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Retirement Benefits Schemes in Kenya

May 12, 2019

The Retirement Benefits Industry plays a huge role in the economy. According to the Organization for Economic Co-operation and Development (OECD) in 2017, assets in Retirement Benefits Schemes totaled 50.7% of GDP in the OECD countries and 19.7% of total GDP in the non-OECD jurisdictions. It is clear that most non-OECD countries still have a long way to go in the growth of the sector. In Kenya, the Retirement Benefits Assets as a percentage of GDP stood at 13.4%, compared to more developed markets like the USA at 84.1% and the UK at 105.3%. Over the last decades, we have seen reforms and education initiatives by the Retirement Benefits Authority (RBA) to educate people on the importance of saving for retirement. The industry has registered great growth from both member contribution and good performances leading to the assets under management growing to Kshs 1,166.6 bn in 2018, from Kshs 287.7 bn 10-years ago, translating to a compound annual growth rate of 14.3% over the last 10-yea...

Kenya Mortgage Refinancing Company Update

Apr 28, 2019

Following the announcement of the formation of the Kenya Mortgage Refinancing Company (KMRC) by the National Treasury Cabinet Secretary, Hon. Henry Rotich in April 2018, we released the Kenya Mortgage Refinancing Company Note, where we introduced the facility and its main functions, highlighted the successes of other mortgage refinance companies in Africa, and emphasized on the conditions necessary for the KMRC to thrive. To recapture the Note, the KMRC is an initiative of the National Treasury and the World Bank, whose main objective is to grow Kenya’s mortgage market by providing long-term funding to primary mortgage lenders. The initiative aims to support the affordable housing agenda by increasing the availability and affordability of housing finance, thus boosting home ownership. Primarily, a mature mortg...

Kenya Listed Banks FY’2018 Report

Apr 20, 2019

Following the release of FY’2018 results by Kenyan banks, the Cytonn Financial Services Research Team undertook an analysis on the financial performance of the listed banks and identified the key factors that shaped the performance of the sector, and our expectations for the banking sector in 2019. The report is themed “Growth and Recovery in a tough operating environment”, as we assess the key factors that influenced the improved performance of the banking sector in 2018, the key challenges, and also areas that will be crucial for growth of banking sector going forward. As a result, we seek to answer the questions, (i) “what influenced the banking sector’s performance?”, and (ii) “what should be the focus areas for the banking sector going forward?” as the sector navigates the relatively tough operating environment. As such, we shall address the...

Nairobi Metropolitan Area Commercial Office Report 2019

Apr 7, 2019

The Nairobi Metropolitan Area (NMA) Commercial Office Report released annually aims to inform on supply, performance and the investment opportunity in the NMA Commercial Office Market. As per the Report-Market Review 2017, released in 2018, the commercial office sector had a surplus of 4.7 mn SQFT of office space, with average occupancy rates and rental yields coming in at 82.6% and 7.9%, respectively, 5.4% points and 0.6% point lower than 2016’s performance at 88.0% and 8.5%, respectively. The subdued performance was mainly attributed to a tough operating environment in 2017, with i) low credit supply as a result of the implementation of the Banking Amendment Act 2015, and ii) political uncertainty as 2017 was an election year, both factors leading to slower commercial activities thus reduced demand for office space amid the increasing supply of the same. In this report in...

Fixed Income

Mar 31, 2019

T-Bills & T-Bonds Primary Auction: During the first quarter of 2019, T-bills were oversubscribed, with the overall subscription rate coming in at 157.2%, up from 74.3% in Q4’2018. The oversubscription was partly attributable to improved liquidity in the market during the quarter, which saw the average interbank rate declining to an average of 3.1%, from an average of 5.1% in Q4’2018, supported by government payments and debt maturities. Overall subscriptions for the 91, 182, and 364-day papers came in at 110.0%, 111.4% and 221.9% in Q1’2019, from 107.1%, 37.7% and 97.7% in Q4’2018, respectively, with investors’ participation remaining skewed towards the longer dated paper. The demand for the longer-dated paper is attributable to the scarcity of newer short-term bonds in the primary market. Yields on the 91-day T-bill rose by 20 bps to close at 7.5% in Q1’2019, from 7.3% in Q4’2018, while yields on the 182-day and...