The Central Bank of Kenya and the Capital Markets Authority require any public share offer to be accompanied by a registered prospectus, full disclosure of financials, governance structures, and risk statements. If you are not shown those documents, you are not investing; you are donating. Yet many developers are promoting early share sales to fund this “dream,” bypassing due process. In the eyes of the law, that is not innovation; it is unauthorized fundraising that exposes unsuspecting buyers to total loss. Buying shares in an unlicensed “future bank” is not visionary; it is financially reckless.

In recent months, a wave of ambitious real estate and construction firms has begun marketing what they call pre-listing shares or founders’ shares in yet-to-be-licensed mortgage banks. The pitch sounds irresistible: buy now at KSh 1 or 5 per share and, once the bank is licensed and listed on the Nairobi Securities Exchange, those same shares could sell for KSh 10 or more. To the untrained eye, it seems like a golden ticket. To the discerning investor, it is an all-too-familiar mirage, a speculative trap shimmering in the heat of greed and misinformation. Under the Banking Act (Cap 488), no entity may operate or market itself as a mortgage or deposit-taking institution without express approval from the Central Bank of Kenya. Before such a licence is issued, the so-called bank is nothing more than a concept paper. Yet many developers are promoting early share sales to fund this “dream,” bypassing due process. In the eyes of the law, that is not innovation; it is unauthorized fundraising that exposes unsuspecting buyers to total loss.

The Central Bank of Kenya and the Capital Markets Authority require any public share offer to be accompanied by a registered prospectus, full disclosure of financials, governance structures, and risk statements. If you are not shown those documents, you are not investing; you are donating. A common lure used by such promoters is the promise of listing on the Nairobi Securities Exchange at KSh 10 starting price. This is fiction. Listing is neither automatic nor guaranteed. It demands years of audited accounts, profitability, capital adequacy, and compliance with the Capital Markets Authority’s rigorous corporate governance code. The NSE does not sell hope; it lists performance. Share prices are not determined by wishful thinking but by market valuation, which is based on transparent financial reporting and investor confidence. Too many Kenyans have been left clutching paper certificates from “pre-listing” schemes that never saw the inside of the Exchange. These papers cannot be traded, redeemed, or recognized. They are souvenirs of misplaced trust.

Buying shares in an unlicensed mortgage venture exposes investors to a toxic brew of risks. There is regulatory risk because the venture may never obtain a Central Bank licence, which could render your shares worthless. There is liquidity risk, since there is no open market for unlisted shares, you cannot resell them. There is governance risk, since, without Capital Markets Authority oversight, there is no protection against the misuse of funds. There is a conflict of interest risk because the same directors managing construction, land sales, and banking plans may divert funds into non-bank projects. And there is reputation risk, because when the promised “bank” fails, public trust in genuine financial innovators collapses too.

The reality of the Kenyan mortgage sector further exposes the illusion. The mortgage market remains small and fragile, with fewer than 30,000 active mortgages nationwide according to Central Bank of Kenya data. Even established players like Housing Finance Corporation continue to struggle with defaults and liquidity challenges. A newcomer must raise massive capital, deploy robust credit-risk systems, and win consumer confidence, no small feat in a volatile housing market. For investors, expecting shares to multiply in value without a functioning bank, audited results, or regulatory approval is not a strategy; it is pure speculation.

The wise investor must resist emotional persuasion and glittering promises. Verify the Central Bank of Kenya’s list of licensed mortgage institutions, request the Capital Markets Authority-approved prospectus, avoid pre-listing hype, and seek independent legal and financial advice. It is better to invest in a transparent, operating bank than to gamble with money on an unlicensed dream that may never materialize. Support genuine innovation, but let diligence be your first investment.

Buying shares in an unlicensed “future bank” is not visionary; it is financially reckless. Until the Central Bank licence is granted, the Capital Markets Authority prospectus is published, and the Nairobi Securities Exchange listing is approved, your money is exposed to the whims of promoters rather than the discipline of the market. The wise investor would rather miss the first wave of hype than drown in the tide of regret.

Disclaimer:
This Editorial is for informational and educational purposes only. It does not constitute financial advice or endorse any particular company, product, or investment. Readers are encouraged to seek independent professional guidance and to verify all licensing and regulatory information directly with the Central Bank of Kenya and the Capital Markets Authority before making any investment decisions.

The Diaspora Times.