AFFORDABLE HOUSING
KMRC advances over Ksh150m to Saccos for mortgage lending
Stima, Bingwa, and Tower Saccos top list of mortgage lenders
The Kenya Mortgage Refinance Company (KMRC) has disbursed KSh 2.76 billion to mortgage lenders, with banks accounting for the largest chunk of the fund.
Kenya Commercial Bank (KCB) and HF Group lead the pack with Ksh 2.12 billion and Ksh 515 million, respectively.
Stima Sacco tops in the co-operative sector with Ksh 69 million mortgage loans. Other Saccos that have received financing from the state firm are Tower Sacco Ksh 30 million and Bingwa Sacco Sh27 million.
Other co-operatives lined up for re-financing by KMRC include Kenya Police, Mwalimu National, Safaricom, Ukulima, Imarisha, Unaitas, Imarika, and Harambee Saccos.
KMRC has re-financed 1,427 mortgages worth Sh2.76 billion, according to its Chief Executive Officer Johnstone Oltetia. About 337 mortgages valued at Ksh 979 million are in the offing.
Several Saccos have also presented their new and eligible mortgages for re-financing by KMRC; the treasury-backed lender offers cash to banks and Saccos for onward lending to home buyers.
The firm is financed by World Bank, African Development Bank, and the government. Eighty percent of the World Bank credit line is earmarked for affordable housing, a loan of up to Ksh 4million in the Nairobi metropolitan area (Nairobi, Kiambu, Machakos, and Kajiado) and up to Ksh 3 million elsewhere.
According to the firm the difference, 20per cent will be available for upper-middle-income housing. On the other hand, 40% of AfDB funds will be used to re-finance mortgages of up to Ksh 5million, and 60% will go into re-financing mortgages of up to Ksh 8million. For purposes of affordable housing, the borrower’s income threshold is Ksh. 150,000 per month.
KMRC lends to banks and financial co-operatives at an annual interest of five percent. The firm has mobilized about Sh40 billion, including an asset base of Ksh 2.27 billion, Sh25 billion committed by the World Bank, and Sh10 billion from the African Development Bank (AfDB).
Oltetia said participating primary mortgage lenders (PMLs) had already received Sh.2.75 billion with the disbursement drawn from the World Bank line of credit.
This initial lending, provided at a fixed rate of 5% per annum, will help mortgage lenders create new mortgages in the market on long-term-tenor within single digits rates.
The four institutions made successful applications and demonstrated a re-finance-able mortgage portfolio of 1400 mortgages, which acts as the collateral for the funding.
“The disbursement of funds illustrates the legal, structural and strategic foundations that we have been putting in place since inception for a fit for-purpose mortgage re-finance company,” said Oltetia.
More participating institutions are at an advanced stage of accessing funding from KMRC.
“They are presently preparing their mortgage portfolio based on KMRC’s eligibility criteria, and once submitted KMRC will review and release more funding in due course,” he said.
Established in April 2018 as a Public-Private Partnership (PPP), under the supervision of the Central Bank of Kenya (CBK), Kenya Mortgage Refinance Company’s role is to provide long-term funds to primary mortgage lenders (Banks, Micro Finance Banks, and Saccos) to increase the availability and affordability of home loans to Kenyans.
KMRC provides concessional fixed-rate, long-term finance to mortgage financiers so that they can transfer the same benefits to individual borrowers, making home loans more accessible and affordable to a majority of Kenyans.
KMRC’s objectives include contributing to the growth of Kenyan capital markets through the issuance of bonds as a source of sustainable long-term funding, assisting in the standardization of mortgage practices in Kenya through enhanced capacity building to member institutions on the underwriting of mortgages, and generally contributing to the growth of the mortgage market in Kenya
In October 2019, KMRC conducted a portfolio review of its 20 participating financial institutions to determine the existence of a portfolio that meets KMRC eligibility criteria. The review identified a potential aggregate housing loan portfolio of KES 50.3 billion that the firm could potentially re-finance.
The firm provided the Sacco Societies Regulatory Authority (SASRA) was with capacity-building support to ensure the regulator’s mortgage lending guidelines and approvals are aligned with KMRC requirements.
KMRC is expected to play a significant role in contributing towards the achievement of the Affordable housing objective in Kenya.
In the short term, KMRC is well-positioned to support emergency interventions to stabilize the housing market post-Covid-19 pandemic. In addition, as a liquidity provider, KMRC will support mortgage lenders by providing secure long-term funds against an eligible portfolio of mortgages.
Recently, the firm appointed three advisers to guide its planned debut bond issue, whose proceeds will be channeled to banks and Saccos for affordable home loans.
NCBA Investment Bank, Lion’s Head Global Partners, and Mboya Wangong’u and Waiyaki Advocates will advise the firm on the cash call targeted for July-September this year.
NCBA Investment Bank is the financial advisory and brokerage unit of NCBA Group PLC. At the same time, Lion’s Head is a frontier and emerging markets-focused investment bank with headquarters in London and offices in Nairobi, Lagos, Dubai, and New York.
The firm has been allocated Sh11.5 billion for the year starting July 2021 in proposed budget estimates.
The Central Bank of Kenya licensed KMRC in September last year.
