Mortgage firm Housing Finance will on Thursday launch its rights issue aimed at raising Sh2.3 billion to strengthen its lending capacity.

Through the issue, the mortgage financier will issue 115 million new ordinary shares as rights to existing shareholders through the Nairobi Stock Exchange (NSE).

The rights are on a one to one ration meaning that for every share held, an investor would be entitled to one share.

An initial application by the institution for the Rights Issue flopped last year after the Capital Markets Authority (CMA) delayed the approval. The regulator had then requested on being provided with more information on the company's prospectus.

Faced by a depleted balance sheet in the last financial year, the issue is bound to be core to the premier mortgage financier's five-year strategic plan that seeks to place it at the top reaches of the property market in the country.

In 2007, the company recorded a 20 per cent decline in pre-tax profits due to a squeeze in interest income and expanding operation costs.

Equity Bank and British American Investments Company (Britak) last year played a role in increasing the bank's capital after buying out 24.9 per cent stake in the firm.

The Sh1.1 billion deal bought out shares previously held by the Commonwealth Development Corporation (CDC)

Apart from improvement on its lending muscles, analysts also note that additional funds will play a critical role in shoring up the bank's core capital.

This will enable it to satisfy market regulations as they seek to increase lending and deposit taking portfolios.

According to Mr Peterson Mwangi, of Afrika Investment Bank, the rights issue by the firm will overly be a success.

"Going by past trends witnessed in the market on rights issues, I expect an over subscription which would be good for the institution," said Mr Mwangi.

Established in 1965, through a joint venture between the Government of Kenya and CDC, Housing Finance was aimed at helping post-independence Kenyans own houses.

The company has also embarked on aggressive marketing which among other initiatives included launching a number of differentiated fixed-rate products to drive up its business mix and win over more customers.

Late last year, the company introduced Hekima Milele, a one-stop solution for financial services where customers can access a range of financial services.

The product is part of collaboration with its new partners, Equity Bank and Britak, bringing together developers and service providers.