Housing Principal Secretary Charles Hinga has justified the move of the government to invest housing levy deductions in Treasury Bonds and Bills.
In response to concerns raised by Kenyans over the use of the money, Hinga noted that the investment was in line with the Affordable Housing Act.
He explained that the housing projects take time, a factor that would make the collection stay idle in the accounts.
Therefore, instead of the money staying idle, Hinga noted that investments in Treasury Bills would be prudent and beneficial owing to the interest earned.
"This is called liquidity management. Construction projects are long term some will take two years, you collect money today to pay a certificate in six months. The prudent thing is to invest extra liquidity, and earn interest," the PS stated.
He also added that the interest would help the government undertake more housing projects.
"The Affordable Housing Act envisioned this and provided for mechanism to invest cash you don’t need today but might require in a few months. So, the funds are safe earning interest as we roll out more across the country," he added.
The government collects funds for the affordable housing programme through the implosion of a 1.5 per cent levy on income earned by Kenyans in the formal and informal sectors.
Investment Interest
Treasury Bills are short-term investment plans. Treasury Bills have maturities of 91 days, 182 days and 364 days.
Kenyans.co.ke, through analysis of the data by the Central Bank of Kenya (CBK), established that the Treasury Bills have attracted interest rates between 10-17 per cent in recent years.
The latest 91-day T-Bill has been offered at an interest rate of 15.937 per cent.
Therefore, should the government invest Ksh20 billion in the T-Bill, the state department will be looking at an interest of Ksh3.1 billion.
"Treasury bills are a secure, short-term investment, offering you returns after a relatively short commitment of funds. Treasury bill rates in Kenya are attractive, providing an excellent investment opportunity that is readily available, as they are auctioned each week.
"Treasury bills are sold at a discount. This means that investors choose the amount that they will receive when the bill matures, or the face value of the bill, and pay less than that amount when purchasing it," CBK explained.
What the Law Says
As detailed in the Affordable Housing Act that was assented to by President William Ruto this year, the Affordable Housing Board has the power to invest the money when the money is idle.
"The Board may, with the approval of the Cabinet Secretary in charge of Treasury, invest any income that is not immediately required," section 13 of the Act reads.
According to data from Boma Yangu, there are 400 projects set to be undertaken under the affordable housing programme.
