The Kenyan government bond M-Akiba, sold through the mobile phone last year, was a victim of the failure by key players to listen to the target audience, says regional financial think tank FSD in a post-issuance survey carried out to explain its low uptake.
When it was issued in March last year, M-Akiba, the first mobile-based Treasury instrument to be sold in Africa, targeted $10 million but only raised about a quarter of that figure.
According to the FSD report, key players in the issuance of the bond did not address the recommendations for the unbanked segment such as the preference for small denominations in purchasing the government security and maturity tenure in months not years.
“M-Akiba had the potential to reach over 30 million registered mobile money account holders, and even with the excitement and interest when the bond was piloted and launched, the number of retail customers purchasing bonds proved to be low,” reads the report authored by Tamara Cook and Evans Osano.
Ms Cook is the head of digital innovations at FSD Kenya while Mr Osano is the financial markets director at FSD Africa.
At the launch, more than 300,000 people registered on the M-Akiba platform, but only 5,988 purchased the bond, raising $2.48 million. The government extended the sale period to allow people more time to buy but there was little difference.
The issuance coincided with the electioneering period, which the issuers say could have impacted the result.
M-Akiba was a three-year bond sold in denominations as small as $29 with a return rate of 10 per cent paid semi-annually and a tax-free status in line with other infrastructure bonds. The bond’s target was small investors who did not need a bank account to take part.
All one needed was to register with their phone and after a few minutes, invest at least $29 — far less than $499 needed to buy other Treasury bonds — in addition to a cumbersome application process.
Investors could use mobile phone networks’ financial platforms like M-Pesa to send money and receive interest payments on the M-Akiba bond, which could be traded in the secondary market.
The Kenyan survey also shows that there was a poor understanding of the product, even by those who bought the bond — less than two per cent knew they could the Nairobi Securities Exchange if they needed their money.
Further, the purchasing process was not clear as, after registration, the second stage did not give clear and immediate instruction on how to complete the purchase.
“The screenshot displays were sometimes misleading and confusing, so individuals may not have realised their purchase was not complete after registration,” notes the survey.
“Over 60 per cent of the individuals interviewed did not receive a single reminder message after registering, and 70 per cent of those who registered but didn’t purchase did not know when the investment round was closing.”
There was also poor timing of the launch, as it coincided with national elections, so media advertising of the product was swamped by election coverage.
Another reason cited for the poor uptake was that the bond came at a time when banks were keeping a tight lid on lending as well as discouraging interest-earning deposits, in the wake of interest rates capping.
With M-Akiba returns being priced at 10 per cent per year, it presented the best savings instrument since a saving account cannot yield that much return. The return on the three-year bond is about three percentage points above deposit rates at commercial banks.
M-Akiba was officially launched in June last year to much fanfare and great hopes that the $10 million on offer would also sell out. Three months prior, a pilot offer lured 102,632 people to register, but only 5,692 of them went on to buy.