Safaricom Sh15b bond a boost for turbulent domestic debt market

Safaricom’s issuance of the first Sh15 billion tranche of its Sh40 billion domestic medium-note programme (MTN) is a boost to Kenya’s capital markets and a vote of confidence for the future of the country’s technology sector.

The MTN, containing an option to raise an additional Sh5 billion subject to demand, is heavily predicated on green energy projects and is tax-exempt, providing investors an opportunity to make gains on Safaricom’s sustainable business programme.

This comes on the back of a volatile capital market in Kenya that has seen corporate bond turnover drop 78 per cent in the past decade, from Sh2.9billion in 2015 to Sh630 million this year.

Safaricom’s Information Memorandum on the domestic medium term note programme cites the firm's need to diversify its sources of capital to power the next growth phase, one that will prominently feature sustainable business financing.

This includes forays into green financing that will see much of its energy demand plugged by solar power and a modernised battery programme that will reduce the amount of diesel the firm consumes.

Since 2017 the Nairobi Securities Exchange (NSE) and the Capital Markets Authority (CMA) have worked with several partners including the Climate Bond Initiative and Kenya Bankers Association, KBA to drive green bond issuers in the country.

In that time, three green finance transactions have been realised including one green Real Investment Trust, REIT and more than Sh11 billion in private finance has been mobilised for climate change purposes including the first green bond cross-listed at the NSE and London Stock Exchange, LSE.   

Financing through the capital markets also draws the interest of corporates looking for financing that is more cost effective compared to bank borrowing in the long run. Market-driven investor competition and reduced intermediary fees ensure lower capital raising costs, with the cost savings passed on to investors.

Despite some bonds earning investors yields of up to 20 per cent in September this year according to CMA statistics, retail investor participation in this market segment has traditionally been subdued.

According to data from the CMA, local individual and corporate investors to the corporate bonds markets stood at 759 and 603 in the third quarter of 2025. This stands in stark contrast to the 1.2 million local individual and 40,000 thousand local corporate investors recorded in the equities market over the same period of time.  

Safaricom’s MTN will present investors with broader access to the markets and deepen investor participation at a much-needed time for investors in East Africa’s largest bourse.

Bond markets globally have underperformed over the past year, bogged down by inflationary pressures and concerns over geo-political tensions around trade policies and tariffs.

However, despite the macro-economic conditions, Safaricom is floating its medium term note banking on the strength of its future income stream driven by investment into cutting edge consumer technologies including artificial intelligence, AI, 5G wireless and big data analytics.

In the past year, the firm reported Sh371 billion in service revenue, an 11 per cent increase compared to the previous year with more than half of this attributed to M-Pesa and mobile data revenue.

With more than 2.3 trillion transactions running through the M-Pesa consumer app and Sh896 billion on its business app in the past year, Safaricom has indicated plans to expand functionality of its payments ecosystem.

This includes expansion of the credit, wealth and insurance solutions,as well as growing the e-government platforms and the agent ecosystem into underserved regions in the country.

Investors into the medium term note can also place bids on their mobile phones using USSD codes, presenting a chance for all Kenyans who have the barest of feature phones an opportunity to participate in the opportunity and thus advancing financial inclusion.

The icing on the cake is the tax-free status of the bond, which incentivises both individual and corporate investors to maximise their earnings while contributing to the sustainable financing of the growth of East Africa’s largest technology company.

The writer is Managing Partner Maudhui House , a Public Affairs Consultancy.  Oscar@maudhui.co.ke