The Kenya Mortgage Refinance Company (KMRC) bond has been bond oversubscribed by 480 percent as investors put in Kes8.1 billion worth of bids against a target of raising just Kes1.4 billion.
The bond, which closed to investor bids on Friday, is expected to lease on the Nairobi Securities Exchange (NSE) in March and represents the first tranche of KMRC medium-term notes (MTN) worth Kes10.5 billion.
While announcing the results of the KMRC MTN programme, Capital Markets Authority (CMA) Chief Executive Officer Wyckliffe Shamiah said; ‘’this is a major milestone which positions the capital markets as a source of funding to support productive economic activities such as delivery of affordable housing, which is one of the pillars of the National Big Four Agenda. It affirms the growing issuer and investor confidence in the bond market.”
KMRC says it will use the proceeds for on-lending by extending long-term loans to primary mortgage lenders as it seeks to increase the availability of affordable housing finance in Kenya.
KMRC was set up to provide long-term funds to primary mortgage lenders such as banks, microfinance institutions and Saccos in order to increase the availability and affordability of home loans to Kenyans.
The markets watchdog also approved a Kes3.9 billion Medium Term Note Programme for Urban Housing Renewal Development Limited in December 2021, whose proceeds will be used to support an affordable housing project in Nairobi.
Loans extended to primary mortgage lenders to re-finance mortgage loans are capped at Kes4 million in Nairobi metropolitan area (Nairobi, Kiambu, Machakos and Kajiado) and Kes3 million elsewhere to individual borrowers whose monthly household income is not more than Kes150,000, notes KMRC website.
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 the available home loan products remain largely out of the reach of many Kenyans, while the houses units in the market are also relatively expensive.
In October last year, regional brewer East African Breweries Ltd (EABL) bond was oversubscribed by 245 percent, a situation that Mr Shamiah said underscores the rising investor confidence in Kenya’s bonds market.
For EABL, the CMA approved an issuance to raise Kes11 billion, but the investing public placed nearly Kes38 billion bids.
Mr Shamiah noted that in the last 14 months, CMA has approved the issuance and listing of the Centum Investments Company Plc Kes4 billion medium-term note, the EABL Kes11 billion MTN Programme, which reported a 245 percent oversubscription, and the multicurrency Family Bank medium-term note, which lodged 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.