NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Kenyan banks are faced with a new revenue headache following the introduction of mobile-based infrastructure bond M-Akiba.

The banks, which are already reeling from the effects of interest rates capping, now face huge competition on deposits from the bond, which gives 10 per cent interest a year, above the capped 7 per cent that banks are offering.

Also, M-Akiba incorporated the use of the new mobile banking channel (PesaLink) that banks launched recently, allowing lifting of deposits from accounts into the new savings facility.

The bond also comes at a time when banks have started keeping a tight lid on lending, as well as discouraging interest-earning deposits, in the wake of the new law that came into force in September 2016.