CASE STUDY
Kenya Mortgage Refinance Company (KMRC) Medium-Term Note Programme
CATEGORY
Demand
Capital market tool
Anchoring
Geography
Kenya
LISTING EXCHANGE
Nairobi Securities Exchange
SECTOR
Affordable Housing
DFI / DONOR INTERVENTION
IFC (USD 2 million equity; USD 5.5 million in first bond tranche)
TRANSACTION SIZE
USD 93 million
TRANSACTION YEAR
2018–2025
Structure and Capital Market Tool
In January 2022, Kenya's Capital Markets Authority approved an unsecured KES 10.5 billion (USD 93 million) MTN programme, to be issued in tranches and listed on the Nairobi Securities Exchange (NSE). The amounts raised from the issuance were earmarked for disbursement to primary mortgage lenders for onward lending, increasing the availability of affordable housing finance. Like commercial banks with larger shareholdings, SACCOs also act as primary lenders and provide broader reach to lending operations through their expansive branch network.
IFC committed to serve as anchor investor by purchasing up to 40% of the bonds, with support from the International Development Association (IDA) Private Sector Window Local Currency Facility, and participated in the first bond sale with a commitment of USD 5.5 million (KES 628 million). The debut tranche was a seven-year, KES 1.4 billion note carrying a 12.5% coupon paid semi-annually. Its tenor was aligned with KMRC's weighted average mortgage book, and it drew applications of KES 8.1 billion against the KES 1.4 billion target, an oversubscription of around 480%. The bond was listed and began trading on the NSE in March 2022.
Background and Market Context
The Kenya Mortgage Refinance Company (KMRC) is a mortgage liquidity facility established in April 2018 to provide long-term funding to primary mortgage lenders, develop Kenya's affordable housing segment, and expand access to housing finance. KMRC has an unusually diversified shareholding structure, reflecting a mix of grassroots and public policy goals. The Kenyan government, through the National Treasury, holds a majority stake. The remaining shares are divided among local commercial banks, savings and credit cooperatives (SACCOs) that have a strong presence in towns and rural areas, and DFIs, namely the International Finance Corporation (IFC) and Shelter Afrique.
Initially, KMRC relied on funding from MDBs, including loans from the International Bank for Reconstruction and Development (IBRD) and the African Development Bank (AfDB), along with an equity investment from IFC (USD 2 million) to support capitalisation and market confidence. The inaugural medium-term note (MTN) programme marked a deliberate shift towards market-based funding, raising KES 1.4 billion in the issue's first tranche in February 2022.
Development Impact
KMRC's bond programme increased access to affordable housing finance, giving commercial mortgage lenders the ability to on-lend for longer tenors at a fixed rate. Development finance played a role from the start, providing debt and equity funding to KMRC. In this demand-side example, IFC's anchoring of the company's MTN programme contributed to integrating housing finance into Kenya's debt capital markets, widening the local institutional investor base and deepening capital markets.