Kenya will roll out an electronic over–the–counter trading platform for government securities, enabling investors to start buying and selling Treasury bills and bonds online in the coming days, the Central Bank of Kenya (CBK) has said.
Outgoing CBK governor Patrick Njoroge said the modernised Central Securities Depository (CSD) would be launched in “less than a month”, more than a year from the initial timeline of June 2022. Works on the electronic over–the–counter (OTC) secondary market platform for government securities, funded by the World Bank Group, started around September 2020 and was expected to go live a year ago.
Dr Njoroge said the platform would help tap more than Sh400 billion wired back home by Kenyans abroad annually into government debt. Presently, the bulk of remittances go into household budgets like settling medical and education expenses, rent and household utilities, among other bills.
“The CSD provides a new and easy way to invest in government securities and will, therefore, be beneficial to the diaspora. They don’t need to come back to Kenya to make investments in the T-bills, T-bonds, among others,” the CBK chief told the opening session of the Global Forum on Remittances, Investment and Development (GFRID) in Nairobi.
“They will register CSD online from wherever they are, mitigating the current inconvenience of having to come physically to the Central Bank. Importantly they will also be able to invest in the government of Kenya securities online on their phones.”
The government borrows from the domestic market through short-term Treasury bills, which are repayable within a year and longer-dated bonds, with the latter currently tradeable on the Nairobi Security Exchange’s fixed income board.
T-bills, in the meantime, are not listed and can only be sold by rediscounting (selling them back to the Central Bank). The one-year T-bill is, however, tradeable in an OTC market at the CBK.
The cash sent back home by Kenyans in foreign countries has since 2015 remained the largest source of foreign cash flows in Kenya, ahead of tourists, foreign direct investments (FDIs) and leading agricultural exports such as horticulture and tea.
Kenya Diaspora Remittances Survey Report, commissioned by the CBK, suggested in December 2021 that the largest share of the cash sent goes into supporting families at home and buying food and household goods.
The Indian diaspora, for instance, is famed for growing and developing the country’s IT and business process outsourcing (BPO) industry, which was valued upwards of $150 billion (nearly Sh21 trillion, where $1 is equivalent to Sh139.60) back in 2015, according to conservative data by Ministry of Overseas Indians Affairs.
India was then estimated to be exporting IT and BPO services valued at $78 billion (more than Sh10.89 trillion) and sustaining more than 3.5 million jobs.
“We should stop looking at our diaspora as an ATM where you go get some money and spend it. We should be on an investment journey with them,” Dr Njoroge, whose tenure expires in days, said.
“The benefits of the diaspora should go well beyond the remittances. This is an appropriate time to discuss how the diaspora can participate in economic development.”
Besides electronic trading capability, the new modernised CSD is expected to “improve pricing efficiency and transparency in securities trading thereby lowering yields,” according to Treasury’s 2021 Budget Statement. The system will enable banks to trade with each other by exchanging collateral of their treasury holdings, thus allowing smaller banks to get favourable interbank rates.
Currently, small lenders get expensive interbank rates when borrowing from their big peers because they are considered risky and do not offer collateral for their overnight loans.