INVESTMENT

CMA commits to issue Kenya's first diaspora bond

It intended to unveil the bond earlier in the year but the plan was curtailed by the outbreak of Covid-19.

In Summary
  • The country is mulling a green diaspora infrastructure by end of this financial year.
  • Last year, Kenyans abroad sent Sh280 billion
CMA policy and strategy director Luke Ombara during a roundtable briefing in Nairobi on November 14,2017. Photo/Enos Teche.
CMA policy and strategy director Luke Ombara during a roundtable briefing in Nairobi on November 14,2017. Photo/Enos Teche.

Kenya plans to issue its first diaspora bond for green infrastructure projects this financial year, a move that will see the country end a decade long procrastination.

Speaking while releasing Q3 Capital Markets Soundness Report last week, Luke Ombara, director, regulatory policy and strategy at the Capital Markets Authority (CMA) said plans to raise debt from Kenyans living abroad are advanced.

"The diaspora has indicated that they would like to be part of the economic recovery of Kenya through financing long term projects in exchange for profit," Ombara said.

 

However, the officer did not give further details, saying a study will be done to determine the investor appetite.

''This is important to avoid under subscription of the debt instrument,’’ Ombara said.

CMA in consultation with other stakeholders is ongoing to decide on whether the issue will be dollar-denominated or in Kenya shilling.

The country has anticipated raising debt from diaspora dwellers for almost 10 years now, with the Central Bank of Kenya (CBK) indicating it planned to raise $600 million in 2011 but this did not happen. 

CBK intended to raise the amount to build up a hard currency reserve to support the shilling, which had dropped by 10 per cent against the US dollar.

The World Bank estimates that Kenyans abroad hold up to $1.8 billion in checking accounts earning zero interest while remittances back home is largely for consumption.

Ombara said the diaspora green bond will be attractive to the group, as they will earn interest similar to those of domestic treasury bonds.

He said measures to make the issuance of infrastructure and green bonds attractive through appropriate tax incentives are in place with a committee established to identify public projects that qualify for green finance.

The capital markets regulator intended to unveil the bond earlier in the year but the plan was curtailed by the outbreak of Covid-19.

The government’s desire to tap into funds raised by its citizens living abroad is perhaps pushed by the surging number in diaspora remittances and demand for cheaper debt.

Last year, Kenyans abroad sent Sh280 billion which was a 3.7 percent rise compared to Sh269.7 billion dispatched in 2018.

In September, CMA granted a fund manager’s license to African Diaspora Asset Managers Limited, demonstrating the government’s urge to tap into idle diaspora funds.

The fund manager offers financial products and services in asset management, unit trusts, financial investment management, financial planning, wealth management, discretionary portfolio management, property development and private equity.