Eleven Savings and Credit Cooperative (SACCOs) that are shareholders of state mortgage lender Kenya Mortgage Refinance Company(KMRC) are poised to benefit from the decision by KMRC to float the first tranche of KSh 10.5 Billion Medium Term Notes(MTN), sized at KSh 1.4 Billion.
SACCOs to benefit from KMRC KSh 10.5 Billion Bond Issue A Medium-term note (MTN) is the issue of a bond in tranches. This type of debt program will enable KMRC to have constant cash flows coming in from its debt issuance thus enabling the company to tailor its debt issuance to meet its financing needs.
The notes will be listed at the NSE; hence they can be traded. This allows the investor to buy and sell the KMRC bond at the Nairobi Securities Exchange(NSE).
MTN Program enables companies to offer debt securities on a regular and/or continuous basis.
Compared to other forms of debt securities, MTN’s typically have maturities of between two to five years. It is common for companies to issue both short-term and long-term securities under an MTN Programme.
Staying ahead: How Harambee Sacco retains top position in KMRC
Harambee SACCO remains the largest shareholder in KMRC among savings and credit societies, with a shareholding of 1.4% and a total contribution of KSh 25 Million, an equivalent of its allocation.
It has also opened its common bond to allow for members from the private sector, subject to approval from the Board.
The SACCO draws its membership from National and County Governments, Government Parastatals, Constitutional bodies, Government Departments, Kenya Defence Forces, National Police Service and National Youth Service.
According to the SASRA Annual Supervision Report 2020, Harambee SACCO is the 4th largest with a balance sheet size of KSh 32.56 Billion, Total Members’ Deposits of KSh 21.53 Billion, Gross Loans of KSh 22.24 Billion and a Total Income of KSh 3.22 Billion.
Harambee SACCO expects to raise close to KSh 1 Billion through the disposal of properties in Mombasa, 11 acres in Kisumu and 10 acres in Siaya.
The SACCO shareholding in the state mortgage lender is followed by that of Stima SACCO which has a shareholding of 1.1% in KMRC, having contributed KSh 20 Million.
Unaitas SACCO, Imarika SACCO, Kenya Police SACCO, Imarisha SACCO, Mwalimu National SACCO, Bingwa SACCO, Ukulima SACCO, Tower SACCO and Safaricom SACCO each have a shareholding of 0.6% and contribution of KSh 10 Million each.
On December 17th, 2020, KMRC approved loans for disbursement (pending security perfection) of KSh 2.75 billion to participating primary mortgage lenders (PMLs).
These PMLs are KCB Bank Kenya Limited, Housing Finance Company Limited, Stima SACCO Society Limited and Tower SACCO Society Limited; which received an allocation of KSh 2.13 Billion, KSh 514 Million, KSh 69 Million and KSh 29 Million respectively.
The approvals for disbursement will be funded from the World Bank line of credit. The initial lending is to be issued at a fixed rate of 5%.
KMRC is set up as a public limited liability company incorporated under the Companies Act.
As a non-bank financial institution, it is restricted to providing long-term funding and capital market access to primary mortgage lenders through the issuance of bonds to investors.
As a wholesale secondary market institution, it neither take deposits nor lends directly to individual borrowers.
KMRC is subject to regulation and supervision of the CBK with CMA providing oversight over its bond issuance operations. In addition to Applicable Laws, the KMRC’s internal operations are governed by its Memorandum and Articles of Association.
Currently, there is an undersupply of affordable housing in Kenya, leading to a lower demand for mortgages and housing loans needed to finance the purchase of houses. This is also occasioned by high prices of the houses available in the market which mostly cater for high income earners.
The government, through the Big 4 Agenda, has plans to facilitate the building of 500,000 affordable housing units. This shall increase the demand for loans for purchasing the affordable houses. Banks and SACCOs would then advance more mortgages and loans to people which will be used as collateral to access finance from KMRC.