The International Finance Corporation(IFC) and Shelter Afrique are the new board members of Kenya Mortgage Refinance Company(KMRC), a state-owned mortgage finance firm that also has private sector players.
The two institutions join other shareholders on the KMRC Board that includes; the Treasury, and 20 Primary Mortgage Lenders (PMLs); eight banks, one Micro Finance Bank, and 11 SACCOs (Savings and Credit Cooperatives).
The Banking sector is represented by KCB Group, Cooperative Bank, DTB, HF Group, NCBA, Absa Kenya, Stanbic, and Credit Bank.
Kenya Women Microfinance Bank (KWFT) is the sole Micro Finance Bank shareholder. SACCOs include Kenya Police, Mwalimu National, Safaricom, Ukulima, Bingwa, Imarisha, Unaitas, Imarika, Tower, Stima, and Harambee Sacco.
Kenya Mortgage Refinance Company has already raised KSh 2 billion capital from its shareholders, while the National Treasury has mobilized KSh35 billion from development partners namely the World Bank and the Africa Development Bank.
The state mortgage firm has also received KSh 1.2Billion from other shareholders (Banks and SACCOs), and a further KSh 400 Million in the form of equity investment from IFC and Shelter Afrique.
“From an operational standpoint, I can confirm that everything is now in place for us to start providing long-term finance to participating financial institutions, for onward lending to home loan borrowers at affordable rates once KMRC obtains a license,” said KMRC Acting CEO Johnstone Oltetia.
The National Treasury is contributing to the Affordable Housing agenda through the establishment of a liquidity facility (KMRC) in order to address inherent financing challenges and unlock liquidity for affordable housing.
KMRC was incorporated in April 2018 as a Limited liability company under the Companies Act 2015, with the sole purpose of providing secure long-term funding to primary mortgage lenders (Banks & Saccos) in order to increase availability and affordability of housing loans to Kenyans.
The firm is regulated by the Central Bank of Kenya(CBK) as a non-deposit taking financial institution, with the Capital Markets Authority (CMA) will provide oversight over its bond issuance operations.
KMRC was established as a public-private partnership arrangement with majority private-sector owned in order to crowd in private sector funding to support affordable housing
The company, which is owned 80% by the private sector and 20% by Government, will extend long term loans at fixed rates to financial institutions secured against mortgages so that they can extend the maturity of their housing loans to end borrowers hence increasing affordability.
Given Kenya’s growth and urbanization rates, there is critical need to deliver housing at the lower end of the income spectrum in order to improve housing conditions for the average Kenyan.
Through its re-financing activities, KMRC will seek to catalyze the growth of the mortgage market in Kenya by targeting households that fall within the mortgage gap and lower-middle-income categories which represent about 95% of the formally employed population.
Kenyans will be able to access long term housing loans and enjoy a wide choice of competitively priced mortgages due to increased competition and product innovation amongst Primary mortgage Lenders.
This will lead to an increase in homeownership and growth in household assets.
The primary mortgage lenders will also benefit by improving their asset-liability risk management by matching long-term mortgage loans with long-term funds. The companies will have access to funds and reduce barriers that inhibit the small lender’s active participation in the growth of the mortgage asset portfolio.
It is envisioned that in the medium term, KMRC will contribute to lowering of overall transaction costs by pooling issuance of bonds as compared to financial institutions accessing the market individually and spur development of the mortgage market.
KMRC will be a regular issuer of long-term, high-quality investments needed by institutions with long term liabilities thus crowding in pension funds, social security funds, and insurance companies.
A Mortgage Refinance Company (MRC) is a non-bank financial institution, incorporated as a limited liability company to provide affordable long-term funding and capital market access to primary mortgage lenders such as banks and financial co-operatives.