I&M Bank’s $155 Million Bond Bet Comes as Credit Demand Rises

As interest rates remain elevated and liquidity conditions tighten across Kenya’s banking sector, I&M Bank’s $155 million bond issuance underscores a broader shift by lenders toward capital markets as a more reliable source of long-term funding, allowing them to sustain credit growth, meet regulatory capital requirements, and finance regional expansion even as traditional deposit growth slows and borrowing costs remain high.

I&M Bank taps bond market for $155 million to fund growth

I&M Bank is turning to the local debt market for fresh capital, betting on investor appetite as it pushes ahead with expansion and lending growth.

The bank has announced a public Medium-Term Note (MTN) programme worth up to $155 million, marking one of its most significant funding moves in recent years. The first tranche will seek to raise $77.5 million, with a 30% greenshoe option that could lift the amount to $100.8 million if demand comes in strong.

The notes will be offered to the public and later listed on the Main Fixed Income Securities Market Segment of the Nairobi Securities Exchange, giving investors a chance to trade them after issuance. The offer opened on April 30, 2026, and is set to close on May 15, with allotment expected on May 18 and listing on May 21.

Unlike short-term borrowing, this programme is designed to give the bank stable, long-term funding. The first tranche will run for five and a half years, offering a fixed interest rate with semi-annual payments. Investors will get their full principal back at maturity, depending on the final pricing. However, the notes are unsecured and subordinated, meaning they rank below other senior debts if anything goes wrong.

The bank says the funds will be used to support lending to businesses and individuals, finance expansion plans, and strengthen its capital base under Tier II requirements. In simple terms, this gives the bank more room to grow its loan book while staying within regulatory limits.

“This proposed note issuance reflects our confidence in the Bank’s long-term strategy, underlying business strength and disciplined approach to growth. The proceeds are intended to support lending, enhance funding resilience and strengthen our capital position in line with our strategic priorities,” said Group CEO Kihara Maina.

The move comes at a time when the lender is riding on strong financial results. For the year ended December 2025, I&M reported a 29% jump in profit before tax, showing solid momentum despite a tough economic environment marked by high interest rates and rising costs. Operating income grew by 23%, while customer deposits climbed to $2.7 billion. Net loans stood at $1.7 billion, pointing to steady credit growth.

Maina also pointed to the bank’s credit profile as a key factor in attracting investors. “We continue to strengthen our funding base while supporting long-term growth across our markets,” he said.

The group holds a national long-term rating of A+ from Fitch Ratings, a signal of relatively low credit risk within the Kenyan market. It also has a track record of meeting obligations from previous note issuances, which could help boost investor confidence in the new offer.

Medium-Term Note programmes are increasingly becoming popular among banks because they offer flexibility. Instead of issuing one large bond at once, lenders can raise funds in smaller tranches over time, depending on market conditions. This approach helps manage borrowing costs and reduces pressure to take up expensive funding when conditions are not favourable.

For I&M, this flexibility could be crucial as it expands across the region and deepens its presence in key sectors such as corporate banking, SMEs, and retail lending. The additional capital will also help cushion the bank against potential shocks while positioning it to take advantage of new opportunities in East Africa’s evolving financial landscape.

At a broader level, the issuance adds to growing activity in Kenya’s corporate debt market, where more firms are exploring alternatives to traditional bank loans. With interest from pension funds, fund managers and institutional investors on the rise, instruments like MTNs are becoming an important channel for raising long-term capital.

If the offer is well received, it could set the tone for more issuances in the market this year, especially as companies look for stable funding in an environment where liquidity remains tight and borrowing costs are still relatively high.

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