Speaking in Dar es Salaam last week when the bond was officially placed in the market, NMB’s acting Managing Director, Albert Jonkergouw said the bond which has a green shoe option of 15bn/-, is available to investors from all walks of life.
The bond, which is the second such product to be issued by NMB and is available at any of the bank’s branches countrywide or from selected bond brokers, has been approved by Capital Markets and Securities Authority (CMSA).
The CMSA approved first tranche of the NMB’s Medium Term Note (MTN) Programme, will see investors earn the 10 percent interest rate paid quarterly for its entire three year term of maturity in June 2022. The interest rate paid is subject to withholding tax.
The NMB retail bond is tradable, so one can sell it to another buyer and receive the principal before the maturity date. Investors can sell the bond before maturity on the open market through a stockbroker in line with the Dar es Salaam Stock Exchange rules.
“NMB is principally funded by retail deposits but there are other attractive funding options, with the NMB Retail Bond we are looking to raise 25bn/- with a green shoe option of 15bn/-,” said Jonkergouw.
He said many investors have shown interest about investing in high quality bonds and the bank considers such demand as a good opportunity to satisfy such a need which will help stimulate the development of the local capital market and diversify funding sources.
“An opportunity that allows us to mobilise funds that the bank can use to create new customer loans at favourable rates,” the acting Managing Director said.
“The NMB Retail Bonds are special for they are open to the general public for buying and can be purchased from NMB’s largest network of branches across the country,” said the bank’s Head of Consumer banking NMB, Omari Mtiga.
Mtiga said at a news conference to launch the bond that the type of bond floated provides opportunities to small investors to put their money in a product with lower denomination. “This bond allows them to diversify their investments and trade in the bonds market thus providing needed inclusion and access using the bank’s easily accessible network,” Mtiga noted.
The NMB Retail Bond which was launched on 10th June will be in the primary market till 8th July 2019 when interest will start accruing. “Applications for the NMB Bond may be made via any of the 229 NMB branches or appointed bond brokers,” he stressed.
What exactly is the NMB Retail Bond?
A bond is a type of investment that allows investors to put their money in a typically corporate or governmental entity by lending their money for a fixed period inclusive of interest that will not change over the bond tenure. When you buy an NMB bond, you have lent the bank your money. NMB guarantees to return your money (capital) within a fixed period until maturity which covers the time you invested until the bond matures.
NMB will also pay you the agreed interest rate every quarter. Interest from your bond as per the law is eligible for withholding tax deduction. This is different from shares, since a bond does not give you ownership of the corporate entity and you are not allowed to vote and /or make a decision in the bank.