The World Bank has approved a $250 million International Bank for Reconstruction and Development (IBRD) loan to enhance access to affordable housing finance for Kenyans who are unable to access long-term housing finance.
The Kenya Affordable Housing Finance Project (KAHFP) will support the establishment and operationalization of the Kenya Mortgage Refinance Corporation (KMRC) a largely private sector-owned and non-deposit taking financial institution under the supervision of the Central Bank of Kenya.
KMRC’s goal is to drive affordability of mortgages by providing more long-term funding to financial institutions, an incentive to enable them to offer long tenure loans to homebuyers.
The project will also assist the Ministry of Lands and Physical Planning to improve property registration and address structural constraints in the land management system in Kenya.
“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 and in alignment with the World Bank Group’s Maximizing Finance for Development agenda,” said Felipe Jaramillo, World Bank Kenya Country Director.
“Urban housing currently remains unaffordable for most Kenyans due to cost of financing, the short loan tenures and the high cost of properties,” he added in a statement issued in Nairobi on Thursday.
Currently, commercial banks in Kenya hold only about 26,000 mortgage loans of an individual value of $110,000.
The interest rate cap of 2016 coupled with an overall Non-Performing Loan (NPL) ratio of 12% led banks to tighten their credit standards and offer variable rate loans locking out middle to low income would-be homeowners.
Kenyans largely access loans from Savings and Credit Cooperatives (SACCOs) that are estimated to provide almost 90% of Kenya’s total housing finance.
While SACCOs’ interest rates remain low at 12% they remain highly constrained by the short-term nature of their deposits liabilities and short loan tenures of not more than five years.
The KAHFP support will target households that are classified by the Government of Kenya to fall within the mortgage gap and low-cost categories and represent 95% of the formally employed population.
JK/as/APA