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Gulf African Bank invests Sh500m in infrastructure bond

CARTOON
By | March 19th 2009

By Jackson Okoth

Gulf African Bank is on the list of subscribers to the recently floated Sh18.5 billion infrastructure bond.

The bank has invested Sh500 million in the instrument and will be paid a return of 12.5 per cent by the Government upon maturity of the bond.

" The Government is free to utilize these funds in a project of its choice. We shall share the revenues from these projects and anything above the coupon rate will be returned to the Government," Mohammed Haris, Head of Corporate Banking, Structured Finance and Product Development told The Standard.

The unrestricted Mudarabah financing agreement between the bank and Central Bank of Kenya allows Gulf African Bank to give money to the Government for investing in a commercial enterprise. While the management and work is the responsibility of the Government, profit generated is shared in a predetermined ratio.

Needed funds

"We are happy to be part of the process that will help the government raise the urgently needed funds, which will ensure sustainable development for the future generations as well as help the Government achieve the vision 2030," said Gulf African Bank CEO Najmul Hassan during the announcement of the partnership. Under Mudarabah financing, Gulf African Bank has no right to participate in the management although they have authority to oversee the activities.

Liability is limited to the level of investment unless Gulf Africa Bank allows the Government to incur debt on its behalf.

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CBK is already toying with the idea of introducing shar’iah compliant bonds and Treasury Bills.

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