The Kenya Mortgage Refinancing Company, is a mortgage liquidity facility established by Kenya’s National Treasury, with support from the World Bank. The main aim of the KMRC is to grow Kenya’s mortgage market by providing liquidity and long-term funds for Banks and SACCOs, but also serves as a critical support for the government’s Affordable Housing pillar of the Big-4 Agenda. If effectively implemented, the KMRC could enable increased home ownership for Kenyans; an expansion of the country’s mortgage market; and general standardization of the sector through improved lending practices and increased inclusivity; while expanding the bond market in the country.
This article highlights ongoing topical research that has been undertaken by Cytonn Investments on the establishment of the KMRC:
- The first focus note, published in 8 April 2018, offered an introduction into Kenya’s mortgage market so far and key opportunities in the sector, as well as lessons from existing mortgage refinancing companies in Africa, including the Egyptian Mortgage Refinancing Company (EMRC), the Nigeria Mortgage Refinancing Company Plc (NMRC), and the Tanzania Mortgage Refinancing Company (TMRC). Here, they identify a number of challenges (and opportunities) facing MLF’s in the region. Some of the challenges include: inefficient regulation schemes and policy regimes; unestablished capital markets and institutional investors bases, poor macroeconomic environments, insufficient supply of affordable homes, and the lack of an efficient land titling process. For the KMRC to succeed, there is need to establish a regulatory oversight that includes the participation of private sector; the institution of rules of governance for efficiency; and the increased production of affordable homes into the market, which needs to be backed by a clear and efficient land titling process.
- In the second focus note published in 28 April 2019, Cytonn Research highlighted developments in Kenya’s banking sector, elaborating on the existing barriers to mortgage issuance in the country. They identified some key challenges that could face the KMRC, including high costs of debt, competition from government instruments, maturity mismatch between the primary and secondary bonds; and bureaucracy and inefficiency in State departments, most notably those related to land tenure and property registration. This paper also undertook a detailed case study of the Tanzania Mortgage Refinancing Company (TMRC), which has led to marked improvement in Tanzania’s mortgage markets. Lessons from Tanzania for Kenya include: the need to expand financial capacity; ensure the production of affordable housing stock through partner agencies; ensure increased awareness among homebuyers; and to support the development of complementary solutions, including microfinance markets.
Click here to access the two notes by Cytonn:
First note – The Kenya Mortgage Refinancing Company
Second note – Kenya Mortgage Refinancing Company Update