The government is working on a framework seeking to guarantee part of mortgages to be advanced to workers in the informal sector in Kenya who have irregular income.
The framework will see the workers in the sector dubbed “jua kali” easily access loans to construct homes from banks and SACCOs in the strategy seeking to de-risk lending to them.
According to Kenya Mortgage Refinance Company (KMRC), a joint undertaking of the National Treasury and private lenders, the plan will help increase mortgage uptake in Kenya.
RSF is in the tail end of development and seeks to rope in approximately 15.96 million workers in the informal sector or 83.4 per cent of Kenya’s 19.14 total workforce, according to 2022 data from Kenya National Bureau of Statistics.
The ambitious plan will see KMRC undertake to bear some of the risks on mortgage loans advanced by lenders to borrowers in the informal sector whose incomes are irregular.
The joint venture firm will disclose the share of risk it will bear on conclusion of extensive discussions on the pricing, market analysis testing and financial modeling before adopting it.
The move is widely seen as an extension of President William Ruto’s ambitious legacy aimed at enabling more Kenyans, especially in the low-income segment, access affordable housing.
KMRC usually offers finances to participating banks and SACCOs for lending at a friendly 5 per cent annual fixed interest rate to homebuyers earning less than Sh150,000 monthly.
Potential homeowners are given access to a maximum of Sh8 million to purchase property in the Nairobi metropolitan area and a maximum of Sh6 million other parts of the country.
The uptake of mortgage in Kenya has been very low with 27,786 people estimated to have taken home loans totaling Sh261.8 billion by December 2022, according to latest CBK data.
Formation of KMRC by former president Uhuru Kenyatta saw Kenya bag the "Innovative Housing Public-Private Partnerships" award at the inaugural African Union for Housing Finance (AUHF) Awards on October 31, 2023 for empowering more low-income earners.
From January to September 2023, KMRC disbursed nearly Sh2.40 billion to refinance 606 mortgages, compared to Sh5.84 billion released to lenders to fund 1,957 mortgages in 2022.