{"id":159,"date":"2016-04-19T10:44:23","date_gmt":"2016-04-19T10:44:23","guid":{"rendered":"http:\/\/realtyspace.codefactory47.com\/?p=159"},"modified":"2022-03-30T23:13:05","modified_gmt":"2022-03-30T23:13:05","slug":"kenya-mortgage-refinance-company-progress","status":"publish","type":"post","link":"https:\/\/kingdomassets.co.ke\/?p=159","title":{"rendered":"Kenya Mortgage Refinance Company (KMRC) Progress"},"content":{"rendered":"

The Kenya Mortgage Refinance Company (KMRC) was established as a key institution to support the Affordable Housing Pillar of the Government of Kenya\u2019s Big 4 Agenda.<\/p>\n

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The Kenya Mortgage Refinance Company (KMRC) was established as a key institution to support the Affordable Housing Pillar of the Government of Kenya\u2019s Big 4 Agenda. It was incorporated in April 2018 as a non- deposit taking financial institution under the supervision of the Central Bank of Kenya with the single purpose of providing long-term funds to primary mortgage lenders (Banks, Micro Finance Banks and SACCOs) in order to increase the availability and affordability of mortgage loans to Kenyans.\u00a0 The company was licensed by the Central Bank of Kenya (CBK) in August 2018 and began operations in September 2020.<\/p>\n

In terms of products, KMRC offers two key loan products that include;<\/span><\/p>\n

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  1. Affordable housing loans:<\/b>\u00a0These are\u00a0loans extended to Primary Mortgage Lenders (PMLs) to re-finance mortgage loans capped at Kshs 4.0 mn in Nairobi Metropolitan Area (Nairobi, Kiambu, Machakos & Kajiado) and Kshs 3.0 mn in other parts of the country to individual borrowers whose monthly household income is not more than Kshs 150,000. The loans are issued at a fixed rate of 5.0%, and,<\/li>\n
  2. Marketing housing loans:<\/span><\/b>\u00a0These are<\/span>\u00a0loans extended to Primary Mortgage Lenders to re-finance mortgage loans above the Affordable Housing loans threshold of Kshs 4.0 mn, and income greater than 150,000.<\/span><\/li>\n<\/ol>\n

    In January 2022, KMRC got\u00a0approval<\/a>\u00a0from the Capital Markets Authority (CMA) to roll out a Kshs 10.5 bn medium-term bond programme. The firm aimed to raise Kshs 1.4 bn during the first tranche of issuance in February 2022. The first tranche issued recorded an oversubscription of 478.6%, attributable to the attractive returns offered by the bond of 12.5%, receiving bids worth Kshs 8.1 bn. KMRC only accepted bids worth Kshs 1.4 bn since the bond did not have a green shoe option. In light of the above, International Finance Corporation (IFC), an international financier, announced plans to buy Kshs 4.2 bn worth bonds from the Medium Term Note Program (MTN). If successful, since the purchase is expected to be on the second tranche, this will make IFC an anchor investor to the mortgage lender\u2019s MTN, with a 40.0% stake of the bond.\u00a0IFC owns 11.8% of the KMRC shares as at 30th<\/sup>\u00a0September 2020, having invested Kshs 213.7 mn in the KMRC during formation.<\/p>\n

    The bond programme will position capital markets as a source of funding that supports the affordable housing initiative, which is one of the pillars of the\u00a0Big Four Agenda<\/a>. The capital raising activities by KMRC are highly welcome especially in light of the obstacles in the Kenyan capital markets in terms of access to financing which have limited private sector\u2019s participation in the development of affordable housing. These obstacles include lack of sufficient real estate funding sources coupled with high dominance on banks as a source of funding. According to the World Bank, capital markets contribute a mere 1.0% of Real Estate funding in Kenya, compared to 60.0% in developed countries.<\/p>\n

    In order to help increase house ownership levels, reduce the ever-widening housing supply gap and help diversify sources of capital, the\u00a0following can be implemented to accelerate funding for KMRC;<\/p>\n

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    1. Develop a Clear Financing Model:\u00a0<\/b>KMRC should come up with a comprehensive funding mechanism to prevent a negative spread between the lending rate and the borrowing rate. KMRC could either:<\/li>\n<\/ol>\n