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State mortgage financier gets nod to raise Sh10.5b

By Patrick Alushula - Jan 13th 2022

From left: Kenya Mortgage Finance Company (KMRC) Head of Risk and Compliance Florah Muthaura, IFC Business Development Lead for Financial Institutions East Africa Jes Chonzi, KMRC CEO Johnstone Oltetia, IFC Manager for Sub-Saharan Africa Gokhan Kont, KMRC Head of Legal Services Elisha Nyikuli and Head of Credit Geofrey Mwaura during a business meeting to discuss partnership opportunities in the Affordable Housing Programme last year. [File, Standard]

The Kenya Mortgage Refinance Company (KMRC) has received regulatory approval from Capital Markets Authority (CMA) to raise Sh10.5 billion through medium term-debt notes.

The approval was granted the approval yesterday, allowing KMRC to raise the money in several tranches starting with Sh1.4 billion, as it seeks to lift Kenya’s mortgage uptake.

KMRC Chief Executive Johnstone Oltetia said the medium-term note will help the firm build profile as a regular issuer of bonds as it seeks to diversify its source of funding.

“KMRC seeks to build its profile as a regular issuer of bonds in the Kenyan capital market as we work to raise more long-term capital, thereby re-financing more home loans and making them affordable and accessible for Kenyans,” said Oltetia.

This is the debut medium-term note programme for KMRC which started its operations in 2019.

It has been relying on concessional loans from the World Bank, African Development Bank and continental Development Finance Institution to fund its operations.

Commercial banks

KMRC is expected to lift the uptake of domestic residential mortgages by offering long-term loans to primary mortgage lenders including commercial banks, microfinance banks and savings and credit co-operatives.

Central Bank of Kenya (CBK) data showed the value of mortgage loans outstanding was Sh232.7 billion in December 2020.

This compares to Sh237.7 billion in the previous year, cut by repayments and lower new loans in the Covid-19 environment.

Banks that are participating in KMRC and are also shareholders in the company include KCB, Cooperative Bank, Diamond Trust Bank, Housing Finance Group, NCBA Bank, Absa Bank Kenya, Stanbic Bank Kenya and Credit Bank.

Kenya Women Microfinance Bank is the sole microfinance institution while Saccos include Kenya Police Sacco, Mwalimu National Sacco, Safaricom Sacco, Ukulima, Bingwa, Imarisha, Unaitas, Imarika, Tower, Stima and Harambee.

Asset maturity

KMRC hopes to resolve the current asset maturity mismatch that has largely contributed to the high-interest rates on home loans in Kenya.

The company will be raising long-term funds and then on-lending to participating financial institutions.

The participating financial institutions are expected to match the maturities of the long-term credit from KMRC, with the home loans they offer to borrowers, resulting in lower interest rates and driving up uptake.

The bond issue follows KMRC’s receipt of an issuer rating of AA- from GCR, a rating agency, in August last year.

CBK in July last year also lowered the capital required by banks to back mortgages, effectively giving them additional money for lending towards home-ownership.

The regulator had prior to that required banks to maintain capital that is at least half the value of the mortgage book but cut this to 35 per cent.

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