November 2022 Infrastructure Bond: What Is Redemption Structure & Bond Amortization in Kenya?

Infrastructure bond

Written by Agatha

October 28, 2022

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Every Treasury Bond has terms and conditions stipulated in the bond prospectus. This document 👇🏾:

bond amortization

Investors in Kenya are used to long-term bonds where there’s only one redemption date (when your principal amount is paid back in full). For example, an 18-year bond issued in 2022 where your principal will be paid in full in 2040.

If you’re a visual learner, watch the video on our YouTube Channel:


The November 2022 Infrastructure Bond (IFB1/2022/14) has 2 conditions that people seem not to understand and I’ve been receiving numerous questions from The Wealth Tribe. You need to understand the 2 conditions before you invest:

✅ Redemption Structure

✅ Amortization

Redemption Structure simply answers the question: When will your principal amount be repaid? 

Bond amortization means the gradual or regular repayment of the face value (principal) and the interest on the bond in the course of its life. 

Simply, it’s the process of paying off a debt with regular payments.

Now that you understand the meaning of the two, let’s get to the specifics:

Tenor (Time Period):  14 Years

Redemption Date: 27th October 2036

Coupon Rate: Market Determined (see an explanation at the end of the article)

Period of Sale: 26/10/2022 to 8/11/2022

Value Date (when your amount has been received for crediting CBK): 14/11/2022

Amount on Offer: Kshs. 60 billion

Minimum Investment Amount: Kshs. 100,000

bond amortization

Redemption Structure: 

  • 4th November, 203050% of unencumbered outstanding principal amount.
  • 27th October, 2036 – 100%, final redemption of all outstanding amounts.


No partial redemption will be paid on encumbered securities on amortization dates.

Any amounts upto Kshs. 1 million per CDS account at amortization will be redeemed in full except for encumbered securities.

Encumbered securities: These are bonds that have been used as collateral for a loan.

We often hear real estate investors say ‘the land has encumbrances’ after a search. This means that the said land was used as collateral for a loan and therefore cannot be transferred to a new owner. 

So, what do the above terms mean in layman’s language?!

Those who invest 1 million or less will get their FULL principal amount back in 8 years (4th November, 2030). 

In a nutshell, this is an 8-year Infrastructure bond for anyone who invests 1 million or less because you’ll get ALL your money back on 4th November, 2030, it also means that will be the end of receiving interest payments.

Practical Examples:

If you invest Kshs 100,000 then use Kshs. 20,000 of your bond as collateral for a loan, the Kshs 20,000 will be encumbered.If you won’t have paid back your loan by 4th November 2030, only Kshs 80,000 will be paid back. 

If you invest Kshs 1,000,000 then use 20% of your bond as collateral, the Kshs 200,000 will be encumbered. If you won’t have paid back your loan by 4th November 2030, only Kshs 800,000 will be paid back. The Kshs 200,000 will be paid during the final redemption date.


Is receiving your principal amount early a good or a bad thing?

This is great for retail investors most of whom put in amounts under 1 million. You get ALL your money back in 8 years to spend or invest elsewhere

Secondly, it lowers your inflation risk because returns on this bond are not inflation-adjusted. 

The rising interest rates are still a risk to your Investment.

Higher interest rates= Lower Bond Prices

In other words, interest rates are expected to rise in line with rising inflation, so investors are wary of the risk rising interest rates pose to the market value of bonds.

Rising interest rates affect the market value of bonds, especially bonds with longer maturities. Being able to cash in part of your principal sooner gives you the ability to invest in other high-yielding instruments

What of those who invest more than 1 million?

Those who invest more than 1 million will get back half of their principal amount back in 8 years (4th November, 2030) and the other half on 27th October, 2036.

Note: If you use 100% of your bond as collateral for a loan, the partial redemption won’t apply to you: you won’t get paid on 4th Nov, 2030. 


Practical examples:

If you invest Ksh 1,050,000 then use Kshs 150,000 of your bond as collateral for a loan, then Kshs 150,000 will be encumbered. On 4th November 2030, you’ll receive 50% of your unencumbered amount: Kshs 450,000. You’ll receive the other 50% on 27th October, 2036.

If you invest Kshs 5,000,000 then use Kshs 1 million of your bond as collateral for a loan, the Kshs 1,000,000 will be encumbered. On 4th November 2030, you’ll receive 50% of your unencumbered amount. You’ll receive the other 50% on 27th October, 2036.

Other questions about the November Infrastructure bond:

1. What does a Market Determined coupon rate mean? 

The coupon rate will be determined through the auction process when investors submit their bids. We’ll know the average rate from Central Bank after the period of sale ends.

For a full beginner’s guide on how to start investing in Treasury Bonds in Kenya, click here.

2. If I can’t invest now, will the bond be re-opened in future? 

The bond prospectus states that ‘the bond may be re-opened at a later date.’ This is usually at the sole discretion of the Central Bank of Kenya.

If you miss an opportunity to participate in the primary market, you can still buy the bond in the secondary market (Nairobi Securities Exchange) through an approved stock broker when it begins trading.

3. Why invest should you invest in the infrastructure bond?

  • Passive income – coupons/interest paid every 6 months.
  • Relatively high returns – we expect the coupon rate to be 13.40% or higher.
  • Tax-exempt – interest from infrastructure bonds is exempted from withholding tax.
  • Risk-free investment 
  • You can sell it in the secondary market(Nairobi Securities Exchange) through an approved stock broker.
  • You can access a loan facility from commercial loans by using the bond as collateral.

If you have more questions, leave them in the comments section!


bond amortization

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  1. Mesh

    Thank you for the article, well written. A quick question on selling bonds through the secondary market- can this only be done by stock brokers?


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