John David

NAIROBI, KENYA - The Kenyan  loan market is witnessing a paradigm shift as banks turn to the state to purchase government bonds leaving the private sector starved of cash.

There seems to be an increasing appetite for Kenyan government bonds which has surged in the recent past to unprecedented levels.

This realignments is informed by the fact that state bonds are particularly prime securities due to their high coupon rates that range from eight to 12.25 percent  including infrastructure bonds.

The offer also enjoys an incentive that provides a reprieve by exempting tax on the  returns, further sweetening the deal for buyers.

The shift seems to have infused fresh impetus into the bond market, which is now recording increased activity after a low business for a long period of time.

"The incentives have made the bond markets a preferred  bet for investors more so at this time when other options are not sure to make substantial returns," Fred Mweni, Tsavo Securities managing director told journalists in Nairobi.

Kenya's third bond issue was heavily over subscribed, receiving 770 bids worth Ksh35.3 billion against Ksh14.5 billion on offer for a new eight-year infrastructure bond.

Statistic show that Central Bank of Kenya (CBK) sold bond worth Ksh16.3 billion at a weighted average   rate of 9.579%