Lender NMB becomes borrower of the public
A bond is an investment product in which an investor lends money to an entity as a corporate or governmental, which borrows the funds for a defined period of time at a variable or fixed interest rate.
Early last week, the National Microfinance Bank (NMB) launched a first bond service which issues a 13 percent interest aimed at everyone who wishes to invest in the bank and earn an attractive return. It is a new concept whereby the normal lender (bank) has become a borrower.
It is the first bond to be issued by the bank and that can be bought from any of its branches in the country or selected bond brokers with a minimum purchase of 500,000/-.
Speaking in Dar es Salaam after launching the new product which customers have been given a three months period to invest, the NMB Managing Director, Ineke Bussemaker told The African that the move is a result of the Capital Markets and Securities Authorities (CMSA) granting approval to the Liberat Mfumukeko, thanked the Government of the Federal Republic of Germany for its support to the EAC spanning the years since the re-establishment of the Cooperation between the three founding EAC Partner States to the present, when the Community has expanded to include the republics of Rwanda, Burundi and South Sudan.
“We have truly benefited from the German support which has issue the first tranche of the NMB Plc Medium Term Note (MTN) Programme.
She said investors in the bank Retail Bond will earn an interest rate of 13 percent per annum payable half yearly for its term of three years until June 2019, the interest rate paid is subject to withholding tax.
She adds the bond is tradable so a customer can sell it to another buyer and receive the principal before the maturity date, also they can sell the bond before maturity on the open market through a stockbroker in accordance with the Dar es Salaam Stock Exchange (DES) rules. It is good opportunity for those with extra money to invest.
On the issue of how small scale farmers who are the most prioritized customers of the bank will benefit or get involved, Ineke said they too can be able to benefit from the new service and that is why more education is being delivered at all regions to ensure that they access it.
“The said minimum rate of 500,000/- might be a bit high to some small scale farmers but there catalyzed other Development Partners to support our projects and programmes.”
On his part, Egon Kochanke congratulated Mfumukeko for his appointment and noted the impressive progress in the EAC integration process and re-affirmed to the Secretary General his country’s continued support to the EAC Project and programs.
“We are very happy with our are so many who can afford so through them the bank can be able to gain more profit at the same time be of much beneficial to the investors customers and at the end of the day the profit gained can be delivered as loans to those farmers who could not afford to invest in bonding service, “she said. It is a scratch my back and I scratch yours phenomenon.
Ineke said many investors have shown interest about investing in high quality bonds and the bank will consider it to be a good opportunity to satisfy the need which will help stimulate the development of the local capital market and diversify the bank’s funding sources. Adding that, the opportunity will allow the bank to mobilize funds that it can use to create a new customer loans at favorable rates.
“NMB is principally funded by retail deposits but there are other attractive funding options with the bank’s retail bond we are looking to raise 20bn/- with a green shoe option of 5bn/-,” said Ineke.
Commenting on the issue, the Dar es Salaam Stock Exchange relationship with EAC and I am looking forward to a strong partnership in the development of the regional bloc”, asserted the Germany Ambassador.
Present at the meeting were the EAC Deputies Secretary General in charge Planning and Infrastructure, Dr Enos Bukuku, and that of Political Federation, Charles Njoroge, and other officials from the EAC Secretariat. Manager for market Research and development Ibrahim Mshindo said the new product is very stimulating for the market to see a high profile name continuing the expansion to the range of bonds available.
“The NMB retail bonds are special for they are open for buy to general public and can be purchased from the bank’s largest network of branches across the country, and with the support of issuers like NMB we look forward to growing the service further in the months and years ahead, “he said.
The retail bond will be on offer starting on 10th this month to June this year and interest rate accrued from last week the same starting date. NMB has about 175 branches all over that country. Also the service will also be provided by appointed bond brokers.
The NMB Chief Financial Officer, Waziri Barnabas said time has come for Tanzania investors and customers to stop keeping large amount of money at home instead invest in bonding investment opportunity.