The government has set its eyes on the fast rising proceeds from diaspora as it sought to maximise returns from its newly floated Sh20 billion infrastructure bond.
The Central Bank of Kenya said Tuesday Kenyans in the diaspora would be allowed to participate in tap sales of the bond after the auction date next month. “The bond may be available for tap sales to retail local and Kenyan diaspora investors after the auction and offer amounts will be re-priced at the successful weighted average rate of the main auction adjusted for the remaining time to maturity. The tap sale period will close on February 3, 2012,” the bank said.
A tap sale refers to a procedure that allows borrowers to sell bonds or other short-term debt instruments from past issues at their original face value, maturity and coupon rate.
“This is good for investor because you only buy what you can afford within a specific window provided and wait to buy again when the offer comes up ,” Fred Mweni of Tsavo Securities.
“In this case the government is not rigid on the Sh20 billion indicated and would be ready to take up whatever investors offer during the set sale period.”
Remittances from the diaspora are currently the fourth-largest source of foreign exchange after revenue from tea, horticulture and tourism, hence the special interest by the government.
Kenyans living abroad mainly send money home to help their families and for investment in various sectors, including real estate. In July alone remittances to Kenya jumped by 44 per cent from the same month a year ago to $72.8 million, up from $71.9 million in June. CBK said proceeds from the bond would go towards partial funding of specific infrastructure projects in a raft of sectors including roads (Sh7.36 billion), energy (Sh 18.78 billion) and water (Sh9.71 billion).
According to a prospectus released yesterday investors would be offered a minimum Sh 100,000 and in multiples of Sh50,000 thereafter over a tenure of 12 years.
The coupon rate for the bond, to be sold between August 16 and September 27, has been set at 12 per cent payable semi-annually. The government said Kenyan investor both at home and abroad would be allowed to participate as individuals or incorporated companies that are wholly owned by Kenyan citizens.
“The Kenyan diaspora investors will need to provide proof of their citizenship. Investors can participate directly or through commercial banks resident in Kenya and/or other institutions licensed by the Capital Market Authority of Kenya to trade in government securities,” CBK said.
All payments made in foreign currency would be converted at the shilling mean exchange rate to the other currency. The prospectus said each diaspora investor would be subject to a maximum of Sh20 million for individuals and Sh200 million for institutional investors.