Savings deducted from the Hustler Fund will be used to revive the M-Akiba bond, giving life to a mobile-phone-based investment product that has been met with investor apathy since its launch in 2017.
On Wednesday, the National Treasury unveiled the Board of Trustees for the pension scheme that will manage the savings from the Hustler Fund, paving the way for the investment of close to Sh1 billion that has so far been raised. A significant share of the Sh1 billion will be injected into M-Akiba, said a source at the Treasury, in efforts to make the mobile phone bond viable.
The Treasury is yet to roll out another M-Akiba bond after raising only 1.04 billion from five issuances, most of which have been undersubscribed. Investors can use mobile phone networks’ financial platforms like M-Pesa to send money and receive interest payments on the M-Akiba bonds, which can be traded in the secondary market.
“We will invest most of the money in the M-Akiba bond. This is our way of helping mama mboga to invest in the bond,” said a Treasury official who did not want to be named as they are not allowed to speak to the media.
The official spoke on Wednesday on the sidelines of an event where the Treasury Cabinet Secretary Njuguna Ndungu unveiled the Board of Trustees for the Kenya National Entrepreneurs Savings Trust (KNEST), the pension scheme for the Hustler Fund.
“With M-Akiba, there is the option for mama mboga to invest in the bond herself, and for a scheme to invest on her behalf,” added the official.
Under the terms of the Hustler Fund launched on December 1, 2022, a borrower receives 95 percent of the amount applied for, while the remaining 5.0 percent is split into short-term savings (at 30 percent of the amount) and pension remittance (70 percent). Kenya has a vibrant conventional bond market, which the government relies on to raise the bulk of its financing.
Few ordinary Kenyans buy the debt, however, because there is a minimum investment of Sh50,000 and investors need a commercial bank account. Retail investors can buy mobile phone bonds for as little as Sh3,000 and earn a tax-free interest rate of 10 percent.
Last year, the Capital Markets Authority (CMA) called for a revival of the mobile phone bond, as part of President William Ruto’s bottom-up agenda that targets individuals and businesses in the informal sector that have been financially excluded.
“Under the Kenya Government’s Bottom-Up Economic Transformation Plan, [CMA] management recommends the revitalisation of the M-Akiba savings bond programme to democratise investments in Treasury bonds through FinTech to further boost the fixed income market,” said the CMA in its market soundness report for the third quarter of the year.
The government raised Sh1.04 billion from five M-Akiba issued since 2017, which attracted a total of 582,572 registrations. M-Akiba was supposed to give a chance to the common man to also invest in government securities, which have long been the preserve of elite earners.
The mobile-phone-based M-Akiba required an investor to put in only Sh3,000 as initial investments. The investor could then add to this in multiples of Sh500, meaning that they can invest Sh3,500 or Sh4,000, Sh4,500 and so on. The Hustler Fund pension contributions, which have so far hit Sh1 billion, are likely to rise after President Ruto last week launched the voluntary pension contribution.
With the voluntary savings, the State will put in a shilling for every two shillings put in as long-term savings, up to a maximum government contribution of Sh6,000 per annum.
Through voluntary savings, the government aims to raise savings of between Sh340 billion and Sh540 billion by 2027, said Simon Chelegui, the Cabinet Secretary for Cooperatives and Micro, Small and Medium Enterprises Development.
The Treasury said that KNEST was created following a survey that showed that the informal sector lacked appropriate saving mechanisms, with the available ones not designed to meet the unique and diverse needs of the sector.