The Central Bank of Kenya (CBK) is currently offering a 6.5-year Amortized Bond, designated as Issue No. IFB1/2023/6.5. The bond offer will close on Wednesday, November 8, 2023. The CBK is actively engaged in a sensitization campaign to encourage investor participation in the bond, urging Kenyans to invest in their nation’s growth.
This marks another instance of the Central Bank’s infrastructure bond issuance. A review of past infrastructure bonds demonstrates the enthusiastic reception they have received from investors.
The CBK’s last nine infrastructure bonds achieved an average oversubscription rate of 122.4%. The only exception among these nine was Issue No. IFB1/2022/006, which had a subscription rate of only 50.0%.
In an effort to attract more investors, the CBK has introduced several incentives. First and foremost, the returns from the bond investment will be tax-free. Additionally, the minimum investment amount for the bond has been reduced to KES 50,000, with a competitive bid threshold set at KES 2 million. The government’s target is to raise 50 million from the bond sale.
One key factor contributing to the popularity of infrastructure bonds in Kenya is the stable and attractive returns they offer. These bonds often feature competitive fixed interest rates compared to other fixed-income investments, which is particularly appealing to risk-averse investors and those seeking a steady income stream.
Furthermore, these infrastructure bonds offer Kenyan investors an opportunity to diversify their investment portfolios. Investors are increasingly recognizing the importance of spreading risk across various asset classes, and this bond provides an additional avenue for diversification within the fixed-income asset class.
Given the incentives associated with this specific bond issuance, it is expected that the enthusiasm for infrastructure bonds will continue to grow. The CBK has taken steps to include retail investors in these bond issuances, making it more accessible for individuals from all walks of life to participate.
Additionally, this bond enables Kenyans to play an active role in financing critical national development projects, fostering a sense of civic pride.