Kenya continues to leap beyond expectations pioneering technological solutions to overcome various challenges that the East African economy faces. M-Pesa was simply a taste of things to come. The mobile money service was launched in 2007 and soon became the world’s largest mobile money network with 614 million transactions a month and 29.5 million active users.
Economists from MIT and Georgetown University found that M-Pesa has helped 2% of Kenyan households out of extreme poverty. Time is on Kenya’s side and so is the nation’s unquenchable thirst for financial inclusion through technological innovation. Kenya will go down in history not only for revolutionising mobile money through M-Pesa but for its M-Akiba bond, a bold but realistic and very much needed approach to financial inclusion. The world’s first mobile-only government bond is for the farmer, the “hustler”, the banker, or simply the postman down the road. The bond is offered on M-Pesa.
The Central Bank governor, Patrick Njoroge, stated:
“Police officers, primary school teachers or those working in kiosks can actually buy government securities just as they would buy products or transfer money with their phones.”
Kenyan mobile phone users may invest as little as $30 (3,000 shillings) for bonds with a 10% tax-free interest. Interest will be paid every six months for the three-year bond. Bond buyers typically pay between 50,000 and 100,000 shillings for infrastructure bonds. Understandably, the purchasing power and opportunity costs for a proportion of Kenyans may make it significantly difficult for them to make such investments.
Finance Minister Henry Rotich stated that the government would offer 150 million shillings before a bigger offer in June. The mobile bonds will not only be a great help to individual investors but will also provide the Kenyan government with a new source of cheap money. The International Monetary Fund estimates the country’s public debt to stabilise at 55% of GDP in 2017/2018. Debt service is a growing concern for the nation and other emerging states in the continent as it takes more of an unsustainable share of government revenues.
Some 15 trillion shillings moved through Kenyan phones since the creation of mobile money in Kenya. At present, only 2% of government bonds in Kenya are bought and sold by individual investors. It does not take much imagination to understand the potential for significant growth in the numbers of individual investors in the economy. A revolution is not coming, no. The revolution is already here. Kenya cannot and will not be ignored as a hotspot for innovation and trailblazers both in the financial realm and the tech sphere.
It has been a long time coming. The mobile-bond solution has been in the works since 2015. The hard work continues as individual investors may need to be educated on the benefits of investing their money in the bonds rather than in accounts. As Africa’s biggest mobile money network, Kenyans are not strangers to M-Pesa but some (like many potential investors around the world) may be strangers to the intricacies of investing. Continued efforts by the CBN to educate investors on appropriate investment strategies may not be a bad call. Maybe a few weekly texts to the phones of individual investors will get the ball rolling in a simple but very effective way.