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KCB to boost mortgage arm

NAIROBI, August 26 – Future home owners could be the next big beneficiaries of Kenya Commercial Bank’s ambitious expansion plans.

With a second rights issue successfully under the banks belt, revelations are that the bank could in the near future be considering plans to go back to the market to raise capital for its mortgage arm.

Speaking to Capital Business, Savings and Loans Managing Director Caroline Kariuki disclosed that KCB was already working on the proposal in a bid to stay ahead as a lender in the industry.

“Having Asset-Backed Securities in the market means there is more available capital to provide funding for the mortgage sector,” Kariuki said.

“Naturally, this means housing will become more affordable as more funding is available to fund the sector which currently is predominantly dominated by just a few individuals.”

Kariuki explained that raising funds in the bourse through asset based securities would provide an opportunity for more people to participate in the sector.

Despite an increased need for housing especially in urban areas, development of new housing has seemed to favour high income earners making it quite difficult for Kenyan masses – mostly low and middle income earners – to own houses.

This, coupled with the high interest market rates has not made it any easier for ordinary Kenyans to achieve the long-term dream of owning a home.  

“There is also the other opportunity to have Real Estate Investment Trusts (REITS) that also provides opportunity for everyone to participate in the mortgage sector like they do in the unit trusts,” Kariuki said.

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Speaking at the launch of KCB’s additional rights in the stock market, Capital Markets Authority Chief Executive Stella Kilonzo urged players in the housing industry to take advantage of the recently gazetted Asset-Backed Securities Regulations.

“As a result of the rights issue the bank has been able to raise additional capital which will be reflected in the balance sheet but it will be largely in-liquid. It’s important KCB finds a way to free up this in-liquid asset base, which could be through the issuing of an Asset-Backed Security,” Kilonzo emphasised.

Meanwhile, Kilonzo said, the CMA is committed to enhancing efficiency in the primary market in relations to rights issues.

Normally the rights issue full process does not take less than three months after approval by the Capital Markets Authority.

The procedure then becomes more cumbersome because of the current advance payment system where investors pay for shares before allocation resulting in the receiving bank holding this money for not less than a month.

This is tantamount to denying the economy circulating funds, which could be put to better use.

For instance, the just concluded KCB rights issue intended to raise Sh5.5 billion but collected about Sh8.1 billion an excess of nearly 50 percent.

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