NAIROBI, May 22 (Xinhua) -- Kenyan President Uhuru Kenyatta on Wednesday launched the Kenya Mortgage Refinance Company (KMRC), a financial institution whose sole function is to provide long-term loans to primary mortgage lenders.
KMRC, which starts operations with an initial capital base of 35 billion shillings (about 350 million U.S. dollars), is expected to address inherent financing challenges and unlock liquidity for affordable housing.
Kenyatta said KMRC will provide long-term loans to mortgage lenders in order to increase the availability and affordability of mortgage facilities in the country.
"The intervention is based on recognition that reaching the goal of adequate, safe and affordable housing for all, especially the lower income group, requires a fundamental rethinking of the traditional approach used in the past," Kenyatta said during the launch in Nairobi.
He said the move to provide long-term cheaper funding to primary mortgage providers including banks, microfinance banks and Saccos (financial and nonfinancial cooperatives) is aimed at making mortgage cheaper for Kenyans.
Kenyatta said the initiative is a partnership between the government and the private sector, noting that the initiative demonstrates the possibilities of the growing synergy between the private sector and the government towards the delivery of public goods.
He said the new venture is aimed at addressing the deficit in housing created by the huge rise in the country's population as well as boosting the government's job creation initiatives.
"As we continue to experience the dividends of our growing population, the housing supply has, over the years, not kept pace with the concurrent growth in the demand for houses. As a result, this has led to a huge housing deficit, particularly for the lower income households," he said.
KMRC was incorporated as a non-deposit taking financial institution under the supervision of the Central Bank of Kenya.
The initial loans to kickstart KMRC were provided by the World Bank which contributed 250 million dollars, and African Development Bank which contributed 100 million dollars.
Kenyatta said the government is making deliberate interventions in the housing sector to make it more responsive to middle and lower income segments of the population.
He said the uptake of housing mortgages in Kenya remains below its potential with the Central Bank of Kenya statistics showing that the total outstanding mortgage debt in 2017 stood at about 2.23 billion dollars.
This, Kenyatta said, represents only about 2.74 percent of Kenya's GDP, which shows that the housing mortgage business in Kenya is still very small.
"We expect the refinance company to significantly contribute to the development of the housing finance market in Kenya and help reverse the low mortgage penetration, by increasing the number of mortgages from the current 26,000 to over 60,000 by the year 2022," he said.