The Kenya Mortgage Refinance Company (KMRC) has unveiled plans for a groundbreaking initiative – the Risk Sharing Facility (RSF). This initiative is designed to empower households in the informal sector, which constitutes an impressive 83.39 percent of Kenya’s workforce, by facilitating their access to home loans from banks and savings and credit cooperatives (saccos).
The RSF, currently in its final stages of development, serves as a guarantee for a portion of loans, mitigating the risks associated with irregular incomes among informal sector workers. This move is a significant leap towards democratizing homeownership opportunities for a demographic that has traditionally faced barriers in accessing housing finance.
Johnstone Oltetia, CEO of KMRC, explains that the RSF is a vital component in enhancing housing finance affordability by sharing credit risk for lower-income borrowers. This not only expands KMRC’s offerings but also addresses the exclusion of lower-income customers from accessing home loans, providing a tangible solution to a long-standing issue.
Beyond incentivizing banks and saccos to broaden their financing scope, the RSF is poised to narrow the housing financing gap for non-formal income borrowers, a demographic often deemed high-risk. This aligns with the government’s broader vision for affordable housing, echoing President William Ruto’s commitment to constructing 250,000 affordable housing units annually.
Prospective homebuyers stand to benefit from KMRC’s fixed interest rate of five percent. Qualifying individuals, with a monthly income not exceeding Sh150,000, can access up to Sh8 million for properties in the Nairobi metropolitan area and Sh6 million elsewhere in the country.
Kenya currently grapples with a thin retail mortgage market, where only 27,786 home loans valued at Sh261.8 billion were recorded by December 2022. The average loan size for banks increased to Sh9.4 million last year, effectively locking out low- to mid-income workers. KMRC’s role in derisking the mortgage market is crucial, providing long-term funds backed by the World Bank Group and the African Development Bank to banks and saccos for onward lending.
Despite inflationary pressures, KMRC’s fixed-rate financing remains a stable option in an unpredictable economic environment. The company disbursed nearly Sh2.40 billion between January and September, supporting 606 home loans—a testament to its impactful presence in the market.
As Kenya strides in addressing the evolving housing landscape, KMRC’s visionary initiatives are poised to redefine accessibility and affordability for the nation’s informal sector, marking a substantial leap toward inclusive and sustainable homeownership.
By: Montel Kamau
Serrari Financial Analyst
3rd December, 2023
