KMRC enabled Sacco mortgage is making homeownership possible as Low-income households can access affordable loans to own homes.
Happy. Excited. Satisfied. Rachel Mwangagi describes her feeling. It has been a long and arduous journey for the single parent who works for a county government. Since her husband died, she did all she could to provide the best upbringing for her two children.
She is getting ready to move into her dream home in Nairobi in 2022. A dream come true for the hardworking mother that many still fancy. Her dream has been turned into a reality by her Sacco –Stima Sacco. She always wanted a decent home for her family, but expensive mortgage facilities locked her out.
It all changed when she heard of an affordable mortgage loan offered by her Sacco in partnership with the Kenya Mortgage Refinance Company, KMRC.
“I joined a page on a social media site and I was going through it, I happened to read about a loan facility whose rates were so good. I decided to go to my Sacco branch and inquire about it and the journey began with them assessing how much I earned and which institution I worked with,” she says.
Having secured a Ksh. 4.0 million mortgage facility, whose interest rate is 9.0% and the repayment period is 15 years, Mwangangi considers herself considerably fortunate when she contrasts this with the prevailing market landscape.
According to the Central Bank of Kenya, the average mortgage size is Ksh. 8.6 million, the average interest rate charged is 10.9%, and the average repayment period is 11.2 years.
“This is the best thing that happened to me since I was born. In this country where do you get a loan at 9.0%? I was speaking to my friend who was telling me I have been given free money. I was very excited because I had earlier just repaid a Ksh 1.5 million loan and it took me quite some time because the rate was too high”, she tells a KMRC official.
KMRC has not only enabled her to own a home but, more importantly, realize the quality of housing she has always desired, a quality she would not have been able to enjoy had she relied on her savings only for this undertaking.
“I had planned of putting up something small using my little savings but when I found that the Sacco could facilitate me to get additional cash, I changed the plan. If it were not for KMRC I would not have achieved my dream house. I am grateful that through this facility I am able to put up the building I have always dreamt of, my house is very beautiful,” she says with a fetching smile.
Another beneficially Faith Birgen, an assistant sales manager with an agricultural organization based in Eldoret, had struggled to ramp up her savings for a long, hoping to realize her target of being a homeowner by the time she was 30 years old.
Inaccessibility of mortgage facilities in the market with double-digit interest rates and short tenures bothered her much. At 29, Birgen moved into her own house, purchased at the cost of Ksh 5.4 million thanks to KMRC enabled mortgage.
“I was looking for a mortgage plan then I visited a credit officer at my Sacco who proposed two mortgage plans, one was the Sacco’s stand-alone and another was the KMRC-backed through my Sacco. I opted for the KMRC-backed mortgage because it was quite friendly in terms of the interest rate,” she says.
“Instead of paying my monthly rent which at the end of it the house will not be your asset, KMRC has enabled me to invest now in an asset. The amount that I pay monthly is quite friendly and my living standard has not changed. I am now able to manage my finances better.”
The affordable housing program is helping youth such as Birgen fulfill their homeownership dream, which seemed unattainable in the past. With support from the World Bank Group (WBG), the KMRC mandate is to provide long-term funds to primary mortgage lenders (Banks, Microfinance Banks, and Saccos) to increase the availability and affordability of home loans to Kenyans.
KMRC was granted a license to conduct a mortgage refinance business in Kenya on September 3, 2020. The company is designed to push mortgages down-market to underserved market segments through single-digit and longer-tenured facilities. Beyond serving as a game-changer for persons such as Mwangangi, it also positively impacts the supply of long-term finance from financial cooperatives.
“Prior to KMRC we did make attempts into the mortgage lending business but only through scheme loans. This meant that we were merely administering mortgage schemes on behalf of other companies. KMRC has given us the capability to offer mortgage facilities just like any other financial institution. So far, we’ve received Ksh 69 Million from KMRC, out of which we’ve lent out more than 50.0 per cent”, says Stima Sacco Chief Executive Officer, Dr Hassan Gamaliel.
Dr Gamaliel says Stima Sacco’s demand is steadily growing, and there will be a need to tap into more financing from KMRC as more citizens reach for affordable financing.
“KMRC is enabling us for the first time to lend our own money through a 20 to 25-year facility. We would never have been able to do this; our micro-mortgage product would have been able to go only up to 12 years. What this has meant in terms of affordability is what we are really into”, Dr Gamaliel says.
The value of outstanding mortgages in Kenya closed in 2020 at Ksh. 232.7 billion, this was a 2.1% decline compared to the close of 2019. The number of mortgages in the market closed in 2020 at 26,971, down 3.7% compared to 2019. With primary mortgage lenders witnessing a rise in the pipeline of applications for affordable financing, KMRC is helping to recast the mortgage landscape in Kenya to be more inclusive.
KMRC has been supported since its inception by the World Bank Group, which provided technical assistance and financing to the Government of Kenya to design and operationalize it. IFC invested equity in KMRC alongside eight Commercial Banks, one Microfinance Bank, eleven SACCOs, Shelter Afrique, and Kenya’s Government. Source kmrc.co.ke/news
