President Uhuru Kenyatta has launched the Kenya Mortgage Refinance Company (KMRC), a financial institution whose sole function is to provide long-term loans to primary mortgage lenders.
The move to provide long-term cheaper funding to primary mortgage providers including Banks, Microfinance Banks and Saccos is aimed at making mortgage cheaper for Kenyans.
Making mortgage affordable for larger sectors of the population supports the Affordable Housing Pillar of the Big 4 Agenda.
KMRC, which starts operations with an initial capital base of Shs 35 billion, was incorporated as a non-deposit taking financial institution under the supervision of the Central Bank of Kenya. It will provide long-term loans to mortgage lenders in order to increase the availability and affordability of mortgage facilities in the country.
Its role will be to source loans from big investors and multilateral lenders and act as a pool from which mortgage lenders in the country can draw from at affordable rates. The initial loans to kick-start KMRC were provided by the World Bank and the African Development Bank at Sh25 billion and Sh10 billion respectively.
Speaking at the launch of institution, President Kenyatta said the initiative is a partnership between the Government and the private sector.
He said the initiative demonstrates the possibilities of the growing synergy between the private sector and the Government towards the delivery of public goods.
The President said the new venture is aimed at addressing the deficit in housing created by the huge rise in the country’s population as well as boost the Government’s job creation initiatives.
“As we continue to experience the dividends of our growing population, the housing supply has, over the years, not kept pace with the concurrent growth in the demand for houses. As a result, this has led to a huge housing deficit, particularly for the lower income households,” said the President when he spoke at the event held at the Windsor Country Club.
The President said the Government is making deliberate interventions in the housing sector to make it more responsive to middle and lower income segments of the population.
“The intervention is based on recognition that reaching the goal of adequate, safe and affordable housing for all, especially the lower income group, requires a fundamental rethinking of the traditional approach used in the past,” said the President.
He said the uptake of housing mortgages in Kenya remains below its potential with the Central Bank of Kenya statistics showing that the total outstanding mortgage debt in 2017 stood at about Shs 223 billion.
This represents only about 2.74% of GDP, which clearly shows that the housing mortgage business in Kenya is still very small. Contrasting the country’s mortgage uptake to South Africa’s the President admired its performance accounting for 31% of the South African nation’s GDP.
He said the Government expects KMRC to contribute to more homeownership through cheaper mortgages.
“We expect the refinance company to significantly contribute to the development of the housing finance market in Kenya and help reverse the low mortgage penetration, by increasing the number of mortgages from the current 26,000 to over 60,000 by the year 2022,” the President said.
KMRC will largely be financed through debt and equity, and will offer affordable housing and market housing loans to primary mortgage lenders.
The affordable housing loans refinancing will be capped at Shs 4 million and Shs 3 million in Nairobi and the rest of the country respectively. Refinancing for market housing loans will be issued at market rates.