Capital Markets

KMRC rejects Sh16.5bn mortgage funding bids

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Completed affordable housing project in Ngara, Nairobi on September 18, 2020. PHOTO | JEFF ANGOTE | NMG

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Summary

  • Kenya Mortgage Refinance Company (KMRC) has revealed that eight lenders participating in the first phase of the refinancing programme submitted a pool of mortgages amounting to Sh21 billion, but only Sh4.5 billion qualified.
  • KMRC, the firm formed through a partnership between the Treasury and private lenders to mobilise cash to back affordable home loans, said Sh16.5 billion mortgages failed the the tough World Bank test following a portfolio review in July and August.

More than three-quarters of home loans that were submitted for the first phase of refinancing in the State-backed affordable housing plan did not meet the stringent requirements set by the World Bank Group.

Kenya Mortgage Refinance Company (KMRC) has revealed that eight lenders participating in the first phase of the refinancing programme submitted a pool of mortgages amounting to Sh21 billion, but only Sh4.5 billion qualified.

KMRC, the firm formed through a partnership between the Treasury and private lenders to mobilise cash to back affordable home loans, said Sh16.5 billion mortgages failed the tough World Bank test following a portfolio review in July and August.

Six saccos — including Harambee, Stima, Tower, Imarika and Bingwa — and two undisclosed banks applied for funding.

Chief executive Johnson Oltetia did not disclose the portfolios submitted by individual lenders.

The criteria require lenders applying for concessional funding from KMRC to have at least 80 percent of the mortgages within the affordable housing threshold — up to Sh4 million for property in the Nairobi metropolitan area and Sh3 million elsewhere.

“The financial institutions submitted to us their ready portfolio… which was actually about Sh21 billion,” Mr Oltetia said.

“But when you synthesise that to the World Bank funding, which is the current line that we are drawing, then it reduces to Sh4.5 billion because the majority of the mortgages they currently have are above the threshold for affordable housing.”

The World Bank extended about Sh25 billion to KMRC in form a concessional loan through the Treasury, with the African Development Bank (AfDB) injecting in about Sh10 billion which will be tapped in the second phase.

Additional funding has also come from 19 financial institutions – seven commercial banks, 11 saccos and one microfinancier (Kenya Women Microfinance Bank) – which bought shares and are participating in the programme.