The Central Bank of Kenya's (CBK) enhanced over-the-counter trading platform, DhowCSD, has dramatically expanded investor participation in government securities.
Since its launch in July 2023, accounts trading state securities surged by 112 percent to 95,178 as of August 31, 2024, up from 44,844.
The platform has attracted retail investors locally and abroad, as well as domestic and international institutions. Retail holdings in Treasury bills and bonds rose from 7.1 percent in June last year to 13.5 percent recently, totaling Sh730 billion.
High interest rates have further fueled this trend; a tax-free infrastructure bond issued in February offered an 18.46 percent coupon, becoming 2024's highest-grossing asset.
However, the platform's success has unsettled banks facing client attrition and increased competition for deposits.
Banks report that direct purchases of government securities are "๐๐๐๐๐๐๐ ๐๐๐ ๐๐๐๐๐ ๐๐ก ๐๐๐ ๐ก๐ , โ๐๐๐โ๐ก๐๐๐๐๐ ๐๐๐๐๐๐ ๐ ๐๐ฃ๐ ๐๐๐๐๐๐ก๐๐ก๐๐๐ ๐๐๐ ๐คโ๐๐๐๐ ๐๐๐ ๐๐๐๐๐ ๐๐ก๐ ๐๐๐ก๐ค๐๐๐ ๐๐๐๐๐ , ๐๐๐ ๐๐๐๐ค๐๐๐๐ ๐๐ข๐ก ๐๐๐๐๐๐๐ ๐ก๐ ๐กโ๐ ๐๐๐๐ฃ๐๐ก๐ ๐ ๐๐๐ก๐๐," according to a recent survey submitted to the CBK.
They are urging the government to intervene to manage the loss of their intermediary role.
In response to the growing demand for accessible investment options, the CBK is planning a new platform called the "hustler bond system."
This initiative, a revamp of the defunct M-Akiba platform, will allow low-income investors to purchase government securities for as little as Sh645.95 ($5), further democratizing investment in treasuries.
Investing through ๐๐ก๐จ๐ฐ๐๐๐ has been simplified to make it accessible to more investors.
๐๐๐ซ๐'๐ฌ ๐ก๐จ๐ฐ:
๐๐๐ญ ๐ฎ๐ฉ ๐ฒ๐จ๐ฎ๐ซ ๐๐๐๐จ๐ฎ๐ง๐ญ: Download the DhowCSD app or visit the online portal. Provide personal information and upload necessary documents like your ID, passport photo, and KRA PIN certificate. Once approved (usually within 2โ3 days), you are ready to invest.
๐๐ก๐จ๐จ๐ฌ๐ ๐ฒ๐จ๐ฎ๐ซ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ: Log in and browse available Treasury bills and bonds with different maturity periods and interest rates. Select the one that fits your investment goals.
๐๐ฅ๐๐๐ ๐ฒ๐จ๐ฎ๐ซ ๐๐ข๐: During an auction, enter the amount you want to invest and, if applicable, your desired interest rate. Submit your bid through the app or portal.
๐๐๐ข๐ญ ๐๐จ๐ซ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ ๐๐ง๐ ๐ฆ๐๐ค๐ ๐ฉ๐๐ฒ๐ฆ๐๐ง๐ญ: If your bid is accepted, you'll be notified via email or SMS. You'll then arrange payment through your bank, typically using a bank transfer method like RTGS.
In other News, Central Bank of Kenya (CBK) has summoned top executives from major banks to address the issue of persistently high lending rates, despite recent reductions in the benchmark interest rate.
In August, the CBK cut the Central Bank Rate (CBR) to 12.75%, yet average lending rates remain high at 16.84%.
This discrepancy has raised concerns that banks are not passing on the benefits of lower rates to consumers, hindering economic growth and burdening borrowers with costly loans.
CBK's decision to lower the benchmark rate was influenced by a significant drop in inflation, which reached its lowest level since December 2012.