The Centre for Affordable Housing Finance in Africa(CAHF) entered into a partnership with the Reits Association of Kenya(RAK) and is pleased to provide a blog series on housing and housing finance. 



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Housing affordability continues to be a key challenge in Kenya given the current high cost of funding and
unavailability of financing amid rising property prices resulting in one third of public sector and urban
wage earners living in inadequate housing.

The Government of Kenya’s (GOK) affordable housing programme, christened ‘Boma Yangu,’ which is one
of the governments Big Four Agenda, aims at facilitating affordable and decent housing for Kenyans in all
47 counties in the low and middle-income brackets who are unable to own decent homes due to the
prohibitive land and construction costs and stringent financing requirements. It aims at delivering 1 million
homes with 800,000 units (bedsitters, 1, 2 and 3 bedrooms) costing between KES.0.8Million (US$7,788)
and KES.3.0Million (US$29,204) while 200,000 will be social housing units costing between KES.0.6Million
and KES.1.0Million.

These affordable housing units are available to lowest paid workers earning less than KES.14,999 per
month (about 2.62% of Kenya’s formally employed work-force) who will qualify for social housing with
homes selling for about KES.500,000. Those earning between KES.15,000 and KES.49,999 per month (72%
of workforce) will be offered homes under the tenant purchase scheme while individuals grossing
between KES.50,000 and KES.99,000 (23% of the formal workforce, according to the Kenya National
Bureau of Statistics) will be offered mortgages at 7% per annum with a repayment period of 15 years.
According to the World Bank’s economic update ‘Housing Unavailable and Unaffordable’, Kenya’s housing
deficit stood at 2 million in 2017 with 61% of urban households living in slums. Annual housing production
remains at partly 50,000 units, way below the targeted provision of 250,000 units.

The panacea to Kenya’s affordable housing conundrum may be found in the implementation of green
finance within project finance structures in various housing projects within the Republic of Kenya. This
article will focus on the opportunity offered by green bonds in Kenya through a substantive analysis of the
first Kenyan green bond, implemented by Acorn Holdings Limited to create student housing for Kenya’s
growing youth population.

How does green financing work and what does it involve?
Green financing is any financial instrument or investment including equity, debt, grant, purchase and sale
or a risk management tool (investment guarantee, insurance product or commodity, credit or interest
rate derivative) issued to a firm, facility, person, project or agency, public or private, in exchange for the
delivery of positive environmental externalities that are real, verified and additional to business. Green
financing increases levels of financial flows (from banking, micro-credit, insurance and investment) from
the public, private and not-for-profit sectors to sustainable development priorities thereby promoting
public-private partnerships for sustainable development.

What is a green bond?
The World Bank, which has been issuing bonds since 1947, issued the first green bond in 2007 creating a
new way to connect financing from investors to climate projects after a group of Swedish pension funds
wanted to invest in projects that help the climate. Bonds are essentially an agreement where issuers
borrow funds from investors and must repay investors at an agreed rate after a specified amount of time.
The concept of a bond that is dedicated to a specific kind of project is the history-making quality that
fundamentally changed the way investors, development experts, policymakers, and scientists work
together. A green bond therefore is a type of fixed-income instrument that is specifically earmarked to
raise money for climate and environmental projects.

Similar in structure and characteristic of standard bonds in terms of seniority, rating, execution process
and pricing, the novelty of green bonds is the capital is used in projects like clean energy, energy efficiency,
low carbon transport, smart grid, agriculture and forestry and similar projects. They are typically asset-linked and backed by the issuing entity’s balance sheet, so they usually carry the same credit rating as
their issuers’ other debt obligations.

The Climate Bond Initiative reports that the global green bond market has grown exponentially over the
past 6 years, with US$. 170.9 Billion issued in 2018 and US$. 263 Billion in 2019. Green Bonds issued in
Africa include South Africa’s first municipal green bond issued in 2014 worth US$. 101.3 Million and its
second issue in 2017 worth US$. 67.5 Million, Nigeria’s 2017 bond of US$.30 Million, and Egypt’s 2020
bond of US$ 750 Million.

Types of Green Bonds
Green bonds are of three types; corporate green bonds issued by financial and non-financial corporations
e.g., the Vodafone green bond; sovereign green bonds issued by national governments and can either be
denominated in the specific country’s local currency or in foreign currency; and sub-National green bonds
issued by cities, counties or government agencies.

Benefits of Green Bonds
Green bonds offer various benefits for both investors and issuers as a means of encouraging climate
sustainable growth. On top of providing investors with tax-exempt income, green bonds offer a means of
accessing sustainable investments in the fixed income market in a familiar low risk vehicle for investors.
Advantageous reputational benefits accrue for issuers due to the requirement of enhanced transparency
and disclosure associated with green bond issuance appeals to investors. The bonds provide an ideal
opportunity to develop Public Private Partnerships to accelerate the advancement of new technologies
and energy efficiency, enable projects at a lower cost of capital, and ensure alignment with current or
future climate policies in line with the Paris Agreement.

Funding of Affordable housing in Kenya using Green Financing
Green financing offers cheaper options to fund projects whose bottom line directly impact the
environment. Residents of low-income communities are more likely to live, attend school and work in
older, less energy-efficient buildings resulting in higher utility costs and negative health and
environmental outcomes a problem green financing can resolve. By reducing utility costs i.e., the
implementation of solar hot water systems and energy efficient lighting and enhancing people’s
surroundings, green finance affordable housing improves the environment and produce positive health
benefits for residents.

The financing is new in Kenya and we believe the market is ready for it based on the country’s first green
bond issue subscription rate. It will enable Kenya meet its affordable housing agenda with more housing
developers shifting to this sustainable finance. For instance, in February 2013 Housing Finance Company
(HFC) secured a KES.1.7 Billion (US$20 Million) Green Building finance from the International Finance
Corporation (IFC). KES.350 Million (US$.4 Million) of this was funded through the Canada Climate Change
Program to finance energy efficient projects particularly homes construction that leads to at least a 20%
reduction on water and energy consumed daily. Pan African housing development financier Shelter
Afrique is also betting on green financing to fund its affordable housing projects across Africa.

Case Study: The Acorn Holdings Limited (AHL) Green Bond
On 13th January 2020, AHL listed its green bond in the Nairobi Stock Exchange making it the first green
bond in East and Central Africa. Days later it was listed in the London Stock Exchange (LSE) making it the
first Kenya shilling denominated corporate green bond to be listed in the United Kingdom effectively
enabling investors from the LSE to invest in Kenya thus widening the country’s investor pool.

Structure of the Bond
The bond offers bond-holders collateral, unlike previous bonds issued in the Kenyan market, thus reducing
the risk of loss of capital. It is further backed by a 50% guarantee from Guarantee Company Limited, a
Mauritius based private infrastructure Development Company thus protecting the investors of the bond.

Projects of the AHL Green Bond
AHL intends to use the bond’s funds on the following projects:
1.Qwetu 3 and 4 United States International University (USIU-A);
2.Qwetu Hurlingham Phase 1;
3.Qwetu Chiromo Phase 1; and
4. Qwetu Sirona Phase 1.

The projects will provide accommodation for university students that are in proximity to a specific project.
Average rent out is 100 Sterling Pounds (Kshs. 13, 167) per month however, the Qejani hostels which are
a lower variety, will go for 60 Sterling Pounds (Kshs. 7,909). This is affordable considering the services they
offer i.e., internet connectivity, study areas, security, transport and a social community for the students
in addition to offering a solution to security and clean accommodation concerns.

Noteworthy is the uptake with AHL having already rolled out three purpose-built student accommodation
properties with more than 1,500 beds in reference to the Jogoo Road and Ruaraka campuses. The third
property in Parklands opened in March 2019 and the fourth property in Wilson View opened in early 2020
and have received demand like the rest.

In conclusion, the AHL green bond has led the country in introducing alternative forms of investments
with a wide range of benefits for investors, the environment and society. Accordingly, investors,
developers and the government should leverage green bonds when it comes to realizing sustainable

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