M-Akiba (world first mobile based goverment bond) off to flying start

[Nefertiti]

hk what do you think of the timing? Did the elections affect the uptake?

[hk]

hk what do you think of the timing? Did the elections affect the uptake?

Yes elections has affected everything, from stock market to mama mboga. Also maybe a 5b bond was a little too big without the supporting advertisement to inform potential buyers.

[Nefertiti]

Yes hk, they just assumed it would work for the working class. Comparing it with M-shwari... a branded product aggressively marketed. Folks don't use M-shwari for the return - it's really about accessible banking. Low-grade investors already have access to stock market, fixed deposits, saccos, etc.

Personally I think loan market should be left in private hands. GoK should even stop the local T-bill & -bonds story and stick to Exim. Why should Treasury compete with the private sector - including SME who cannot access the international market - are we not shooting ourselves in the foot?

[RV Pundit]

It's should be available as a democratic option for those who want... maybe counties can use to float small time bonds.Companies can also it to float small time debt.And you never know when you'll need such an option.

[Nefertiti]

Pundit am all for innovative options but the timing is just wrong. First, private sector activity has slowed down for a while... interest cap means banks are now limiting SMEs... and more savings/deposits are good to increase the banks float which they must lend. M-kiba competes directly with banks for savings.

Second, international debt options have expanded significantly for GoK - even for counties - I see no motivation for GoK to look inwards.

Third, local debt - M-kiba, T-bill & T-bond rates - are much higher than Exim even for shortterm. Rotich and Dr Njoroge are being imprudent with tax money - they should go to the cheapest source.

This option is only good if Kenya goes rogue and is banned from international market - 0% unlikely. That is the real capital democracy provided by China.

[Georgesoros]

We are on the same page.
This will only turn into a political thing and people will lose money.
KEEP govt out of business. Stick to referee.

Pundit am all for innovative options but the timing is just wrong. First, private sector activity has slowed down for a while... interest cap means banks are now limiting SMEs... and more savings/deposits are good to increase the banks float which they must lend. M-kiba competes directly with banks for savings.

Second, international debt options have expanded significantly for GoK - even for counties - I see no motivation for GoK to look inwards.

Third, local debt - M-kiba, T-bill & T-bond rates - are much higher than Exim even for shortterm. Rotich and Dr Njoroge are being imprudent with tax money - they should go to the cheapest source.

This option is only good if Kenya goes rogue and is banned from international market - 0% unlikely. That is the real capital democracy provided by China.

[Omollo]

I said before and will repeat: These are Jubilee ponzi schemes. Ponzi schemes in Kenya emerge just before elections and wind up at the end. The following 5 years are used to pursue a mirage just before another election and a new set of schemes.

[hk]

Pundit am all for innovative options but the timing is just wrong. First, private sector activity has slowed down for a while... interest cap means banks are now limiting SMEs... and more savings/deposits are good to increase the banks float which they must lend. M-kiba competes directly with banks for savings.

Second, international debt options have expanded significantly for GoK - even for counties - I see no motivation for GoK to look inwards.

Third, local debt - M-kiba, T-bill & T-bond rates - are much higher than Exim even for shortterm. Rotich and Dr Njoroge are being imprudent with tax money - they should go to the cheapest source.

This option is only good if Kenya goes rogue and is banned from international market - 0% unlikely. That is the real capital democracy provided by China.

M-Akiba bonds are cheaper for government than treasury bonds. So the governments gets cheaper loans while savers get better return than fixed deposits. After all banks just take regular deposits and buy tbills while paying depositors measly deposit rates. Eventually M-Akiba should not only diversify government credit option but lower overall rates. If government can borrow directly from its citizen ala uncle Sam bonds the banks would be forced to lend to private sector to make money.
The onus is on banks especially investments banks to come up with innovative ways of lending to private sector by introducing junk bonds pegged to M-Akiba, the CMA needs to relax debt listing rules to make it easier. Also we need securitization law to make easier to bundle loans together.
The problem with exclusively borrowing in international markets is currency risk. An influx $8b(annual budget deficit) not driven by trade would strengthen the Ksh. decimating tourism, horticulture and manufacturing. Also if ksh. weakens by 10% it becomes more expensive to pay back and from there its a cascading effect. The key is to have both local and international.

[hk]

We are on the same page.
This will only turn into a political thing and people will lose money.
KEEP govt out of business. Stick to referee.

Government isn't in business by issuing M-Akiba bonds anymore than when treasury issues tbills.

[Nefertiti]

M-Akiba bonds are cheaper for government than treasury bonds. So the governments gets cheaper loans while savers get better return than fixed deposits. After all banks just take regular deposits and buy tbills while paying depositors measly deposit rates. Eventually M-Akiba should not only diversify government credit option but lower overall rates. If government can borrow directly from its citizen ala uncle Sam bonds the banks would be forced to lend to private sector to make money.
The onus is on banks especially investments banks to come up with innovative ways of lending to private sector by introducing junk bonds pegged to M-Akiba, the CMA needs to relax debt listing rules to make it easier. Also we need securitization law to make easier to bundle loans together.
The problem with exclusively borrowing in international markets is currency risk. An influx $8b(annual budget deficit) not driven by trade would strengthen the Ksh. decimating tourism, horticulture and manufacturing. Also if ksh. weakens by 10% it becomes more expensive to pay back and from there its a cascading effect. The key is to have both local and international.

The trouble with M-Akiba is that it siphons money from the limited savings/deposits pool - which the banks need to lend and consumers to spend. It is a poor substitute for t-bonds/bills. If M-Akiba succeeds, the banks will not have money for SMEs at all and retail will suffer, at least the fraction now in GoK hands.

We appreciate the necessity of local & international debt mix. The elephant in the room remains - forex rate, GDP, inflation, etc are stable - but private sector continues to suffer. US private sector is massive, robust and cannot be comparable to Kenya - ours must be nurtured by GoK. This is the trouble with reforms - brace for the impact.

Perhaps the reforms should be staggered? Interest caps, CBK bad debt rules, real estate taxes, M-Akiba, etc. We can have a stimulus package.

[hk]

The trouble with M-Akiba is that it siphons money from the limited savings/deposits pool - which the banks need to lend and consumers to spend. It is a poor substitute for t-bonds/bills. If M-Akiba succeeds, the banks will not have money for SMEs at all and retail will suffer, at least the fraction now in GoK hands.

We appreciate the necessity of local & international debt mix. The elephant in the room remains - forex rate, GDP, inflation, etc are stable - but private sector continues to suffer. US private sector is massive, robust and cannot be comparable to Kenya - ours must be nurtured by GoK. This is the trouble with reforms - brace for the impact.

Perhaps the reforms should be staggered? Interest caps, CBK bad debt rules, real estate taxes, M-Akiba, etc. We can have a stimulus package.

The available data shows that banks are loading up on t bills instead of lending to private sector, if government stopped borrowing or shifted borrowing to M-Akiba banks wouldn't have any other option other than to lend to private sector. This is what mwiraria did. That's why its imperative that banks develop another business model to lend to private sector at a higher rate than stipulated spread. That's why junk bonds might come in handy.
Stimulus packages I am sceptical, because such things are short term. What we need is a longterm policy to encourage capital goods investment and lowering of burden to PAYEs and vat. Investors needs predictable tax regime. In Kenya every budget there's always a change which affects investment.

[KenyanPlato]

Rotich should be replaced with a Gema CS. Kalenjins have no exprience in running dynamic economies like kenyan one. Rotich is running experiments on KE economy. I think Ruto is advising him. We know Ruto barely passed his botany classes so for him to be advising a CS on economy is tragic.

Kalenjins belong to Livestock ministry. there they can comeup with plans to steal cattle from pokots

[KenyanPlato]

Look at what Ruto arm of the government is doing

http://www.nation.co.ke/business/Debt-burden-mounts-as-Treasury-borrows-Sh430bn-in-5-months/996-4095080-anxnof/index.html

[Nefertiti]

Rotich should be replaced with a Gema CS. Kalenjins have no exprience in running dynamic economies like kenyan one. Rotich is running experiments on KE economy. I think Ruto is advising him. We know Ruto barely passed his botany classes so for him to be advising a CS on economy is tragic.

Kalenjins belong to Livestock ministry. there they can comeup with plans to steal cattle from pokots

The best economic planner in Kenya was Tom Mboya - in the 60s - when the economy experienced a real boom. With Mwai Kibaki of course. In fact it is the same master stroke Mwiraria brought back under Kibaki. Today the planning job is de facto Dr Njoroge who is setting fiscal policy - cause we resorted to US model in 2010.

[KenyanPlato]

TJ found a Mzungu economy and there was a lot of room to grow. with free funds from West it was easier to grow the economy as new aristocrats bought land and built mansions..My old man built himself a 7 bedroom mcmansion on a 50 acre of land. he thought of himself as a lord of poverty because he even bought calves from delamere  farm. The family still has this breed of short Holsteins with big round stomachs.. The person managing economy is Rotich and he is doing a poor job

[RV Pundit]

seem treasury concurs with HK - and is not giving up on m-akiba. way to go.
http://www.businessdailyafrica.com/markets/news/Treasury-plans-another-M-Akiba-despite-low-subscription/3815534-4101488-mhhu6u/index.html