Capital Markets Authority regulatory and policy director Luke Ombara. PHOTO | SALATON NJAU | NMG The Capital Markets Authority (CMA) plans to form a credit guarantee scheme to help small and medium-sized (SMEs) firms raise money without exposing investors such as bondholders to losses.
Director of policy and regulation at CMA Luke Ombara said in a virtual briefing Tuesday the scheme would help lift the waning bond appetite, especially when SMEs seek capital from the Nairobi Securities Exchange (NSE).
CMA wants the scheme to run like the recently gazetted State credit guarantee scheme that targets to help SMEs access money from banks by using the scheme as collateral.
“We want to have a special scheme to support issuance of instruments to SMEs or expand the scope of the recently gazetted scheme to include capital market credit for SMEs,” said Mr Ombara.
“The option will be for the industry to set aside funds as a guarantee scheme to support SME raise funds through capital market that is backed with this scheme.”
The CMA did not give details on the size of the fund it hopes can boost the attractiveness of SMEs to investors given that the scheme will shield them from losses.
This comes at a time the corporate bond market activity has declined and firms such as TransCentury looking to exit the bourse to get funding from private equity firms.
The default of bond payment by firms such as Chase Bank, Imperial bank and Kaluworks has made investors develop cold feet as they seek to lend to only stable firms.
Investors are still seeking recourse on their Sh4.82 billion and Sh2 billion Chase and Imperial bonds respectively after the two banks sunk into receivership.
Data from the CMA shows there were only six outstanding commercial papers valued at Sh38.1 billion at the end of December last year against 20 commercial papers valued at Sh61.9 billion at the end of 2018.
The outstanding commercial papers dropped to five — Stanbic Bank, NCBA, East African Breweries, Family Bank and Real People after Centum Investment fund cleared its five-year Sh6.6 bond early June.NCBA has also announced that it will redeem its Sh7 billion medium-term note mid next month, to leave outstanding bonds at four.
