DEMAND

High investor confidence as KMRC's bond oversubscribed

Investors sent applications worth Sh8.1 billion against Sh1.4 billion issued

In Summary
  • CMA terms the oversubscription as huge investor confidence
  • The authority granted KMRC approval to issue an unsecured Sh10.5 billion MTN Programme in January
Ongoing construction of the Pangani Affordable Housing Programme on January 21, 20222
Ongoing construction of the Pangani Affordable Housing Programme on January 21, 20222
Image: ANDREW KASUKU

The first tranche of the Sh10.5 billion unsecured Medium-Term Note (MTN) issued by Kenya Mortgage Refinance Company (KMRC) has been oversubscribed by 480 per cent.

The state-owned mortgage financier issued Sh1.4 billion mid-last month but received offers worth Sh8.1 billion. The Capital Markets Authority (CMA) has termed the oversubscription as huge investor confidence in private bonds.

“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 Wyckliffe Shamiah said in a statement.

KMRC will use the proceeds for on-lending by extending long-term loans to primary mortgage lenders like Saccos to increase the availability of affordable housing finance in Kenya.

This is expected to boost the growth of home ownership through affordable mortgage rates.

Last month, the authority granted KMRC approval to issue an unsecured Sh10.5 billion MTN Programme in tranches. It will be listed at the Nairobi Securities Exchange (NSE).

It had earlier approved Sh3.9 billion MTN for Urban Housing Renewal Development Limited in December 2021, whose proceeds will support affordable housing in Nairobi.

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,'' KMRC CEO Johnstone 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.

One of the constraints of the growth of housing in Kenya is the financing constraint with total mortgages in Kenya at fewer than 30,000 as mortgages remain out of the reach of many Kenyans, while the houses units in the market are also relatively expensive.

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.

The country has an estimated 200,000 annual shortfall, which is expected to rise by 100,000 every year. 

The country has in recent times demonstrated 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. 

CMA approved an issuance to raise Sh11 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.

''The oversubscription of the KMRC, EABL and Family Bank corporate bond issues by 480, 245 and 147 percent, respectively, indicates enhanced investor confidence and growing liquidity in the market,'' CMA said.