The Central Bank of Kenya (CBK)’s improved over-the-counter trading platform dubbed DhowCSD lifted the number of accounts trading in State securities by 112 percent to 95,178 as of August 31, 2024, new data shows, a rise from 40,000 when the platform went live in July 2023.
This also an increase from June 2024 when there were 80,000 CSD accounts—meaning that 15,000 new accounts were created within the two months between June and August this year.
“The efficiency introduced by the DhowCSD has led to an increase in the investor base by 112 percent from 44,844 accounts as at go live July 31, 2023, to 95,178 accounts as of August 31, 2024,” the government’s delivery unit, which sits in the executive office of the President says in new disclosures.
“The investor categories include retail investors, encompassing both local and diaspora participants, as well as institutional investors, both domestic and international.”
The DhowCSD platform has allowed investors to directly purchase Treasury bills and bonds from their smartphones with the new system shortening the previously lengthy signup process.
Participation of retail investors in buying of State securities has improved after the adoption of DhowCSD with their holdings of Treasury bills and bonds rising from 7.1 percent in June last year to 13.5 percent as of last week or an equivalent of Sh730 billion.
High interest rates on Treasury bills and bonds along with the liberalisation of government securities access through the DhowCSD platform has increased participation of retail investors in the direct purchase of the securities.
For example, February’s tax-free infrastructure bond delivered a coupon/interest rate of 18.46 percent making it the highest-grossing asset in 2024.
The rise of DhowCSD has, however, caused unease among banks amid an exodus of clients.
Banks said the switch has resulted in competition for deposits, raising their cost of funds, and are now asking the State to intervene to manage loss of their intermediary role.
Buyers of Treasury bills and bonds previously purchased T-bills and bonds through banks before the CBK introduced the direct-window option.
“Bank respondents indicated that there was a need for intervention by the government to manage disintermediation of banks as fixed-term deposit customers switch to the purchase of T-bills and T-bonds and thus increasing the cost of deposits, heightening aggressive competition for wholesale deposits between banks and crowding out lending to the private sector,” commercial banks told the CBK in a market survey response last month.
The CBK has set its sights on further improving participation of retail investors in bond trading by mulling a new platform dubbed the hustler bond system.
The CBK requested proposals for provision of consultancy for the pre- and post-implementation review of the planned platform in May.
Low-income investors will be allowed to buy government securities for as low as Sh645.95 ($5) as the government pushes to democratise investments in treasuries.
The hustler bond system, a revamp of the now defunct M-Akiba platform is set to run alongside DhowCSD.
