The Kenya Mortgage Refinance Company (KMRC) was incorporated in 2020 to derisk the mortgage market for workers earning up to Sh150,000 a month.
It says it refinanced 1,948 home loans through participating banks and saccos last year, a 239.37 percent climb compared with 574 mortgages in 2021.
Chief executive Johnson Oltetia discusses the task of overseeing the setting up of the firm and rolling out its operations, initially on an interim basis from August 2018 before being confirmed two years later and its impact so far.
There is a bit of confusion on whether KMRC is a parastatal given the heavy involvement of the Treasury in its formation.
The idea of KMRC was not to have a State corporation because there will be no difference from the National Housing Corporation.
So it was agreed a PPP [public-private partnership] model would work. So we incorporated it under the Companies Act but we also needed it to be regulated by the Central Bank of Kenya because that is the trend around the world.
Then, we needed institutions to come in and essentially become shareholders and at the same time become beneficiaries of the KMRC funding.
How did you get the approval through given the usual red-tape in government?
We developed a policy paper which went all the way and we got the approval. I was asked to do the implementation and when you are doing that you have to rely on your experience.
I got tremendous support from the Treasury where I used to work as an advisor to the Cabinet Secretary and Principal Secretary on financial matters, mainly capital markets, pension and insurance.
This was one of the assignments I was given to support affordable housing. The leadership at the Treasury agreed with most of the suggestions and opinions I provided. I also learnt a lot from other jurisdictions.
You had no prior experience as a CEO when you took over this job. What gave you the confidence and belief to take up this position?
When I was at the Capital Markets Authority, my job was supervision of institutions, including the [Nairobi Securities] Exchange, CDSC, brokers, investment banks and other intermediaries.
That gave me the opportunity to learn how they run a company. Sometimes, bad lessons, sometimes good lessons. That is the kind of experience I used for purpose of building KMRC.
What was the hardest part in building this organisation?
The hard part was the operational structure which is about people who can help drive the organisation basically from a concept note.
I relied on a lot of research because you get information from everywhere, including the World Bank. We modelled around what other countries around the world have.
What were the top qualities you looked for when you hired the team you hired to drive the institution?
One thing; attitude. You need to have the right attitude because the most difficult thing to deal with in a human being is changing the attitude.
Once you have that, all the other things you can develop, including experience and other skills. When you are coming to KMRC, it is not about academic qualifications because it is obvious you have that.
The talent here is a blend of banking and capital markets. KMRC is more of a development finance institution. There are a lot of opportunities to develop skills and we provide that here.
There’s a feeling in the industry that the impact of KMRC has not been major thus far
We have funding here for home loans, but that will not be sufficient if we don’t have the supply [of affordable housing units]. Now constructing a house I am told takes about 24 months to complete.
That means it takes about two years to bring in units that you need because even when KMRC has money, you need to see there are developments.
What do you see in the market in terms of the development of targeted houses given the maximum home loan is Sh8 million?
There is traction. You have seen the President and the State Department of Housing going out to launch projects.
That is very useful because it will help move the supply side faster and also help KMRC refinance faster. But the impact that KMRC is creating may not be visible immediately.
You have refinanced 2,871 mortgages worth Sh8.1 billion. What is the biggest challenge slowing down the pace of refinancing home loans?
The [land] registration process still takes time. There are also titling issues. For example, there are houses that came up in 2020 under the Park Road project. Up to last year, there were no titles.
If there’s no title deed and that is the security that’s held [by banks and saccos], then you will not refinance that loan.
Even if you have affordable housing units, as long as there is no title or security, we will not be able to refinance. So that continues to affect the scaling up of affordable housing.
What is KMRC doing to help scale up the supply side?
We participate in bringing all stakeholders together through affordable housing conferences to continually have conversations and address the issues that are coming up so that at some point we all have alignment and we can speed up the affordable housing projects.