KMRC's Sh3b green bond clears the way for single-digit mortgages

L-R: Johnstone Oltetia, CEO and Managing Director, KMRC; John Mbadi, CS National Treasury; Haron Sirima, Chairman, KMRC Board; and John Gachora, Group Managing Director, NCBA, during KMRC’s sustainability bond bell-ringing at the NSE. [Wilberforce Okwiri, Standard]

The Kenya Mortgage Refinance Company (KMRC) officially listed its highly anticipated Sh3 billion sustainability bond on the Nairobi Securities Exchange (NSE) fixed income market, marking a major milestone for the capital markets.

The transaction is a return to the market for the state-backed mortgage refinancer after a four-year hiatus.

The bond issue attracted Sh9.38 billion in investor bids, representing a 312.8 per cent oversubscription.

Adhering strictly to its capital targets, KMRC accepted the exact target of Sh3 billion, leaving Sh6.38 billion in unallocated bids on the table.

The listing represents Tranche 2 of KMRC’s ongoing Sh10.5 billion Medium-Term Note (MTN) programme.

The company deferred its capital markets plans in 2024 due to aggressive monetary tightening that threatened to push its funding costs above levels compatible with its low-interest mandate.

However, a pivot by the Central Bank of Kenya, which cut its benchmark lending rate by 250 basis points to 8.75 per cent, opened up an attractive fundraising window.

KMRC Chief Executive Johnstone Oltetia described the bond as a vote of confidence from investors.

“Today’s listing affirms the role of capital markets in making homeownership more accessible, affordable, and sustainable. The investor response demonstrates confidence in KMRC’s mandate of promoting affordable home ownership while deepening Kenya’s debt capital markets,” he said.

Unlike generic corporate debt, 100 per cent of the net proceeds from this sustainability note are legally ring-fenced under KMRC’s March 2026 Sustainable Finance Framework.

The capital will be utilised exclusively to refinance eligible green home loans targeting resource-efficient residential buildings featuring energy- and water-saving designs, as well as social home loans focused on lower-income segments.

“This is a sustainability bond that cuts into green as well as the social. At least 30 per cent of what we are raising goes into green, and the difference is part of the social aspect that we are covering. And the social we are talking about is supporting people at the lower end who are disproportionately affected. They never get mortgages when they need them because they are considered higher risk by financial institutions. But the blending nature of this transaction helps push financing down to make it a lot more affordable,” explained Oltetia.

The new debt paper features a fixed coupon rate of 12.2 per cent per annum, payable semi-annually. Structured as an eight-year amortising note with a weighted average life of 5.1 years, the bond avoids the standard bullet repayment risk at maturity. 

Instead, it pays back principal gradually to investors on an annual basis, with the first redemption slated for November 2026. KMRC is actively pursuing tax-exempt status from the Kenya Revenue Authority (KRA); had it been denied, the coupon was structurally engineered to scale up to 12.87% to shield investor yields.

NCBA Investment Bank acted as the Lead Arranger and Placing Agent for the transaction, alongside financial advisor Cygnum Capital.

NCBA spearheaded the pricing mechanism, structural engineering, and marketing that mobilised the Sh9.38 billion in applications.

“The structure and the tax-exempt nature of it were very attractive. In terms of who the investors were, we've seen a wide range. This market is typically driven by institutional investors,” said NCBA Group CEO John Gachora.