Speech by Mr Kung’u Gatabaki, Chairman, Capital Markets Authority, During Housing Finance Bell Ringing Ceremony Arising From The Listing Of The Second Tranche Bond At The Nairobi Securities ExchangeGovernor, Central Bank of Kenya, Prof. Njuguna Ndung’u
Chairman, Housing Finance, Mr. Steve Mainda;
The Managing Director, Housing Finance, Mr. Frank Ireri;
Board of Directors of Housing Finance
Board of Directors of Nairobi Securities Exchange
Representatives from the Media
Ladies and Gentlemen;
Congratulate Housing Finance
It gives me great pleasure to join you this morning to celebrate the listing of Housing Finance Second Tranche Bond at the Nairobi Securities Exchange. I wish to congratulate you, on behalf of the Capital Markets Authority, on the completion of a successful second tranche bond issue.
Indeed, the success of this tranche of the bond issue in which you managed to raise Ksh5.28 billion against a targeted Ksh2.9 billion is a confirmation of investors’ appetite for participation in the capital markets in Kenya as well as a resounding vote of confidence in HF and economic prospects of the nation. Ladies and Gentlemen, allow me to recognize that during the first tranche of the Housing Finance bond issued in 2010, the company was able to surpass its targeted amount of Ksh5 billion to successfully raise Ksh7 billion.
I am happy to note that the amount raised during the first tranche of the Housing Finance bond issue was used to fund and supply housing projects in the country. Housing has been highlighted as one of the critical components of the Vision 2030 and is undeniably a cross cutting issue under both the social and economic pillars. The Authority is pleased to note the capital markets were able to play so effectively their critical role in resource mobilization and the intermediation between lenders and borrowers of capital.
In connection with supporting the supply of housing and real estate development more generally, the Authority is proud to note that it has lodged the legal and fiscal framework for Real Estate Investment Trusts (REITs) with the Ministry for Finance for their consideration and gazettement into law. The process of developing this regulatory framework was extremely consultative and we note the role played by representatives from HF to ensure the framework will be responsive to the needs for both construction financing as well as unlocking value in exciting income generating properties.
Bond Market reform
Ladies and Gentlemen, I am pleased to observe that the Capital Markets Authority is committed to the implementation of reforms in the bond market. As such, I would like to take this opportunity to highlight important milestones in the implementation of these reforms.
Between 2006 and 2012, the Authority approved the issue of corporate bonds for eight organizations namely: PTA Bank, Barclays Bank, Mabati Rolling Mills, Shelter Afrique, CfC Stanbic Bank, Safaricom Limited, Housing Finance and Consolidated Bank. Through the capital markets in Kenya, these organizations were able to raise Ksh67 billion jointly to fund their operations.
The first infrastructure bond seeking to raise Ksh18 billion for projects towards water, energy and roads, ladies and gentlemen, was issued by the government in 2008, and this was over-subscribed by 45 percent. I am happy to note that shortly after, in 2011, the Government issued a 30 year savings bond, the longest tenure in the history of our nation.
In 2009, in partnership with key stakeholders, we were able to implement the automation of bond trading which facilitates ease in trading and contributes to liquidity.
Ladies and gentlemen, I am delighted to note that the Authority has taken specific steps to deepen the bond market further. In this regard we have lodged for gazettement into law a legal framework for licensing of players in bond trading known as the Authorized Securities Dealers. This category will provide for the direct access to trading of fixed income securities by commercial banks, fund managers and insurance companies in order to increase efficiency and reduce costs in the markets. This new class of intermediaries form a critical component of the hybrid bond market being introduced to allow for OTC trading of debt securities to support increased liquidity in the market. In this process we are proud to note the excellent support from the Nairobi Securities Exchange which is refining its systems to be able to provide a robust post-trade reporting system for the OTC market.
Further, we have made submissions to the Ministry for Finance in respect of a framework to allow companies to issue fixed income securities simultaneously across the whole of the East African Community through a harmonised and coordinated eligibility and approval framework in all markets. If this is adopted, products like commercial papers and infrastructure bonds will be capable of being issued in the region as well.
Additionally, we are in the process of supporting the integration of an efficient trading, clearing and settlement infrastructure to be operated seamlessly across the EAC by linking the regional Central Securities Depositories and Securities Exchanges.
Allow me to pause at that juncture and reiterate our congratulations to the HF team for this highly successful issuance.