TMRC sees oversubscription on fourth tranche corporate bond

The listing held last Friday is part of TMRC’s 120bn/- executed at the bourse that saw individual retail investors’ appetite growing.

Oscar Mgaya TMRC chief executive officer said at the listing event that the fourth tranche was successfully raised 11.28bn/- from a issuance aimed at raising 10bn/-.

According to him, the first tranche had an oversubscription of four percent, tranche two had an oversubscription of two percent, and tranche three 27 percent subscription.

“I’m happy to report that in tranche four there was good participation both from individual investors and corporate ones. In terms of number of investors 69 percent were individuals and 31 percent were corporates,” said Mgaya.

The participation shows that the public is becoming more aware of the product and it is gaining confidence with TMRC since it started issuing corporate bonds in 2018.

He said the oversubscription proves that one can raise funds from domestic capital markets through corporate bonds. The total funds mobilized I the four tranches worth 42bn/- alongside private corporate bond issues which attracted 62bn/- in total.

“The country’s mortgage market is still struggling to grow. One of the measures of the size of the mortgage market which is the mortgage to GDP ratio shows the size of the market in relation to it is less than one percent,” said Mgaya.

In comparison with some of the countries in the East African region, Keya’s growth is 2.5 percent, Uganda is less than one percent and Rwanda is 3.7 percent. He said the current performance should motivate stakeholders to collectively strive for higher growth.

“Some policy measures need to be observed to grow the market, especially that differentiates the mortgage product from other real estate sector products;

Most of the mortgage lending is done by banks while in other markets you may find mortgage financing companies only focus on one product,” he said.

According to him, in 2021 the mortgage product risk wave rate capital was reduced to 50 percent while other loans maintained 100 percent.

The purpose was to steer people towards mortgages. Recently, salary loans have also been pegged at 50 percent risk wave and personal loans destined to housing are acquired through this window.

Nocodemus Mkama, chief executive officer Capital Markets and Securities Authority (CMSA) said that the appetite from individual retail investors is likely to boost liquidity of the capital market.

“The bond has been oversubscribed due to the conducive investment environment created by the government. During the financial year ending June 2022 through the Finance Act waived withholding tax corporate bonds issued by companies,” he said.

He said the decision has contributed to attracting more participation from corporate and individuals. The minimum corporate bond threshold for individual investors has been reduced to 500,000/- from the previous 1m/-.

The value of total investment on capital markets has grown by 7.87 percent attracting 35.39trn/- as of April 2023 compared to 32.81trn/- in April 2022.

Investments on treasury bonds have grown by 1653 percent to 18.37trn/- compared to 15.76trn/- of the corresponding periods.

Japhet Justin, commissioner of debt at the Ministry of Finance and Planning said that the public need to be sensitized on opportunities available at the TMRC especially when it comes to acquiring mortgage loans from the company.

“Majority of the people have been acquiring loans from commercial banks for building houses under the personal loan window. We need to educate these people on the difference of mortgage loans to personal loans in achieving the same goal,” said Justin.