ultimate goal.

Compared to the 2%-7% annual interest, banks are currently offering on savings accounts, you are better off saving with M-AKIBA. Other key benefits include:

  • It is a tax-free bond
  • It is a low-risk, savings or investment option
  • You are guaranteed to find a buyer when you sell your bond
  • It is a secure and convenient way of investing in the bond market
  • Transactions occur in real time with a confirmation message once you make a trade.

Things to note

You can check the status of your investment by dialing *899# and going to “My Account” menu to view your statement. In addition, once the bond is registered you will automatically be allocated a stockbroker. You will receive an SMS alert with the name of the broker. Alternatively, you can use the USSD code and choose the ‘my account’ option and follow the instructions for information on your broker.

Now that we know more about M-AKIBA, the next step would be to see if it suitable for our purposes. Are you looking for a way to save, that is risk-free and has competitive returns? Then M-AKIBA is the right product for you. You can also make extra cash by trading on bonds through your mobile wallet. Sign up today and share with us your experience using the platform.

You can learn more about M-AKIBA by checking out the FAQ’s. All the best!

About the author

Wellington Ayugi

Wellington Ayugi handles Business Development at Covered and has a passion for personal finance, microfinance, and developments in financial technology

  • munduMulosi

    I stopped reading at the point you said 3000 invested at 10%pa will earn 300 bob at the end of 6 months. No sir, it will have earned Ksh 150

    • Mohamed Omar

      Hi munduMulosi,

      Thank you for highlighting this and bringing it to our attention. We sincerely apologize for the editorial error and any inconvenience caused.

      Mohamed