Linzi Finsco Trust has received approval from the Capital Markets Authority of Kenya (CMA) to float the first ever Sukuk bond (islamic bond) in the country. Precisely, a sukuk bond differs from nominal bonds in that as a sharia-compliant bond, it prohibits interests but offers investors a share of the returns generated by the associated tangible asset.

 

Linzi aims at raising Kshs 3.0 Bn ($20.4 Mn) under the Sukuk bond, which will be used to develop 3,069 affordable housing units, with an expected IRR of 11.3%. Conversely, the timeline to float the bond is yet to be disclosed. Nonetheless, the initiative’s timing could not have been any better as it aligns with the government’s affordable housing agenda of delivering 200,000 units annually.

 

According to the 2023 Nairobi Metropolitan Affordable Housing report, inadequate financing by both developers and end users has been a key setback in bridging Kenya’s housing gap currently standing at 2.0 Mn units and growing by 250,000 units p.a. As such, CMA’s step to approve Linzi’s bond issuance opens a new avenue of raising capital to supplement delivery of the housing initiative, while enhancing investments diversification.

 

Sukuk bonds are continuing to gain popularity in Africa while offering impressive returns to investors. Kenya’s step is thus remarkable as it joins other countries that have adopted the development financing instrument. Egypt, Morocco and Nigeria have for example issued and raised $1.5 Bn in February 2023, $116 Mn in 2018, and $130.2 Mn in December 2022, respectively according to Reuters and government body sites. Additionally, Algeria is also in the process of adopting the financing instrument, while KCB floated Tanzania’s first Sukuk bond last year.

 

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