The ongoing efforts to democratize trading in government securities are a welcome move. It is something I have always called for. The elitism that surrounded the trading in these assets never made sense. In a country where digital finance is highly advanced, anyone with a mobile phone should be able to participate in buying or selling government securities.
The launch of Dhow CSD will enable Kenyans of all walks of life to lend money to the government and benefit from the high-interest rates on offer without any need for intermediaries. The registration process has also been digitized. It will now take minutes to open a CDS account with CBK instead of the manual process, which took weeks.
Some people have been asking me whether this will adversely affect banks’ liquidity. When you lend money to the government, it will be immediately used to buy goods and services. Thus, the money will quickly return to circulation.
So, the overall liquidity in the banking sector wouldn’t be affected. Maybe challenges could arise if the retail uptake were to be massive, leaving some small banks gasping for breath due to liquidity squeeze. This could result in further consolidation in the sector.
Credits: Ephraim Njega