The World Bank 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 operations 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.
“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,” says Felipe Jaramillo, World Bank Kenya Country Director.
He further went on to say;
“Urban housing currently remains unaffordable for most Kenyans due to the cost of financing, the short loan tenures and the high cost of properties.”
Currently, commercial banks in Kenya hold only about 26,000 mortgage loans of an individual value of KES 11,000,000. 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.
“The project will endeavour to boost shared prosperity for all Kenyans by addressing rapid urbanization which often manifests itself through the development of slums,” says Caroline Cerruti, World Bank Senior Finance Specialist and Task Team Leader for the Project.
“The World Bank has supported many mortgage refinance companies in emerging markets, and Kenya has the right pre-conditions for KMRC to be successful, such as supportive macroeconomic conditions, well developed capital markets and financial institutions active in housing finance”.
KAHFP is expected to increase access to finance by tripling the proportion of urban households having access to a mortgage. The project will promote inclusive finance through KMRC serving SACCOs and microfinance banks, which target borrowers on low and irregular incomes.
Investment into affordable housing will have a strong economic multiplier effect given the number of linked sectors and could support 132,000 new jobs. Better housing conditions are also linked to improved health and education outcomes.
The project will be implemented through KMRC, the National Treasury and the Ministry of Lands and Physical Planning.