Kenyan bond reforms aim to boost lending, reduce interest

Apr 12, 2011

Reforms in Kenya's bond market are hoped to reduce the cost of borrowing and encourage private sector lending, Business Daily Africa reports.

Ministry of finance permanent secretary Joseph Kinyua said the current interest rate spread was "unacceptably high" and therefore the reforms - including the introduction of an over-the-counter system for treasury bills and bonds - would aim to widen the range of people and companies able to invest.

Central Bank of Kenya data for February put the interest rate spread at approximately 10.51 per cent.

But primary dealers may be in shorter supply after the reforms if they do not have the required capital.

According to the publication, the current 30-year Treasury bond pays a 12 per cent return - and lenders are reluctant to cut their rates to private industry below this.

Larger and medium-sized lenders offer averages of 14.66 per cent and 13.35 per cent respectively, while small banks are higher at 14.82 per cent.