Mortgages
National Treasury CS Ukur Yatani.

The Kenya Mortgage Refinance Company (KMRC) has already disbursed over Kes2 billion to primary mortgage lenders to refinance home loans while an additional Kes7 billion is currently in the pipeline, the Treasury has said.

The National Treasury CS Ukur Yatani disclosed this during the official start of trading of KMRC bonds on the Nairobi Securities Exchange.

KMRC’s bond was oversubscribed by 480 percent attracting bids worth over Kes8.114 billion against a target of Kes1.4 billion.

“The response to our inaugural bond issue demonstrates the market’s confidence in the KMRC’s model and strategy and is a statement to the importance of the Company’s mandate to increase homeownership and transform the country’s housing sector,” KMRC CEO Johnstone Oltetia.

CS Yatani said that the bond’s oversubscription shows confidence in the good governance, business strategy, and operational model at KMRC on financing affordable housing.

“KMRC was established as a collaboration between the government and the private sector to play a key role in the affordable housing pillar under the big four agenda,” CS Yatani noted.

In practice, the company mobilizes long-term funds, which it then on-lends to participating lenders, which include commercial banks, savings and SACCOs and microfinance institutions across Kenya.

Read also: KMRC bond 480 percent oversubscription signals investor confidence

The company is helping to resolve the asset maturity mismatch that has been blamed for high-interest rates on home loans in Kenya, the CS added.

The lenders are then able to match the maturities of the long-term credit available to them from KMRC with the home loans they offer to borrowers, resulting in lower interest rates, hence driving the affordability of mortgages.

“KMRC is the vehicle mandated to see affordable housing come to fruition under regulation by Central Bank of Kenya. In effect, this medium-term note is a step in deepening the capital markets,” CBK Governor Dr Patrick Njoroge said.

The loans extended to primary mortgage lenders to re-finance home loans are capped at Kes4 million in Nairobi metropolitan area (Nairobi, Kiambu, Machakos, and Kajiado) and Kes3 million elsewhere to individual borrowers whose monthly household income is not more than Kes150,000, notes KMRC in its website.

June 2021, the banking sector regulator cut the amount of capital that is required to be held by banks for residential mortgages from a risk rate of 50 percent to 35 percent in tandem with global best practices.

Since it received its operating license from CBK in September 2020, KMRC has relied exclusively on concessional funds from the World Bank and the African Development Bank, the continental development finance institution, for long-term capital.

KMRC now adds onto the list of four Acorn Holdings Africa, Centum Investments, Family Bank, and EABL corporate bond issues that have been rolled out within the last two years.

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