Treasury’s 2022 Infrastructure Bond Now Open – Invest with Ndovu Today and Earn More

If you are an investor and are looking to build up a well-diversified portfolio, experts will mostly advise you to include both stocks and bonds in your investments. And while stocks will offer you a good potential for capital appreciation, bonds will provide a consistent stream of investment income, and it significantly lowers the overall risks in your portfolio.

Most investments depend on what the economy does, and diversifying your portfolio is a good way to remain afloat. For example, when interest rates fall, shares are likely to drop, but bond prices will increase – and therein lies why it is a good investment.

But what exactly are bonds, and how do they work?

What Are Bonds?

In a nutshell, bonds are debt securities issued by governments or large corporations as a means of raising funds. Investors buy these bonds by putting an upfront amount as an initial investment (principal). When the bond matures (maturity date), the investors are paid back their principal alongside a fixed, periodic interest payment (coupon) from the entity that issued the bond, also known as the issuer.

Good examples of such an investment are government bonds, which are often issued to raise funds for budgeted national expenditure or the repayment of the national debt.

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When you purchase these bonds, you are lending the government an agreed amount – usually 100,000 shillings in Kenya – for an agreed period.

In return, the government pays you back a set level of interest at regular periods, making bonds a fixed-income asset.

At the maturity date, you get your original investment back. However, maturity dates differ depending on the bond. The maturity date for government bonds can range from one year to 30 years, and although there are many different types of Treasury bonds, their basic operations are similar.

How Government Infrastructure Bonds Work

Investing in government bonds, treasury bonds, for instance, requires one to have a CDS account with the central bank. A CDS account is an account that records the ownership of your securities (bonds/bills in this case) and any of your transaction history whenever you buy or sell them.

The government of Kenya avails different types of bonds:

• Fixed coupon Treasury bonds, which means that the interest rate associated with the bond will not change over the bond’s life, so semiannual interest payments from these bonds will stay the same.
• Infrastructure bonds are used by the government for specified infrastructure projects. These bonds typically see a lot of market interest because returns from them are tax-exempt.
• Zero-coupon bonds are similar to Treasury bills, in that they are sold at a discount and do not have interest payments. They are also typically issued for a short time.

If, for example, you invest in a 10-year treasury bond with a principal amount of Ksh. 100,000 shillings and a coupon rate of 12%, you will earn KShs 12,000 every year – or Ksh. 6000 every 6 months. But this amount is subject to withholding tax. If it is charged 15% withholding tax, you will earn Ksh. 10,800 every year.

On the other hand, if you invest in 10-year infrastructure bonds with a principal amount of Ksh. 100,000, and a coupon rate of 12%, you will earn Ksh. 12,000 every year. Your interest will not be subject to Withholding tax and hence you will receive your whole amount.

What’s the Catch?

As noted earlier, government bonds can have a maturity of up to 30 years, which is a long time to wait for an investor who needs their money back. This is where Ndovu comes in.

Ndovu is an online platform owned and run by Waanzilishi Capital Limited, an investment adviser licensed by the Capital Markets Authority of Kenya.

Through Ndovu, you can sell your long-term bonds and easily get your money back with ease. What’s more interesting is that you can invest with them and enjoy a range of other benefits such as low principal amounts and high-interest rates that are completely tax-free.

The Government of Kenya Infrastructure Bond 2022

Currently, the government has issued a new infrastructure bond – the IFB1/2022/19 where it is looking to raise Ksh. 75 Billion for funding of infrastructure projects in the financial year 2021/2022 budget estimates. The bond will mature after 19 years and the coupon rate is market-determined.

According to Ndovu estimates, the coupon rate is 12.6% per year. The issue closes on Friday, 11 Feb 2022, at 9 PM.

Why This is a Perfect Opportunity for You

For one, the bond is tax-exempt, which means it offers good returns over the years. But it gets better with Ndovu.

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If you invest through the government, you will need upfront cash of Ksh.100,000 and a CDS account with the central bank, which can take a while to open

But what if you don’t have a CDS account and you don’t have Ksh.100,000? Simple, you invest with Ndovu. Why?

• You don’t need to have a CDS account with the central bank to invest with Ndovu
• You can invest with as little as Ksh.50,000!
• Your return is tax-free!

How Does this Compare to Holding Money in the Bank?

Here is a hypothetical scenario. If you have a principal amount of 100,000, for instance, and you save it in a bank, with a rate of 3% and a subject tax of 15%, by the time it matures (say after 5 years), you will earn Ksh.113,538.

If, however, you choose to invest the same amount with Ndovu, at a coupon rate of 12.6%, it will be tax-exempt and at the maturity date (5 years), you will earn Ksh.181,810!

Now, which one sounds like a better investment? You earn way more by investing with Ndovu, not to mention that you can sell the bond anytime you want.

How to Invest in Bonds with Ndovu

1. Visit www.ndovu.co
2. On the opened tab, click on “Invest Now”
3. You will be led to a sign-in page. If you don’t already have an account with Ndovu, you can create one by clicking on “Sign Up”
4. After signing in, a welcome page will pop up. Click on the “Government of Kenya Infrastructure Bond”
5. Click “Invest Now”
6. Enter the amount you wish to invest in Kenyan Shillings, in this case, Ksh. 50,000 (the minimum Ndovu allows you to invest) or Ksh. 100,000 (you can only invest in multiples of 50,000 i.e you cannot input 60,000).
7. Click “Next” and choose your method of payment – the available options include M-Pesa, Bank Transfer, Kenyan Credit Card, and International Credit Card. The last two attract transaction fees.
8. Click “Pay Now”, follow the instructions,  check the “I have transferred the money” box, then click “Confirm Payment”.
9. You will get a message congratulating you on investing in government bonds.

Here is a video showing you the step-by-step process on how to invest in the government’s infrastructure bond, conveniently, and affordably.

That’s it! You have invested in the 2022 government infrastructure bonds. Now that you understand how it all works, let’s get investing!

Sign up here to get started.