Individual investors control more than three-quarters of government bonds trading accounts, revealing the success of the Central Bank of Kenya (CBK)’s improved over-the-counter trading platform dubbed DhowCSD.
The web-based 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.
CBK data shows that the individual investors held 73,585 accounts or 79.4 percent of the 92,677 total DhowCSD accounts open as of September 6, 2024.
“Investors are now buying government securities from both primary and secondary markets anytime, anywhere. This has transformed the market through operational efficiency and expansion of digital access; market deepening for broader financial inclusion; and contributed to improved monetary policy operations,” CBK stated.
Private companies hold the second highest proportion of DhowCSD accounts at 6.7 percent or 6,209 beating other investors to third place with a 6.5 percent share or 6,024 accounts.
Commercial banks, meanwhile have a lower share of DhowCSD accounts at 2.5 percent or 2,317 accounts.
Money market funds (MMFs) which represent the most popular type of collective investment schemes (CISs) held a 2.2 percent share of the bond trading accounts or a respective 2,039 accounts.
The balance of 1.3 percent of accounts or 1,205 accounts were held by non-profit organisations including churches.
The rise in the number of DhowCSD accounts has coincided with the increased holding of government domestic debt by other investors, a class encompassing individuals and households.
The share of holdings of government domestic debt by other investors has risen from just 7.13 percent as of the end of June 2023 to 13.1 percent as of October 16, 2024.
DhowCSD has capabilities across investor onboarding, the primary and secondary bonds market, and portfolio holdings.
In the primary market, the new CSD platform allows the online placement of bids, cancellation of bids, online auction results access, and the rollover of investments.
DhowCSD is interfaced with other market infrastructure including the Kenya Revenue Authority (KRA) i-tax allowing easy tax remittances, and the NSE trading platform for secondary market trading.
The system is also connected to the new debt recording and management system-CS Meridian at the National Treasury for debt recording and management and banking system for cash settlement.
The rise of DhowCSD has however caused unease among banks amid an exodus of clients.
The banks said that the switch has resulted in competition for deposits, raising their cost of funds, and are now asking the State to intervene to manage the loss of their intermediary role.
Buyers of Treasury bills and bonds previously bought T-bills and bonds through banks before the CBK introduced the direct-window option.
