The Kenya Mortgage Refinance Company (KMRC) has for a second consecutive year deferred plans to issue another bond, put off by high interest rates on government papers.
The affordable housing financier has been weighing the market for a possible issuance of the second tranche of its Sh10.5 billion medium-term note bond this year but has now ruled it out due to the prevailing market conditions.
“There’s one big reason as to why we’re not able to go to the market even this year. You find the government is going to market at around 18 percent, so it’s very expensive for us to go and raise capital markets funding,” KMRC chief financial officer Nyale Yanga told Business Daily.
It had raised about Sh1.4 billion from the first bond issued in February 2022 and hopes to raise more cash through a second one to finance various projects. Raising money from the capital markets is one of the major conditions that KMRC has to meet to continue accessing concessional funding from the African Development Bank (AfDB) and the World Bank, under two different facilities.
The World Bank currently has a €219 million (Sh30.7 billion at current exchange rate) facility with KMRC since 2020, and expiring in June next year, while AfDB has a €90 million (Sh12.9 billion) facility with the lender, expiring in mid-2026.
World Bank had stipulated in the initial lending agreement that KMRC would need to raise at least $12 million (Sh1.5 billion) from bond issuance, and AfDB required the local lender to raise at least €36 million (Sh5.1 billion) from the capital markets.
As it trails both benchmarks, the cheap home loans lender is exploring other options to raise financing to continue facilitating its refinancing of mortgages in the country.
“KMRC [is] to consider further diversifying funding sources including from development partners and bilateral (concessional funding) from various lenders and investors,” AfDB said in a progress report of its facility with KMRC.
Mr Yanga said that the diversified sources they’re exploring include other concessional lenders such as development finance institutions and an extension of the existing facilities by both the World Bank and AfDB.
So far, AfDB has disbursed about 71 percent of the loan facility to KMRC. As of the end last year, KMRC had total borrowings of Sh20.6 billion, comprising the amounts it has so far accessed from the continental lender and the World Bank.
According to data by AfDB, KMRC has so far approved refinancing 3,306 mortgages valued at about Sh10.6 billion as of March this year, about 98 percent of which has been disbursed.
