The Kenya Mortgage Refinance Company (KMRC) is planning to return to the bond market to issue the second tranche of its Sh10.5 billion medium-term note to raise more funds for the disbursement of cheaper housing loans.
In a progress assessment report, the African Development Bank (AfDB), which has invested Sh15.8 billion in the company, said the mortgage financier is evaluating the market conditions to see if they will allow the issuance of their second bond this or next year.
“During 2023, the macroeconomic condition has been challenging for bond issuance in part due to high interest rate, and inflation environment,” the bank said.
“Hence, KMRC has not been able to issue a follow-up tranche under the MTN program and continues to monitor the market conditions for possible bond issuance in 2024-2025.”
KMRC in February 2022 raised more than Sh1.4 billion from its first bond issuance as part of the Sh10.5 billion MTN that was to be raised from the domestic market within four years.
The initial bond diversifies the institution’s funding sources, ending its reliance on foreign development financial institutions and concessional lenders, which had been the primary source of funding for its refinancing activities since its establishment in 2018.
The money raised from the bond and other concessional lenders, including the World Bank, has so far enabled KMRC to refinance 3,142 mortgages valued at Sh9.6 billion as of September last year, AfDB said.
It is working with 12 primary mortgage lenders, which are also shareholders, allowing people to access mortgages at a rate of about 9.5 percent, less than the country’s average mortgage rate of 12.3 percent.
However, if the difficult conditions, characterised by high inflation and interest rates, persist, KMRC may not be able to issue the second bond this year or in 2025, impacting their ability to continue issuing affordable housing loans in the country, AfDB warned.
