Mortgage financier KMRC gets nod to float US$92.7m bond

KENYA – Financial services firm Kenya Mortgage Refinance Company (KMRC) has received the green light from the Capital Markets Authority of Kenya to float Sh10.5 billion (US$92.7 million) Medium-Term Note.

The state-owned mortgage financier plans to issue the private bond in several tranches, starting with one for Sh1.4 billion (US$12.4 million) which will be disbursed to participating primary mortgage lenders (PMLs), for onward lending to mortgagers.

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 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.

The bond comes on the back of the Sh3.9 billion (US$34.4 million) Medium Term Note program 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.

According to CMA CEO Chief Wyckliffe Shamiah,  KMRC’s bond is a major milestone that positions the capital markets as a source of funding to support productive economic activities such as the delivery of affordable housing.

''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 houses units in the market are also relatively expensive''

He said there is improved issuer and investor confidence in the bond market with the recent oversubscription of 245 percent in the East Africa Breweries Limited medium-term notes listed at the Nairobi Securities Exchange (NSE) in November 2021. 

CMA approved an issuance to raise Ksh11 billion (US$97.1 million), but applications were received for nearly Sh38 billion (US$335.4 million).

Other private bonds issued last year include the Centum Investments Company Plc Sh4 billion (US$35.3 million) medium-term note, and the Sh8 billion (US$70.6 million) multi-currency Family Bank medium-term note which recorded an oversubscription of 147 percent.

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

KMRC was established two years ago to support the Affordable Housing Pillar of the Government’s Big Four Agenda and 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. 

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