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FEATURE STORY December 10, 2021

How Kenya is Making Home Ownership Possible for Low-Income Households


With World Bank Group support, Kenya is working steadily toward improving mortgage affordability and increasing the number of qualifying borrowers which has helped expand the primary mortgage market and home ownership.

Photo: Kenya Mortgage Refinance Corporation (KMRC)

The Kenya Mortgage Refinance Company (KMRC), which was granted a license to conduct mortgage refinance business in 2020, is yielding a positive impact on potential borrowers and the supply of long-term finance from Kenya’s financial cooperatives.

NAIROBI, December 10, 2021-Rachel Mwangangi is getting ready to move into her dream home in Kenya’s capital, Nairobi, within the first quarter of 2022. It is the culmination of a long and arduous journey for the single parent who works with one of Kenya’s county governments and solely fends for her two children ever since the demise of her husband.

For a long time, a mortgage facility that she would deem affordable had been out of her reach, with short repayment periods and double-digit interest rates locking her out. This changed when she got to know of lending through her savings and credit cooperative society, Stima Sacco, which had been enabled by onward lending courtesy of the Kenya Mortgage Refinance Company (KMRC).

“I joined a page on a social media site and I was going through it, I happened to read about a loan facility whose rates were so good. I decided to go to my sacco branch and inquire about it and the journey began with them assessing how much I earned and which institution I worked with,” Mwangangi said.

Having secured a Ksh. 4.0 million facility whose interest rate is 9.0% and the repayment period is 15 years, Mwangangi considers herself considerably fortunate when she contrasts this with the prevailing market landscape. According to the Central Bank of Kenya, the average mortgage size is Ksh. 8.6 million, the average interest rate charged is 10.9% and the average repayment period is 11.2 years.

“This is the best thing that happened to me since I was born. In this country where do you get a loan at 9.0%? I was speaking to my friend who was telling me I have been given free money. I was very excited because I had earlier just repaid a Ksh 1.5 million loan and it took me quite some time because the rate was too high,” she said.

Mwangangi’s monthly mortgage service cost is Ksh. 48,000, an increase from the Ksh. 35,000 she currently pays in rent. However, she said she is delighted that KMRC has not only enabled her to own a home but more importantly realize the quality of housing she has always desired; quality she would not have been able to enjoy had she relied on her savings only for this undertaking.

"If it were not for KMRC I would not have achieved my dream house. I am grateful that through this facility I am able to put up the building I have always dreamt of -- my house is very beautiful."
Rachel Mwangangi

“I had planned of putting up something small using my little savings but when I found that the sacco could facilitate me to get additional cash, I changed the plan. If it were not for KMRC I would not have achieved my dream house. I am grateful that through this facility I am able to put up the building I have always dreamt of -- my house is very beautiful,” she said.

KMRC was granted a license to conduct mortgage refinance business in Kenya on September 3, 2020. The company is designed to push mortgages down-market to underserved segments of the market through single-digit and longer-tenured facilities. Beyond serving as a game changer for persons such as Mwangangi, it is also yielding a positive impact on the supply of long-term finance from financial cooperatives.

“Prior to KMRC we did make attempts into the mortgage lending business but only through scheme loans. This meant that we were merely administering mortgage schemes on behalf of other companies. KMRC has given us the capability to offer mortgage facilities just like any other financial institution. So far, we’ve received Ksh 69 million from KMRC out of which we’ve lent out more than 50.0%,” said Dr. Hassan Gamaliel, Stima Sacco’s Chief Executive Officer.

Gamaliel says Stima Sacco’s demand pipeline is steadily growing and there will be a need to tap into more financing from KMRC as more citizens reach for affordable financing.

“KMRC is enabling us for the first time to lend our own money through a 20- to 25-year facility. We would never have been able to do this; our micro-mortgage product would have been able to go only up to 12 years. What this has meant in terms of affordability is what we are really into,” Gamaliel said.

The value of outstanding mortgages in Kenya closed 2020 at Ksh. 232.7 billion, a 2.1% decline compared to the close of 2019. The number of mortgages in the market closed 2020 at 26,971, down 3.7% compared to 2019. With primary mortgage lenders witnessing a rise in the pipeline of applications for affordable financing, KMRC is helping to recast the mortgage landscape in Kenya to be more inclusive.

KMRC has been supported since inception by the World Bank Group, which provided technical assistance and financing to the Government of Kenya to design and operationalize it. IFC invested equity in KMRC alongside eight commercial banks, one microfinance bank, eleven SACCOs, Shelter Afrique, and the Government of Kenya.