Botswana-based micro-financier Letshego has set up a Sh16 billion housing fund to offer mortgages for low-income housing in Kenya over the next five years.
The non-deposit taking microfinance institution is eyeing those locked out of the traditional mortgage market with loans to finance low-cost houses for both residential and commercial use.
Letshego Holdings, listed on the Botswana Stock Exchange, is banking on the housing loans dubbed ‘Makao Poa’ and credit to small and mid-sized enterprises to grow its loan book fivefold from $36 million (Sh3.6 billion) as at December 2015.
“We want to intervene with housing loans where mainstream banking cannot get into,” said Charles Njoroge, chief executive of Letshego Kenya.
“Our housing enterprise finance model enables those without formal employment or regular salaries to gain access to credit for building basic low-cost units,” said Mr Njoroge when the Gaborone-based firm officially launched its brand in Kenya.
Letshego entered the Kenyan market in 2012 by acquiring Micro Africa Ltd in a deal valued at $5 million (Sh500 million). The buyout also gave Letshego an entry into Uganda, Tanzania, Rwanda where Micro Africa Ltd had operations.
The micro lender has 25 branches in Kenya with a client base of 33,000 customers and employs 300 people. Its loan book grew 110 per cent to hit $36 million as at December 2015 with “less than two per cent” being non-performing, Letshego said.
The financial services group now has operations in 10 countries, including Botswana, Lesotho, Mozambique, Namibia, Nigeria, and Swaziland.
Mr Njoroge said average housing loans is about Sh1.5 million and capped at Sh10 million because the product targets the base of the pyramid and use of alternative building technologies such as inter-locking bricks and expanded polystyrene panels.
In total, Letshego plans to lend more than Sh27.5 billion in Kenya in the next five years, mostly in the low-cost housing sector and providing working capital to micro and small entrepreneurs.
Treasury Secretary Henry Rotich, who presided over the event, called on financial institutions to structure special mortgages for the low-income market to plug Kenya’s housing deficit estimated at more than 200,000 units a year.
“Microfinance can help alleviate the scarcity of affordable housing especially by using alternative technology to deliver low-cost housing,” said Mr Rotich.
Official data shows that Kenya had a total of 22,013 mortgage loans as at December 2014.