The World Bank has approved Sh25 billion ($250 million) to help Kenya set up a mortgage refinancing company that will make it easier for banks to access long-term finance for cheaper home loans
The multilateral lender said the cash will enable the country set up the Kenya Mortgage Refinance Corporation (KMRC), to be owned by the State, commercial banks and financial co-operatives.
Once it starts operations in June, the company will raise debt from markets, including mortgage-backed bonds to lend to banks and financial co-operatives using their mortgage loan contracts with customers as security.
Mortgage firms have shied away from writing housing loans mainly due to lack of long-term deposits in the industry to match them.
"Urban housing currently remains unaffordable for most Kenyans due to cost of financing, the short loan tenures and the high cost of properties," said Felipe Jaramillo, World Bank Kenya Country Director.
"We believe that Kenya's vibrant private sector offers an excellent opportunity to crowd in privately held skills and resources towards achieving the country's Big 4 affordable housing goals."
President Uhuru Kenyatta has said provision of affordable housing is one of his four key priority areas in his second term and aimS at providing 500,000 affordable houses in five years.
The World Bank effectively joins a host of other principal shareholders - mainly commercial banks and deposit taking SACCOs -- which have from March confirmed their involvement in the grand project -- but are yet to release the cash.
The National Treasury has disbursed Sh200m out of the Sh1.5bn that it pledged for the project while the other principal shareholders yet to release their contribution. A portion of the World Bank's money will go into equity capital with the rest being used as initial cash reserve. Kenya had just 26,187 mortgage loans valued at Sh22.2 billion in 2017or less than one percent of GDP in the year, compared with about 30 percent of GDP worth of outstanding mortgages in South Africa.
Kenya had just 26,187 mortgage loans valued at Sh22.2 billion in 2017or less than one percent of GDP in the year, compared with about 30 percent of GDP worth of outstanding mortgages in South Africa.