Financiers battle for control of low-end home loans market

The race to provide low-income housing loans has intensified as two micro-finance institutions position themselves to tap into a market that has traditionally been avoided by the risk-averse banking fraternity.

Habitat for Humanity Kenya, a Christian organisation last week unveiled a product where the rural and urban poor must be guaranteed by up to 30 people to access a home loan.

Lower rate
Another micro-finance institution, Jamii Bora, says it would offer its members a nine per cent mortgage rate, which is lower than the market rate of 15 per cent.

Jamii Bora’s move is also a step to grow its loan book as it eyes mainstream banking after acquiring a 51 per cent majority stake in City Finance bank.

The MFI partnered with Baraka Africa Fund and its affiliate, Jamii Bora Scandinavia, which comprises of a development fund of the Swedish churches in the acquisition.

The twin moves by the MFIs are set to kick off a race with the mainstream mortgage providers who have also cast their eye in the low-income housing market. This would provide ready housing for the low income earners, analysts say.

For instance, Housing Finance launched a Sh1 million house under its “Makao” solutions where it provides financing and technical support to land owners partners wishing to put up houses.

The MFIs see the entry into the home loans as a way of providing tailor-made solutions for their clients who could only previously access business loans.
“When the incomes of our members start to rise, the next thing they look for is affordable housing,” says Ingrid Munro, Managing Trustee of Jamii Bora.

“We want to move with our members every step of the way.” The foray into the home loans is also geared towards pushing Jamii Bora’s total loan portfolio to Sh4 billion this year after the MFI hit the Sh3 billion mark early this month.

A pilot project has seen Jamii Bora construct 246 two-bedroom houses in Kaputiei Town, which is south of Nairobi with the backing of its financiers from Sweden and Norway, who have pumped in Sh600 million. This gives Jamii Bora sufficient muscle to play in the home mortgage sector.

The houses go for Sh350,000 where its members pay a mortgage of Sh3,000 a month with repayment periods of five to 20 years.

Guaranteed loan
Habitat for Humanity is looking at a model for funding in stages for buying materials, roofing, and completion.

“The idea of asking the debt seeker to belong to a group is to ensure that at any time within the loan period, the amount given out is guaranteed,” said Mr Simon Nyabwengi of Habitat chairman.