Allowing more Kenyans to lend to State will lighten debt burden


The recent decision by the National Treasury to postpone indefinitely the launch of sale of Government paper through mobile phones, called M-Akiba is intriguing.

Coming at this time when the government is keen to cut costs makes it even more perplexing.

The announcement of an austerity plan expected to save Sh4 billion that includes the banning of ‘non-essential expenditure’ is largely a marginal and short term move that is unlikely to make a dent on the burgeoning costs of running government.

In the first place, how did ‘non-essential items’ find their way into the budget?

This is an admission, if any more was required, that our budgeting process needs review.

The second question is how this directive will be implemented as county governments and Parliament are distinct constitutional organs with autonomous programs.

The prohibition of the much-reviled ‘bench-marking tours’ is a populist stunt intended to grab public attention rather than make any meaningful impact on the budget.

By: the way, are we still on prescribed ‘Passat’ engine capacity policy?

The Sh4 billion savings against a national budget approaching Sh2 trillion is equivalent to making a Sh40 saving from an expenditure of Sh2 million.

Treasury continues to ignore the greatest opportunity to make massive savings, from changing the method of its borrowing.

With total public debt approaching Sh3 trillion and growing, attracting debt servicing costs approaching Sh200 billion this year alone to become the second largest Government expense after salaries, any opportunity to cut this cost should be tried out with a keen sense of urgency.


While Treasury Bill rates are dropping, they remain high by historical terms.

The magnitude of this refusal to adopt M-Akiba can be better appreciated if we work the numbers.

The government budgeted to borrow Sh229 billion this 2015/2016 financial year alone.

If all this debt is borrowed through the conventional method-Treasury Bills and Bonds at an average of 15 per cent per annum, it would cost us Sh34 billion in annual interest payments.

Alternatively, should we invite Kenyans to lend to Government via their cell phones for a return of 8 per cent per annum, we shall witness a deluge of credit flowing to government coffers well beyond the amount advertised.

This would cost Sh18 billion annual interest, a whopping Sh16 billion saving on a single year’s borrowing program.

What exactly is stopping the Government from launching M-Akiba despite compelling evidence of its benefits?

I am most optimistic that once ordinary Kenyans become alive to the fact that they can lend to their government the money it needs to fund what they are asking Government to do for them, and in the process make a handsome return, there will be no turning back.

It is likely to be the beginning of a second fiscal revolution – since the tax-collection boom of the Narc Government – which will enable government to raise substantial funding at much reduced costs, in local currency, at all times.

It is likely to dramatically reduce the need for forex-denominated debt that has compounded our debt servicing obligations in addition to stressing the exchange rate.

What’s more? The opening up of investment in government paper to ordinary Kenyans represents another turning point; the democratisation of opportunity.

Currently, the opportunity is largely enjoyed by financial institutions who hold 53% of all government paper, and high net-worth investors.


But perhaps the greatest beneficiary will, after all, be the government.

By: allowing the widest numbers of ‘lenders’ to compete to lend to it, the government will attract savings at much cheaper rates, perhaps in the 5-6 per cent range, cutting current Government borrowing costs by incredible amounts.

Again I ask, why is it taking us this long to launch M-Akiba?

In his memorandum to Parliament in May 2015 in which he referred to my Central Bank of Kenya Amendment Bill to allow for mobile telephone transactions of government debt operations and lowering of traded denominations, President Kenyatta assured that the program would be launched in mid July.

This hasn’t happened; procrastination is now recurrent formula.

We need to ask hard questions. This dithering is most insensitive. Accountability to public good is becoming a choice to some.

We need bold long term, enduring decisions. We need to activate policies already in place.

We need proactive ‘helicopter’ views to break the conservative chain and see the whole picture from a vantage point.

We must not lower public bar to fit bureaucratic inertia. Jubilee targets are being frustrated. Who are the covert operatives suffocating Presidential pronouncements?

We won’t allow old order to triumph over new dawn. Redemptive actions are needed now.