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NAIROBI, Kenya Jan 14- The Capital Markets Authority has given the greenlight for Kenya Mortgage Refinance Company to float a Sh10.5 billion Medium-Term Note.
The state-owned mortgage financier plans to issue the private bond in several tranches, starting with one for Sh1.4 billion which will be disbursed to participating primary mortgage lenders (PMLs), for onward lending to mortgagers.
KMRC did not however specify the date of the first tranche issuance, saying that it is still making preparations such as onboarding transaction advisors.
“The cash raised from the issuance, whose first tranche is Sh1.4 billion, will be disbursed to participating primary mortgage lenders (PMLs), for onward lending to mortgagers. Through this issuance, KMRC seeks to build its profile as a regular issuer of bonds in the Kenyan capital market as we work to raise more long-term capital, thereby refinancing more home loans and making them affordable and accessible for Kenyans.” KMRC Chief Executive Officer Johnstone Oltetia said.
This is the first time KMRC is issuing a Medium-Term Note Programme to raise long-term capital in its quest to reduce mortgage interest rates and lengthen repayment periods.
Affordable mortgage rates are likely to increase the number of Kenyans owning homes.
KMRC’s Bond issuance is also a boost to the corporate bond market, which is now showing signs of recovery following a series of successful issuances by listed brewer EABL , Family Bank, Centum and student housing developer Acorn Holdings.
“This is a major milestone which positions the capital markets as a source of funding to support productive economic activities such as the delivery of affordable housing, which is one of the pillars of the National Big Four Agenda,” CMA Chief Executive Wyckliffe Shamiah said.
He said there is improved issuer and investor confidence in the bond market with the recent oversubscription of 245 per cent in the EABL medium-term notes listed at the Nairobi Securities Exchange (NSE) in November last year.
KMRC has previously exclusively relied on concessional loans from the World Bank and African Development Bank (AfDB), the continental Development Finance Institution (DFI), for capital.
“This is an important milestone for KMRC as it aims to blend and diversify its sources of funds. One of the constraints of the growth of housing in Kenya is the financing constraint with total mortgages in Kenya at under 30,000 as mortgages remain out of the reach of many Kenyans, while the house units in the market are also relatively expensive,” Oltetia said in a statement.
He added that the firm is raising more long-term capital, thereby re-financing more home loans and making them affordable and accessible for Kenyans.
The bond issue by KMRC comes on the back of the Sh3.9 billion Medium Term Note programme for Urban Housing Renewal Development Limited approved by CMA in December 2021, whose proceeds will be used to support an affordable housing project in Nairobi.
CMA approved an issuance to raise Ksh11 billion, but applications were received for nearly Sh38 billion.
Other private bonds issued last year include the Centum Investments Company Plc Sh4 billion medium-term note, and the Sh8 billion multi-currency Family Bank medium-term note which recorded an oversubscription of 147 percent.
KMRC was established two years ago to support the Affordable Housing Pillar of the Government’s Big Four Agenda. It received an operational license from the Central Bank of Kenya (CBK) on September 18, 2020.
Kenya aims to provide 500,000 new affordable housing units by the end of this year as one of President Uhuru Kenyatta’s top four priorities.
Data by the World Bank reveals that Kenya has an estimated 200,000 annual housing deficit, which is expected to rise by 100,000 every year.
The KMRC bond will be listed at the Nairobi Securities Exchange (NSE).