KMRC eyes mortgage guarantee facility before the close of 2024

Kenya Mortgage Refinance Company (KMRC) Chief Executive Officer Johnstone Oltetia. FILE PHOTO | JEFF ANGOTE | NMG

The Kenya Mortgage Refinance Company (KMRC) plans to set up a partial guarantee scheme by the end of this year to cushion banks and saccos from high-risk borrowers.

KMRC CEO Johnstone Oltetia said the scheme would provide a partial guarantee for any mortgage extended to persons deemed to be high-risk and is aimed at expanding access to housing by boosting the confidence of lenders.

“We are looking at various interventions including a risk-sharing facility through a partial mortgage guarantee targeting low-income earners. 

“Other interventions include onboarding additional primary mortgage lenders and new products such as green mortgages, Shariah-compliant mortgages, and developer financing” he said when he addressed delegates at the just concluded 32nd Economic Symposium of the Institute of Certified Public Accountants Kenya.

A mortgage guarantee is a commitment that in the event of a default, the guarantor (in this case KMRC) will pay the mortgage lender for any loss resulting from a property foreclosure, up to a specific amount.

This means that qualifying lenders would be provided with a cushion from the kitty set up by KMRC should borrowers classified as high-risk default on their mortgage obligations.

This intervention is expected to catalyse the appetite for disbursing mortgages within pockets of the economy widely deemed to be of high risk.

Meanwhile, Mr Oltetia said the mortgage financier is still committed to returning to the capital markets to raise funds through the second tranche of its bond issuance once the economic situation improves.

The KMRC went to market with the first tranche in early 2022 raising Sh1.4 billion having registered an oversubscription of 478.6 per cent implying it attracted bids worth Sh8.1 billion.

According to data by the Central Bank of Kenya, there were 27,786 mortgages in the banking system with the outstanding amount valued at Sh261.8 billion as of the close of December 2022. 

The average mortgage loan in the banking system at the time was worth Sh9.4 million with the average interest being 12.3 percent. 

Since its incorporation in 2018, Sh9.6 billion worth of mortgage lending has been enabled by on-lending from KMRC.

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