LETTERS: Saccos can play role in affordable housing goal


Banks can help saccos grow their housing loan portfolio. FILE PHOTO | NMG


  • The Word Bank estimates that up to 90 percent of housing finance in Kenya is supplied by Savings and Credit Co-operatives (saccos) and housing co-operative networks.

In October 2018, the Centre for Affordable Housing (CAHF) launched the 9th edition of its Housing Finance in Africa Yearbook, at the 34th Annual Conference and AGM of the African Union of Housing Finance, held in Abidjan, Côte d’Ivoire.

The yearbook covers the housing finance situation in 54 countries across the continent, providing data and market information on policy, regulation, and private sector activity in the housing sector in 2018.

One of the interesting angles of this edition is that it highlights the importance of the development of underwriting standards for borrowers in the informal economy, a key element of the affordable housing value chain.

According to the publication, the Word Bank estimates that up to 90 percent of housing finance in Kenya is supplied by Savings and Credit Co-operatives (saccos) and housing co-operative networks.

In it’s review of the Kenyan housing finance market, the Bank found that less than 10 per cent of all housing credit in Kenya comes in the form of mortgages from the banking sector, with the remainder coming from Saccos and housing cooperatives. It was further observed that Saccos package home loans as development loans, generally at lower rates, and with faster processing times than what is offered by commercial banks.

It is with this in mind that plans are underway to launch a Kenya Mortgage Refinance Company in 2019.

A key focus of this facility will be on the savings and credit co-operative (sacco) lending market. Kenya’s sacco and housing co-operative sector provides very useful insights into how the savings of low and moderate-income households might be aggregated in support of a capital base that can then be leveraged to support housing lending.

The yearbook points out that housing cooperatives such as the National Co-operative Housing Union have established developer expertise and strong relationships with their members in the delivery of affordable housing.

In Kenya, the Ministry of Transport, Infrastructure, Housing and Urban Development announced plans to enable the construction of 500,000 affordable housing units over the next five years as part of the government’s four flagship projects. Phase 1 will include the delivery of 30,000 units in Nairobi using government land to reduce the delivery cost and boost affordability. 80 percent of the units will be priced between Sh800,000 ($8,000) and Sh1 million ($10,000).

The remaining 20 percent of the units will be demarcated for social housing, consisting of urban slum upgrades and costing an average of Sh650,000 ($6 500).

The publication further notes that a consortium of 35 Saccos recently launched a housing loans plan in Kenya, enabling their members to obtain interest free mortgages by paying “rent” instalments over 20 years.

Also, saccos offer micro-mortgages through the Kenya Union of Savings and Credit Co-operatives Housing Fund. However, as the World Bank notes,saccos’ single source of liquidity is member deposits, which limits their ability to grow their housing loan portfolio.

If properly executed, this mortgage refinance facility would go a long way in encouraging commercial banks to enter the mortgage space by providing liquidity to these institutions.

A good example from within the region is Tanzania, whereby the Tanzania Mortgage Refinance Company has been instrumental in growing the mortgage market, increasing the number of mortgage lenders from three to 31 over a six-year period.

Alex Litu, informal economy analyst.