I’m
delighted to join you this morning to grace this important occasion,
the launch of the Kenya Mortgage Refinance Company (KMRC).
I
note with appreciation this initiative is a partnership between the
Government and the private sector. It demonstrates the possibilities of
the growing synergy between the private sector and the Government
towards the delivery of public goods.
There
is no doubt at all we are making progress in the quest for the
transformation of the lives of our people. This ground-breaking
initiative only adds the momentum to our quest to enhance access to
affordable housing for all.
As
we continue to experience the dividends of our growing population, the
housing supply has, over the years, not kept pace with the concurrent
growth in the demand for houses. As a result, this has led to a huge
housing deficit, particularly for the lower income households.
In
response to the compelling needs of our fellow citizens, under the Big 4
Agenda, we are making deliberate interventions in the housing sector to
make it more responsive to middle and lower income segment of
population.
The
intervention is based on recognition that reaching the goal of
adequate, safe and affordable housing for all, especially the lower
income group, requires a fundamental rethinking of the traditional
approach used in the past. A new approach is required, one that
establishes the right legal, regulatory, and market environment for the
efficient deployment of private and public capital.
Kenya
has a dynamic mortgage industry; it has been growing rapidly and
becoming increasingly competitive. A number of institutions are now in
this sector, including banks, microfinance banks and Savings and Credit
Cooperative Organizations (SACCOs).
According
to the Central Bank of Kenya, total outstanding mortgage debt in 2017
stood at about Ksh. 223 Billion. This represents only about 2.74% of
GDP, which clearly shows clearly in Kenya the industry is still very
small. South Africa, as an example, boasts of a mortgage sector
accounting for 31% of its GDP
Housing
mortgage finance in Kenya remains below its potential. The major
inhibiting factors to the growth of the Kenyan mortgage market include
lack of access to long-term finance, high interest rates on mortgages,
high cost of houses, high incidental cost of mortgages, low levels of
income and difficulties with property registration and titling.
This
seminal initiative that we are launching today is a policy response to
the barriers that hinder access to affordable housing. We have recently
rolled out the policy framework that will guide the transformation of
the housing sector.
On
the financing side, the Government has been supporting initiatives
aimed at developing innovative instruments to address the housing
financing challenges. Establishment of the Kenya Mortgage Refinance
Company that we are launching today is the highlight of these
initiatives.
In
addition, the National Treasury, in consultation with other key
stakeholders is developing a credit guarantee scheme. Once operational,
it will support a large proportion of creditworthy potential borrowers
that are currently not able to access loans because they do not have a
“formal salary”. The scheme will include a housing guarantee mechanism
for those with low incomes or employed in the informal sector to help
expand access to housing finance.
The
Launch of Kenya Mortgage Refinance Company today, offers the housing
finance market a credible, professional and high-quality large-scale
medium to long-term finance.
Based
on international experience, mortgage refinance facilities are
generally owned by the banks or institutions, which use it for
refinancing. The deliberate inclusion of SACCOs in the solution in
Kenya, is unique and would broaden the reach of housing finance to
borrowers with low and informal incomes.
Kenya
Mortgage Refinance Company will be expected to provide fixed rate
long-term funding to primary mortgage lenders, which would be passed to
home buyers. Fixed rate mortgages would protect homeowners from the
risk of interest rate volatility, hence allowing them to be in control
of their monthly commitments and afford their homes.
The
Kenya Mortgage Refinance Company will also benefit the financial
institutions by providing a liquidity back-stop and facilitate a much
greater level of maturity transformation.
Indeed, the scheme will enable financial institutions to better leverage their deposit base for on-lending as mortgage loans.
In
order for this solution to be successful, primary mortgage lenders need
to position themselves to provide more access to affordable mortgage
finance. Equally important, developers too need to position themselves
to supply, innovative and affordable housing solutions. This not only
allows the property market to function well, but it also stimulates
demand at the lower end.
And the end result is a win-win for both government, and the private sector lenders and developers.
I
wish at this point to thank the World Bank and the African Development
Bank, for agreeing to support this initiative, committing Ksh. 25
Billion and Ksh. 10 Billion, respectively.
I
am happy to say the capitalization of Kenya Mortgage Refinance Company
has been finalized as well as the development of the operational
framework and the constitution of the Board. The Company is now ready
to commence business and, therefore, Kenyans can now count on us to
deliver lower interest rates to finance acquisition of their homes.
My
Administration’s commitment to the people of Kenya, as enshrined in the
Big 4, is steadfast and on course. Every citizen deserves to live a
dignified life that guarantees access to basic needs, provision of a
decent shelter over their head being one of them.
We
expect the refinance company to significantly contribute to the
development of the housing finance market in Kenya and help reverse the
low mortgage penetration, by increasing the number of mortgages from the
current 26,000 to over 60,000 by the year 2022.
Finally,
Ladies and Gentlemen, I want to thank the team at National Treasury for
working tirelessly to make this project a reality. I also want to once
again, thank the World Bank and the African Development Bank for
providing technical and financial support. I also thank all financial
institutions that have graciously agreed to partner with Government as
shareholders of Kenya Mortgage Refinance Company.
With
those remarks, it is now my distinguished pleasure and privilege to
declare the KENYA MORTGAGE REFINANCE COMPANY, officially launched.
Thank You and God Bless You.