LOAN

State backed mortgage firm issues first Sh2.7bn credit to lenders

Participating entities will be advanced at 5% to enable them advance to their customers at rates lower than 12%

In Summary
  • This first disbursement is drawn from the World Bank  line of credit.
  • The company was established two years ago to support the Affordable Housing Pillar of the Government’s Big Four Agenda.
National Housing Cooperation houses in Kilimani, Nairobi /JACK OWUOR
National Housing Cooperation houses in Kilimani, Nairobi /JACK OWUOR

The Kenya Mortgage Refinancing Company (KMRC) first tranche of credit to banks for onward lending to borrowers seeking long-term home loans at affordable rates is out. 

The National Treasury backed lender yesterday released Sh2.75 billion to KCB Bank, HF Bank, Stima Sacco and Tower Sacco which are the first beneficiaries among  primary mortgage lenders (PMLs). 

KCB received Sh2.13 billion, HF Bank Sh514 million, Stima Sacco h69 million while Tower Sacco received Sh29 million. 

This first disbursement is drawn from the World Bank line of credit.

The initial lending, provided at a fixed rate of five per cent per annum, will help mortgage lenders create new mortgages in the market on long-term-tenor within single digits rates.

According to KMRC chief executive officer  Johnstone Oltetia, the Sh2.75 billion is part of a Sh4.5 billion mortgage loan portfolio available for immediate refinancing to participating financial institutions.

''The four institutions made successful applications and demonstrated a re-financeable mortgage portfolio of 1,400 mortgages, which acts as the collateral for the funding,'' Oltetia said.

He termed the disbursement of funds as a historic new dawn in affordable housing finance in Kenya saying that it illustrates the legal, structural and strategic foundations that have been put in place since inception for a fit-for-purpose mortgage refinance company.

In September, KMRC was cleared by the Central Bank of Kenya (CBK) to start issuing credit to local lenders. 

The Sh2.7 billion issued yesterday is part of the Sh35 billion worth of credit extended to the National Treasury by the World Bank and AfDB to support the country's agenda on affordable housing. 

According to KMRC, at least 20 finance institutions have been shortlisted to receive and disburse the credit to aspiring homeowners. 

''They are presently preparing their mortgage portfolio based on KMRC’s eligibility criteria, and once submitted, we will review and release more funding in due course” Oltetia said.

This refinancing will go a long way in making affordable housing a reality – with part of the funds earmarked for financing the Affordable Housing Programme’s Park Road Housing Project.

KCB and HF Bank are among the seven local banks that have committed to set aside Sh365 billion worth of mortgages for the programme.

Others are  DTB, Absa, NCBA, Credit Bank and Kenya Women Microfinance Bank (KWFT) as well as Kenya Police, Mwalimu National, Safaricom, Ukulima, Bingwa, Imarisha, Unaitas, Imarika and Harambee Saccos.

The KMRC boss said they are preparing to raise additional funds to support home loans through a bond issue in the third quarter of 2021.

''Noting that KMRC does not have a track record in the market, an agreement has been reached with African Development Bank to provide a partial credit guarantee and with further support from World Bank group we expect this bond issue to be successful", Oltetia said.

He added that issuance of bonds will help cater for the market-based housing finance, beyond the refinancing of affordable mortgages which is capped at Sh4 million within Nairobi metro; and Sh3 million elsewhere in the country.

The company was established two years ago to support the Affordable Housing Pillar of the Government’s Big Four Agenda.

It was incorporated under the Companies Act, with a required minimum paid-up capital of Sh1 billion. The institution has however surpassed this threshold

National Housing Cooperation houses in Kilimani, Nairobi /JACK OWUOR
National Housing Cooperation houses in Kilimani, Nairobi /JACK OWUOR
National Housing Cooperation houses in Kilimani, Nairobi /JACK OWUOR
National Housing Cooperation houses in Kilimani, Nairobi /JACK OWUOR