Government-backed mortgage firm KMRC eyes US$90m bond to fund low-cost housing

KENYAFinancial services company  Kenya Mortgage Refinancing Company (KMRC) plans to raise KSh10 billion (US$90 million) from investors at the capital markets through a bond by December 2021 to finance low-cost housing, reports Business Daily.

The proceeds from the bond issue will go to banks and SACCOs for onward lending to homeowners at an annual interest of five percent.

“We are looking at a medium-term note of about Sh10 billion (US$90 million)” said KMRC Chief Executive Officer Johnstone Oltetia told the Business Daily.

“We will issue tranches overtime to raise the money that we need.”

The mortgage refinancing firm, which got a permit to formally start operations in September 2020 said it is awaiting approvals from the Capital Markets Authority to roll out the bond plan.

“We’ve not got approvals from the regulator. We will provide more information as soon as we receive approvals,” he said.

The KMRC has raised nearly KSh40 billion (US$360 million) including KSh2.2 billion (US$19.8 million) in equity capital, KSh25 billion (US$225 million) committed by the World Bank and KSh10 billion (US$90 million) from African Development Bank (AfDB).

The State agency offers funds to banks and SACCOs for onward lending at an annual interest of five percent.

The recipient lenders are, in turn, expected to lend out the cash at a single-digit interest rate — lower than the average market rate of 12.06 percent as of May 2021.

It offers loans to workers earning less than KSh150,000 (US$1,350) monthly and whom banks had locked out from the mortgage market.

Prospective home buyers, who qualify for home loans under the KMRC framework, access up to KSh4 million (US$36,000) for property in Nairobi metropolitan area and KSh3 million (US$26,000) elsewhere, with a repayment period of up to 20 years.

KCB Group — the largest mortgage financier by market size — received more than three-quarters of the KSh2.748 billion (US$24.7 million) issued in the year ended June 2021, which covered about 1,400 mortgages that met conditions on size, interest and tenure under the KMRC disbursement criteria.

Other beneficiaries were HF Group at KSh515 million (US$4.6 million), Stima Sacco at Sh69million (US$621,000) and Tower Sacco at KSh30 million (US$270,000).

The average size for the 1,400 home loans refinanced by KMRC last fiscal year is KSh2.6 million (US$23391) — more than three times smaller than the banking industry’s average mortgage size of KSh8.6 million (US$77,372) in 2020.

Mortgage firms have shied away from writing housing loans mainly due to a lack of long-term deposits in the industry to match them.

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