Nairobi — The wait has been long. For about two years, Kenyans have been looking forward to the Safaricom initial public offer (IPO).

The turns and twists ranging from court cases, ownership controversy to suggestions that the company be listed at a foreign stock market had only exacerbated the feeling among Kenyans that someone wanted to deny them a chance to own a slice of the most profitable firm in East and Central Africa.

The waiting is over and investors are gearing for a kill in the IPO that opens on March 28 and closes on April 23. The 10 billion shares being listed will be on offer at Sh5 per unit and investors require Sh10,000 for a minimum of 2,000 shares.

While launching the offer, which is expected to earn the Government Sh50 billion, Finance minister, Mr Amos Kimunya, said that by offering 25 per cent of its stake in the company to the public, the Government wanted as many Kenyans as possible to own a piece of the mobile phone operator. "This IPO provides Kenyans with an alternative way of investing," he said.

As the leading mobile operator with a subscriber base of about eight million, Safaricom last year realised a pre-tax profit of Sh17.1 billion. The impressive performance is expected to continue in the coming years as the number of subscribers increases and new products are rolled out.

The launch of the IPO and its subsequent listing at the Nairobi Stock Exchange (NSE) on June 9 is good news for investors.

For some potential investors, it's good news coming at the wrong moment. The offer also comes soon after the country has gone through a turbulent period following last year's disputed presidential. The unfortunate events that followed pushed the prices of basic commodities up, forcing many people to spend their savings.

It also opens soon after the Easter Holiday, a period when people are known to spend a lot of money shopping and traveling upcountry. It also opens at the worst moment for investors who used to trade through Nyaga Stockbrokers. The stockbroker was recently put under statutory management and many clients might not be able to sell some of their shares to participate in the IPO.

According to Mr Henry Karugu, the marketing and product development director at Equity Bank, many Kenyans have demonstrated their willingness to invest in Safaricom shares and it would be agonising if they were to be left out due to lack of money.

Thus many banks among them Equity, Kenya Commercial Bank , Family Bank, Barclays and I&M have packaged loan facilities specifically for the offer.

Equity Bank, for instance, has developed a loan package that is able to provide 100 per cent financing of any amount of shares that salaried investors will ably for. The loan has a repayment period of 36 months and is pegged at 15 per cent interest rate. Applicants are not required to raise any collateral because the shares will act as the main security.

Investors can apply for any amount, with the only requirement being that they must demonstrate the ability to repay the loan. According to Karugu, the bank will finance fully all applications to a maximum of Sh5 million. For applications exceeding Sh5 million, the investor will be required to produce security to cover for 20 per cent of the loan.

Applicants who don't bank with Equity will be required to open an account and a central depository system (CDS) account with the bank. Customers will only be required to open a CDS account. This arrangement will enable many people to apply for the shares due to the bank's wide branch network that covers the entire country.

Unlike normal loans, Equity will not release the money to applicants but will pay for the applied shares on behalf of the investor.

"We are providing Kenyans with a one-stop-shop through which they can buy the Safaricom shares," says Karugu, adding that Equity is in a position to keep the shares safe for investors having been granted a custodial license.

At KCB and Family Bank, loans will be available for clients who have accounts. KCB will require applicants with a monthly salary to have maintained an account with the bank for at least six months and should be processing their salary through the bank. Just like Equity, the banks will not give out the money but will pay for the applied shares on behalf of the investor.

Crediting the money to the account of the vendor (Safaricom) is a protective measure because many borrowers usually divert borrowed money from the intended purposes.

According to Mr Sammy Muvelah, an investment manager at Zimele Asset Management Limited, the decision by banks to extend unsecured loans to people seeking to invest in shares attests to the fact that anybody is bankable and nobody should be locked out of the financial sector.

"Shares are probably the first assets that an individual can own. It is a positive move by banks to give loans," he observes, adding that this is an extension of the many types of financing that people seek when investing.

He says one should not overstretch him/herself when borrowing to buy shares and should always bear in mind the likelihood of failing to get full allocation. In the past two years there have been five IPOs all of which have been highly oversubscribed, a scenario that is likely to repeat itself with the Safaricom IPO.

Considering that if one million investors apply for a minimum of 2,000 shares at Sh10,000, the 10 billion shares on offer would be fully subscribed and anything more would constitute oversubscription.

Luckily for the Safaricom issue, allocation will be based on the number of shares applied for, meaning that the higher the application amount the higher the number of shares an investor will get. This fact notwithstanding, investors need to evaluate how much debt they can handle when applying for the loan and considering they might not get full allocation.

"People should not seek large credit, get small allocation and start wondering what to do with the surplus debt," explains Muvelah, adding that it would be more prudent for banks to approve the loan subject to allocation as opposed to the current practice of pre-allocation.

Kurugu says that investors should not be worried if they fail to get allocation corresponding with the loan applied for. At Equity, the remaining amount will be disbursed to the applicant's bank account and will go towards servicing the loan.

For speculative investors who might not want to burden themselves with the process of repaying the loan, there is the opportunity of disposing off the shares on the first day of trading in the secondary market and immediately repaying the bank.

Though its advisable to invest with a long term view, it is critically important to repay the bank if you sell the shares on the first day of trading. Failure to repay means you increase your debt.