By Malachi Motano
Savings and credit cooperative societies (Saccos) can now make owning home a reality to their members thanks to a structured financing of affordable houses product by Kenya Mortgage Refinance Company (KMRC) which ensures there is alignment between rents and mortgage take up.
“We needed to focus on Saccos because there is greater understanding that Saccos don’t do mortgages in the country, but they nonetheless lend to individuals and majority of funding they provide actually go into housing,” says KMRC CEO Johnstone Olteita.
Already dozens of Saccos have rolled out mortgage programs in partnership with KMRC which was established in 2018 to support the Affordable Housing Pillar of the Government’s Big Four Agenda. KMRC provides long term finance to primary mortgage lenders (PMLs), who then advance the same to individual borrowers.
Stima and Tower Saccos were lucky to become the first beneficiaries when KMRC disbursed Sh.2.75 billion to participating PMLs since it started. Stima Sacco received Ksh 69million, Tower Sacco Ksh 29 million while other PMLs like KCB and HF Bank who also participated received Sh.2.13 billion and Sh.514 million respectively.
Stima Sacco has dropped long held plans to raise Sh5 billion through a corporate bond to finance its mortgage business. The Sacco CEO Gamaliel Hassan says they came to the decision after partnering with the Kenya Mortgage Refinance Company (KMRC) to finance its homes plan.
“At this time, we do not need to go for a corporate bond. We have partnered with KMRC where Stima Sacco currently holds a directorship seat. The idea behind that is to ensure long-term funding is available to Stima Sacco,” said Hassan.
Stima Sacco first announced the bond plan in 2016, but did not give timelines for the issue after indicating it was seeking regulatory approvals.
It planned to use the funds to offer long-term loans of between 10 and 15 years at competitive rates, hoping to fend off growing commercial banks’ foray into its turf at a time when the now repealed rate cap law had made life difficult for smaller lenders in the market.
The Sacco then identified mortgage financing and insurance as prime areas to venture into. Stima has been developing residential properties for its members.
Mr. Hassan said the affiliation with the KMRC will now allow the Sacco to tap liquidity from institutions such as the World Bank and the Treasury at subsidised rates.
The Sacco, he said, will under KMRC get single-digit interest loans on a reducing balance between a period of 20-25 years.
“We now expect KMRC to fund those long-term loans that ideally a corporate bond would have done,” said Mr. Hassan.
The Kenya Police Sacco has also rolled out mortgage financing for members which coupled with housing projects the Sacco is undertaking, expected to increase home ownership. The Sacco’s National Chairman David Mategwa says members will have the option of repaying the mortgage in 15 years.
“We are delighted to inform you that we have partnered with KMRC to offer low-cost housing home loans for both Residential House Purchase and Residential House Construction,” says Mategwa.
Harambee Sacco now offers mortgageat an annual subsidised interest of seven percent under a plan supported by a State-backed home loans refinancing KMRC approved the Sacco’s two mortgage products, Harambee Home loan that enables its members to purchase readily built houses and Harambee Jenga loan, where borrowers are facilitated to build a house on their own parcels of land.
The two loans are pegged at eight percent interest rate for the 10-year mortgages and at nine percent for over 10 years and up to 25 year mortgages.
KMRC was set up by the National Treasury to ease liquidity challenges for commercial banks and Saccos that disburse affordable home loans.
Another Sacco that has entered partnership with KMC to launch mortgage product is Ukulima Sacco. The Sacco chairman Philip Cherono says his institution is now able to lend to members at affordable interest rates which is nearly half the current market rates. He says the prospective buyers will qualify for mortgages of up to Sh8 million with a repayment period of up to 20 years. Our intention is to offer a mortgage to over 4,000 members by 2022,” he said.
His CEO Richard Nyaanga said the newly launched mortgage products will help in quenching the thirst of the majority of Kenyans seeking to own a home.
Elsewhere Imarisha Sacco was recognized as one of the key shareholders in the implementation of the Presidents’ Big 4 agenda under the Affordable Housing Pillar during its recently held virtual Annual General Meeting (AGM) by KMRC.
The Sacco qualified among the top co-operatives, selected by KMRC in an initiative of the World Bank and the National Treasury to support the affordable housing agenda by providing secure, long-term funding to the mortgage lenders, consequently increasing the availability and affordability of mortgage loans to Kenyans.
Other shareholders that will be refinanced by KMRC include Saccos like Bingwa, Unaitas, Imarika, Mwalimu national along sided banks like DTB, Absa, NCBA, Credit Bank and Kenya Women Microfinance Bank (KWFT) and communications services provider- Safaricom.
There are more participating institutions that are at an advanced stage of accessing funding from KMRC. They are presently preparing their mortgage portfolio based on KMRC’s eligibility criteria, and once submitted KMRC will review and release more funding in due course.
“We needed to focus on Saccos because there is greater understanding that Saccos don’t do mortgages in the country, but they nonetheless lend to individuals and majority of funding they provide actually go into housing,” ” says Olteita.