The Kenya government’s attempts to boost national savings through its retail market bond dubbed M-Akiba failed to excite the market for the second time in a row posting a 21 per cent undersubscription.
The government reopened the mobile-based infrastructure bond hoping to raise Ksh250 million but only managed Ksh197 million ($1.97 million), accounting for a 79 per cent subscription rate.
The bond, which was listed on the Nairobi Securities Exchange on March 12, has a duration to maturity of 18 months and will be redeemed on September 7, 2020.
The proceeds of the bond issue were meant to settle total interest payments valued at Ksh12.38 million ($123,800) for investors who bought into the initial tranche of Ksh150 million in March 2017.
The Central Depository and Settlement Corporation Ltd has so far paid out, on behalf of the government, a total of Ksh59.67 million ($596,700) in interest to M-Akiba bondholders since the first issue.
The government is targeting investors with as little as Ksh3,000 ($30) in investment capital to purchase the bond and benefit from an annual rate of return of 10 per cent paid after every six months, implying that such an investor would receive Ksh150 ($1.5) through his phone after six months and a total of Ksh300 ($3) in a year.
But according to Financial Sector Deepening Kenya, some investors feel that the Ksh3,000 would be better allocated to alternative savings groups or investment opportunities that could provide quick returns or access to credit.
Although the M-Akiba bond was launched with the aim of promoting a national savings culture and reducing the government borrowing costs, this is yet to happen. The government had set a target to raise Ksh1 billion ($10 million) through the M-Akiba bond but last year the issue failed after a successful pilot project.
The government had put M-Akiba bond worth Ksh1 billion ($10 million) on offer, with hopes that the issue would sell out and even allowed a green-shoe option of Ksh2.8 billion ($28 million), that in case of oversubscription it could take up a massive Ksh3.8 billion ($38 million.
However, the government managed to raise only Ksh247 million ($2.47 million) of the targeted Ksh1 billion ($10 million).
Over 300,000 people registered on the M-Akiba platform but only 5,988 purchased the M-Akiba $2.47 million, less than a quarter of the Ksh 1 billion ($10 million) on offer.
It was a three-year bond with a coupon rate of 10 per cent paid semi-annually and a tax-free status in line with other infrastructure bonds.