Ideas & Debate

Saccos hold key to achieving affordable housing target

affordable housing
An affordable housing project in Nairobi. FILE PHOTO | NMG 

The government has pronounced itself in as far as the achievement of affordable housing for all Kenyans is concerned. The priority assigned to affordable housing is such that it makes the cut to be in top four government’s agenda otherwise known the Big Four agenda. Besides affordable housing, the other pillars include universal healthcare, food security and manufacturing.

For the longest time, home ownership has been viewed as a preserve of the privileged few who can afford a mortgage. As of today, the number of total mortgages in Kenya are slightly above 25,000 in a population of over 47 million people. It is estimated that Kenya has an annual housing demand of 250,000 with an estimated supply of 50,000 a year. (80 percent deficit) targeting the high-end market. So the question begs, what about the rest of the population?

The type of housing supply available in the Kenyan market is in the range of Sh6 million and above and only those earning above Sh150,000 net income a month stand a chance to own such homes through a mortgage arrangement.

Commercial banks, mainly profit driven, have been the primary mortgage lenders taking care of the privileged few. The average applicable interest rates for mortgage in the market is 13 percent p.a., making the loans quite expensive and beyond the reach of many in the population.

The majority of Kenyans who earn less than Sh150,000 threshold are therefore locked out of the important home ownership debate. Does it mean they do not need or cannot afford any type of housing? The answer is simple. Housing (shelter) is a basic need just like food and health.


The government together with development partners aims to provide low cost housing. Various projects are ongoing and examples are Ngara Civil Servants Scheme, and the Embu Civil Servants Scheme, among others.

Over time, the Savings and Credit Co-operative society (sacco) movement has often been the trusted savings and investments vehicle for the low income earning majority. The turnaround time for loan facilities is much shorter than with commercial banks. The members have very high level of loyalty towards their saccos and as a result, default is often at a minimum. Saccos have been lauded as one of the most convenient and effective methods to save and invest, especially for middle and low-income earners. The movement makes a formidable partner in realisation of affordable housing pillar of the Big Four Agenda based on the wide reach, the savings culture and members’ loyalty.

According to the Sacco Regulatory Authority (SASRA), there were 163 licensed deposit-taking saccos in the country with 11 more at different various levels of compliance and licensing, bringing the total to 174 saccos. As at December 31, 2018, the sacco movement had 4.74 million members across the country with savings aggregated at Sh341.91billion and gross loans at Sh374.26 billion.

With statistics like these, the saccos’ involvement in national discourse can no longer be ignored. Further, according a study commissioned by SASRA on “sectoral Financing by sacco societies in Kenya” for the period ending December 2016, land and housing received the highest credit from saccos, amounting to 36 percent of the entire credit by saccos.

The government of Kenya, through the Kenya Mortgage Refinance Company (KMRC), has partnered with the saccos to offer affordable mortgage financing at fixed single digit interest rates for repayment periods stretching to a maximum of 25 years (or 300 monthly installments). The single digit interest rates and the long period provided will allow sacco members with relatively lower net incomes to afford financing for outright purchase with minimum and maximum loan amounts pegged at Sh500,000 and Sh4,000,000 respectively. For instance, a loan of Sh4,000,000 advanced at nine percent per annum for 25 years translates to monthly installments of Sh33,568 which starts to make sense to someone earning Sh150,000 and less. The repayment period of 25 years looks like bondage. However, it is important to note that the long term allows lower income earners to qualify for affordable housing financing while the door remains open for the principal prepayments or even early loan redemption at no extra cost.

The government contribution to this affordable housing scheme is two- prong. First, and through partnership with private sector and other development partners, the government is supplying affordable housing units in various parts of the country. Examples are Park Road Civil Servants Scheme with 1,370 units when complete and Machakos scheme that will have 200 units when completed. Others are Shauri Moyo in Kisumu, Embu and Kiambu civil servants’ schemes which are at various stages of completion.

But one is not limited to the units the government is developing. Potential buyers are free to identify a housing unit available for purchase and fits within affordable housing criteria of not more than Sh4 million. If the member already has a plot that qualifies as a suitable collateral, one may apply for a construction mortgage under the same terms as those of outright purchase.

The second government intervention in realisation of the affordable housing agenda is through sourcing funds from development partners which, through the KMRC is advanced to primary mortgage lenders or saccos in this case for onward lending to end home buyers at affordable single digit interest rates. You may need to contact your sacco and find out if they are part of this arrangement to enable you claim your place in the enviable statistics of home owners in Kenya.

It is a historic moment for the sacco movement as it officially partners with the government to attain a national agenda; The affordable housing for the majority of Kenyans through its elaborate network and goodwill across the country.

Mr Kimani is Mortgage Manager, Harambee Sacco Society Ltd.