The Kenya Mortgage Refinance Company (KMRC) plans to issue a green bond by the end of next year to shore up cash for lending to retail lenders.
The bond will be placed privately with institutional investors, fund managers and pension funds, but is currently not contemplated to be offered to the public as is the case with Treasury bonds.
As a green bond, the expectation is that the money will go into ensuring that climate-friendly buildings will be given priority in the financing.
The aim of the KMRC is to test the market for the green bond. It will seek to do book-building in advance in order to establish the appetite and expected return of the targeted investors.
“We intend to issue the first green bond by the fourth quarter of next year or even during the third quarter if everything is in order. We will place the bond privately to test the appetite of the market. We are however yet to determine the actual amount that we will be seeking,” KMRC chief executive Johnstone Oltetia said in an interview.
The company is negotiating with the African Development Bank for a partial credit enhancement – which amounts to a partial guarantee – for the bond to make it attractive to investors by reducing the uncertainty that has hit corporate bonds issued in Kenya.
The corporate bond market has been virtually in a coma since the default by several local companies including banks.
The mortgage refinancer has been raising money for on-lending— which amounted to Sh35 billion as at the end of July—from the World Bank and the African Development Bank.
This has been with the blessings of the National Treasury that holds a 25 percent stake in the company, the rest being held by commercial banks, saccos and microfinance banks. The KMRC will blend cheap money from donors with that from the bond – that will typically be more expensive – in order to arrive at a rate that will make it possible for retail lenders to offer it to low-income home owners at a price lower than that of the market.
The target of the loans is home owners earning not more than Sh150,000 a month.
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