The Capital Markets Authority has published rules to facilitate the issuance of Asset-Backed Securities.
The policy guideline note, approved by the CMA board in April 2017, is underpinned by the principle-based approach that allows the regulator to fast-track the introduction of new products and services in capital markets.
“The issue of the PGNs on diverse products is expected to accelerate the increase of the scope of available capital market products in Kenya’s capital markets, in close consultation with industry stakeholders,” CMA chief executive Paul Muthaura said. Asset-backed securities are securities backed by future cash flow generating assets such as road, water and other infrastructure levies, mortgage loans, credit card receivables, automobile loans and leases, education loan receivables, equipment loans and health care receivables, whose cash flows are used to repay both the principal and interest on the securities issued to purchase those assets.
“This is expected to facilitate ABS transactions to be brought forward based on a clear regulatory regime on the legal structure of special purpose vehicles among other key refinements,’’ Muthaura said. The publication by CMA paves the way for the rollout of ABS in Kenya, which is expected to support investment in capital intensive infrastructure assets as well as cater for the repackaging of future cash flows to raise capital.
