Last Updated:

How to Invest in Government Securities in Kenya

Vincent Nyoike
Vincent Nyoike Investment

Investing in government securities is becoming a great deal for investors in Kenya. There are several platforms that you can use to buy treasury bonds and bills. Learning how to buy and invest in government securities is important for any investor to make returns. You can invest in government securities in the short term, medium-term or long term. This is what you need to know. 

Read also: How to invest in the Kenyan stock market. 

Types of Government Securities in Kenya

There are two types of government securities that you can invest in in Kenya. They are Treasury bills (T-Bills) and Treasury bonds (T-Bonds). An investor who buys a bond or a bill is giving a loan to the government. The good thing about investing in government securities is that they are secure.  

1. Treasury Bills (T-Bills) 

Treasury bills are usually short term investment and you can expect returns after a short period. They are secure, readily available and attractive. Their maturity date range between 91 days, 182 days and 364 days. Treasury bills have competitive returns of between 8% and 12%.

Treasury bills are auctioned every week and they are sold at a discount. An individual or corporate entity can invest in treasury bills. If you have a bank account with a commercial bank in Kenya, you can invest in treasury bills directly through the Central Bank. This way, you can avoid additional fees.

Read also: Sources of passive income. 

How to Buy Treasury Bills

If you want to invest in treasury bills in Kenya, follow these steps.

Open a CDS account. To open a CDS account, you need to have a bank account with a Kenyan commercial bank. A CDS account can be opened by individuals and corporate. You need to collect a mandate card from the Central Bank or its branches and fill it in blocks.

Select an investment option. Treasury bills have a maturity date of 91 days, 182 days and 364 days. As such, you need to choose a maturity date. You also need to select a face value. A face value is an amount you will receive at the end of the maturity date. The minimum face value you can purchase is Ksh 100,000. You can only invest in treasury bills in the denominations of Ksh 50,000. The initial investment is usually less than the face value.

Fill in and submit an application form. You need to fill in an application form regarding the treasury bills you want to buy, issue number, maturity date, your details like name, phone number and CDS account number. The investor then needs to select the rate, which can be interest/competitive rate or non-competitive/average rate.

Receive auction results. Once you have applied for a treasury bill, you need to visit the Central Bank or its branches to determine if your application was successful. It will also help you to know what you owe for a treasury bill.

Make a payment. You need to make payment for your treasury bill within the stipulated period. Failure to make the payment can make you get barred from future investment in government securities.

Treasury bill matures. After the the maturity date, the face value of the treasury bill will be deposited into your CDS account. You can opt to roll over the securities in the next issue. To do so, you need to fill an application.

2. Treasury Bonds

Treasury bonds are medium and long term investments in government securities that pay interest rates every six months. Their maturity period is between 1 year and 30 years. They are secure and are auctioned every month.

The National Treasury offers different types of treasury bonds. For instance, there is an infrastructural bond that is tax-free and attractive to investors. Both individuals and entities can invest in treasury bonds. If you have a bank account with a commercial bank, you can invest in treasury bonds directly with the Central Bank to avoid additional charges.

Read also: Real estate properties to invest in. 

How to Purchase Treasury Bonds 

If you want to invest in treasury bonds in Kenya, follow these simple steps.

Open a CDS account. The first step to start investing in treasury bonds is opening a CDS account. You must have a bank account with a commercial bank. An individual or an entity can open a CDS account. You will need to collect a mandate card from the Central Bank or its branches and fill it with block letters.

Decide how you want to invest. You need to decide for how long you want to invest in treasury bonds. The maturity period is between 1 year and 30 years. You also need to select the type of bond you want to invest in. They include:

  • Fixed coupon treasury bonds. Their interest rates do not change over the bond's lifetime.
  • Infrastructure bond. They are meant for infrastructural projects and they are usually tax-free. They have the highest returns.
  • Zero-coupon bonds. They are sold at a discount and are like treasury bills. They are issued after a short time.

Complete and submit an application form. You need to fill a form indicating the type of bond you want to invest in, duration, issue number, face value, your names and contact details and CDS account number. You also need to select a coupon rate, either interest/competitive rate or non-competitive/average rate. 

Get auction results. Those who applied for treasury bonds need to visit the Central Bank or its branches to determine if their application was successful. They will be notified on how much they need to pay for treasury bonds. Treasury bonds are issued in the amount investors applied for, but the Central Bank can issue bonds in lower amounts. 

Payment. You need to make a payment for the amount owed for treasury bonds. You can make payment using cash or banker's cheque.

Maturity of the Treasury bond. Payment for treasury bonds is made after the maturity date. Interests are paid semi-annually. You can rollover your investment in the forth-coming issue by filling an application form.

Accessing Funds before Maturity Date

You can redeem the money you invested in government securities before the maturity date. The Central bank will repurchase the securities but at low rates to discourage investors from redeeming funds before maturity. You can also transfer both types of securities to other parties.

M-Akiba

M-Akiba is an investment platform that was formed through the collaboration of Central Deposit Settlement Corporation (CDSC), Nairobi Stock Exchange (NSE) and mobile network operators. M-Akiba offers treasury bonds at a fixed interest rate of 10% per year. Through M-Akiba, you can invest in government securities with as low as Ksh 3,000.

Final Word

You can invest in government securities while in Kenya or abroad. You only need to have a bank account with a Kenyan commercial bank. Treasury bills and bonds are excellent sources of passive income and they provide great investment opportunities.