Capital Markets

Mortgage firm taps new Sh2.8bn Treasury loan


Kenya Mortgage Refinance Company chief executive Johnstone Oltetia. PHOTO | JEFF ANGOTE | NMG

The Kenya Mortgage Refinance Company (KMRC) made additional drawdowns worth Sh2.8 billion on a National Treasury loan facility in 2021 for onward lending to mortgage lenders, the company has revealed.

The KMRC has an existing Sh18.82 billion credit line that is being on-lent to it by the government from a financing package worth Sh30 billion provided by the World Bank and African Development Bank (AfDB).

The institution expects to make periodic drawdowns on the facility as it receives mortgage refinancing requests from primary mortgage lenders.

It had already drawn down Sh3.7 billion of these funds in the year ended December 2020. It pays interest at 4.5 percent per annum on the facility.

The KMRC in turn offers funds at an annual interest rate of five percent to banks and cooperative societies for onward lending, allowing these institutions to offer cheaper mortgages at stable rates.

“By end of 2021, KMRC had accessed Sh6.5 billion cumulatively from the credit Lines (World Bank and the AfDB) through the National Treasury. Access of funds (drawdowns) is based on the pipeline of portfolio of mortgages,” said the KMRC.

The institution does not take deposits and therefore has to raise resources from debt issuances and concessional funding.

The firm uses the funds to provide mortgage refinancing and technical assistance to eligible participating financial institutions. By last June, it had refinanced 1,400 mortgages valued at Sh2.76 billion from four institutions.

The move to tap additional capital came as the firm widened its backing of mortgage lenders in the second half of 2021. By November, the KMRC was processing Sh6.2 billion worth of loans to cover about 4,000 mortgages from 11 lenders.

The company has also received approval from the Capital Markets Authority (CMA) to float a debut bond which will be listed on the Nairobi Securities Exchange (NSE).

The company will initially look to raise Sh1.4 billion from the medium-term programme which will eventually see it take a total of Sh10.5 billion from the market.

KMRC did not however announce the date of the first tranche issuance, saying that it is still making preparations such as onboarding transaction advisors.

It had also announced earlier in 2020 that it would seek to have the AfDB act as guarantor for its bond issuance, thus riding on the top credit rating of the pan African lender as it continues to build up its credibility among investors.