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HFC expects refinancing firm to solve home funding hitch

Housing Finance Group offices. FILE PHOTO | NMG
Housing Finance Group offices. FILE PHOTO | NMG 

A proposed mortgage refinancing company will help solve a mismatch for Kenyan lenders relying on short-term deposits to fund long-term home loans, the head of HFC, a subsidiary of housing finance company HF Group, said on Friday.

The government said in April it plans to form the Kenya Mortgage Refinance Company (KMRC), to be owned by the state, commercial banks and financial co-operatives, to unlock funds for lending to home developers and buyers.

Kenya aims to provide 500,000 new affordable housing units by the end of 2022 as one of President Uhuru Kenyatta’s top four priorities.

The country has an estimated 200,000 annual shortfall, which is expected to rise to 300,000 by 2020.

“Mortgages by their very nature are long term so you tend to carry the refinancing risk at every other point in time because you are taking short-term funds and then you are lending them long term,” Sam Waweru told Reuters in an interview.


Plug the gap

“The beauty about the KMRC is that it will plug that gap, because they’ll lend money to the primary mortgage lenders for them to lend long term, and then of course at a fixed rate, offering certainty on costs.”

HFC, which along with KCB Group’s home loans business control about 60 per cent of the Kenyan mortgage market, Waweru said, will join the queue of lenders looking to refinance their loan books, once KMRC is set up.

The process of refinancing HFC’s 50 billion shillings ($498 million) would be gradual, he added.

“That has got to happen in tranches. You can start with one billion, two billion. Even KMRC itself, in the initial stages, it will not have the capacity,” he said.

HFC’s board would consider the opportunity to purchase equity in KMRC once the government sends out offer papers, Waweru said, adding that holding shares in the new entity would help HFC’s ability to refinance portions of its loan book.

Waweru said HFC would partner with the government to deliver increased houses and to offer loans to home buyers, part of the opportunity presented by the affordable housing policy.

Digital banking

HF Group said earlier this week it was cutting 9 per cent of its workforce as it starts offering digital banking services.

Last month, it launched a new app called HF Whizz, allowing customers to open accounts, move funds and get instant loans.

“Today’s customer is mobile so digital is the space to go if you want to continue doing business,” Waweru said.