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.