Treasury Mobile Direct in Kenya. June 15, 2012 Istanbul

Transcription

1 Treasury Mobile Direct in Kenya June 15, 2012 Istanbul

2 Framework for Treasury Mobile Direct Concept: Design and implement the distribution of public debt/ government securities (Treasury bills and Bonds) through mobile phone technology in Kenya. Includes the placement, interest payment and redemption of the securities through the mobile platform. Provides a low cost distribution access channel and increase access to formal savings instruments. Why is it Innovative? Use of mobile technology to reach millions of potential investors, who have mobile phones (with or without a bank account), in a cost effective way. Extends mobile technology beyond money transfers.

3 Objectives of Treasury Mobile Direct Enhance distribution capacity of the central bank which has been trying to reach retail investors and has lowered minimum investment amounts but without success Support democratization access to public debt increase access by retail investors Reduce financial intermediation (brokers and banks) margin on retail products Broaden choice of saving products for retail investors Broaden use of mobile technology as distribution channel for savings products Broadens access to finance and develops sustainable debt markets

4 Mobile Money Market in Kenya CBK has Provided Space for Innovative Solutions including mobile money trasfers Volume (USD Mn) of Money Transfers by Mobile Provider as at December % No. of Customers (19.2Mn) by Mobile Provider as at December % 3% 98% Safaricom Airtel 79% Safaricom Airtel Yu Yu Orange Orange Tangaza Tangaza Mobikash Mobikash -Total number of Customers using mobile money is currently at 19.2 million. -Safaricom s brand M-PESA transfered 98% of all transactions in 2011 more than Ksh 828 billion equivalent to US$ 9.98 Billion in 420 Million transactions at reasonably low transaction costs. 4

5 5 Mobile Money Market in Kenya Regulation and Safeguards The Communications Commission of Kenya signed an agreement with the International Telecommunications union to safeguard cyber activities in the country. National Payment System Act 2011 provides for the regulation of mobile money transfers by the Central Bank of Kenya. 18/06/2012

6 Retail Market Participation in Kenya 6 Outstanding Securities by Holder as at End March 2012 Commercial Banks 50.66% Non-Bank Financial Institutions 1.18% Individuals (Retail) 2.63% Co-ops & Others 3.71% Pension & Trust Funds 30.92% Insurance Companies 10.89% 18/06/2012

7 Project Decisions Which instrument? Which services? Custody and institutional arrangements Marketing and financial literacy Phasing of the project

8 Which instrument for direct distribution to retail? Phased proposal to launch three complementary instruments for different target investors Phase Instrument Target client Nominal Liquidity Phase 1 T-Bills with automatic rollover option Un-banked and banked Low: Kshs 500? Primary and secondary market Phase 2 Phase 3 T-Bond Banked Mid: Ksh ? Savings bill Un-banked Low: Kshs 50? Government specialized money market mutual fund Un-banked and banked Low: Ksks 250? Secondary market Controlled redemption n.a.

9 Which services through a mobile phone? Account opening* Investment* Coupon and principal payments* Account statement on demand* Automatic re-investment Liquidity facility Transferability to third parties Pledging for loans (*Pilot phase)

10 Custody and institutional arrangements Two non-exclusive options: 1. Private CSD provides retail custody accounts 2. CBK provides retail custody accounts In both Mobile Services Providers operate as agents

11 Stylized diagram of infrastructure/institutional arrangements Eligible Retail Investors T bills sold to retail investors through mobile money programs Hold mobile money account Have opened retail custody account with CDSC Unbranded T-bills distributed through authorized MNOs MNO 1 MNO 2 MNO 3 Central Depository & Settlement Corporation (CDSC) Authorized custodian/depository agent for retail T-bills Central Bank of Kenya (CBK) CDSC Nominee account Issuer of T bills Retail Investors MNO Distribution channel/ Customer interface/ Transaction processor 1. Opens custodial accounts for retail investors at CDSC 2. Takes retail cash deposits 3. Channels data/ money flows in T-bills * MNO Mobile Network Operator Account Provider/ Settlement 1. Appoints authorized Mobile Service Providers (MSPs) as agents 2. Ensures compliance with KYC requirements Final Settlement 1. Appoints CDSC as custodian/depository agent for retail T- bills 2. Holds nominee account for CDSC

12 Marketing and financial literacy Instrument design: o Nominals and add-ons o Maturity dates o Liquidity and mobilization features (e.g. pledging) Account opening and KYC requirements Presentation of features in mobile menu Call center Tariff structure Branding and marketing FSD Kenya is conducting a market research project

13 Treasury Mobile Direct Project 13 Project Steering Committee MOF, CBK, CMA, CDSC, FSD Kenya and MNOs Pilot project decisions taken and under implementation: - CBK assessing CDSC s service proposal - WB providing advice on design, institutional and technical implementation PROJECT PROGRESS WB in coordination with FSD Kenya: market survey, product testing, marketing strategy for unbanked investors (phase II) CBK/CDSC key role to (with WB support): - Upgrade existing software for retail custodial services - Validate MNOs software to channel investments -Interface with MNOs - KYC compliance 18/06/2012

14 Thank you! Questions? Comments?

15 ANNEX: Pilot Phase Description. Objective: Test the robustness of the operational architecture using mobile phones. ITEM FEATURES IN PILOT PHASE Nominal Amount Kes 100,000 (Current exchange rate USD/KES ) Cap on Investment Placement Mechanism T-bill Tenors Yield Settlement Cycle T + 0 Settlement Bank Maturity Payment Account Opening Where does client Custody Information reside? Kes 20 Million On Tap Basis, from Thursday and to Wednesday 2pm the following week after the weekly auctions. 91-Day, 182-Day, 364-Day. Each issue will stop being placed when a new issue for that particular maturity is auctioned. Weighted average of previous auction for the remaining maturity of the T-bill. CBK will provide the dirty settlement amount on a daily basis. Chosen by CDSC (Appointed Custodian)to settle through swift on CBK account If under 140,000 ksh to mobile account. If above 140,000 ksh to bank account. New clients defined as those that do not have a bank account associated to their Mobile money account. MNO will follow KYC requirements established by CDSC following CMA s rules. Existing clients defined as those that have a bank account associated to their Mobile money account. MNOs may upload client accounts in CDSC. At CDSC data base At the MNO data base Regular reconciliation processes will be required.