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State mortgage firm eyes Sh10bn bond to fund low-cost homes

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KMRC chief executive Johnstone Oltetia. PHOTO | DIANA NGILA | NMG

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Summary

  • The Kenya Mortgage Refinancing Company (KMRC) plans to raise Sh10 billion from investors at the capital markets through a bond by December to finance low-cost housing.
  • The proceeds from the bond issue will go to banks and saccos for onward lending to homeowners at an annual interest of five percent.

The Kenya Mortgage Refinancing Company (KMRC) plans to raise Sh10 billion from investors at the capital markets through a bond by December to finance low-cost housing.

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,” said KMRC chief executive Johnstone Oltetia told the Business Daily.

“We will issue tranches over time 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 Sh40 billion including Sh2.2 billion in equity capital, Sh25 billion committed by the World Bank and Sh10 billion from African Development Bank.

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 Sh150,000 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 Sh4 million for property in Nairobi metropolitan area and Sh3 million 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 Sh2.748 billion 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 (Sh515 million), Stima Sacco (Sh69million) and Tower Sacco (Sh30 million).

The average size for the 1,400 home loans refinanced by KMRC last fiscal year is Sh2.6 million — more than three times smaller than the banking industry’s average mortgage size of Sh8.6 million last year.

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