Housing microfinance in official housing policy: promising signs in Kenya?

Housing microfinance is beginning to creep into government policy on the continent, or so it seems if recent developments in Kenya are to be considered. Consider the manifesto of the winning party, Jubilee, in the recent Kenyan elections.  Under the housing section, the manifesto makes explicit mention of housing microfinance loans as a finance alternative for building homes for the poor. This is significant. Explicit state acknowledgement of the importance of housing microfinance on the continent is rare. There are some exceptions; in South Africa, the Rural Housing Loan Fund was formed in 1996 by the government as a development finance institution dedicated to channeling wholesale funding to HMF lenders in the country. It nevertheless forms a very small part of the government’s housing interventions, the rest largely driven by state subsidised housing built for the poor that qualify. Morocco has a microfinance law that incorporates housing microfinance – the only such legislation in Africa.  In Tanzania, the Bank of Tanzania’s housing finance initiative (supported by the World Bank) includes explicit attention to housing microfinance markets. There is similar attention to housing microfinance in the World Bank’s project with the Bank of Nigeria, but in both cases, policy change remains to be seen.  Apart from these, there is little else. In fact, previous work done by CAHF, surveying the policy environment in countries on the continent, shows that many are often hostile to housing microfinance finance.

Kenya’s Jubilee manifesto is broad ranging, light on specifics (as one would expect), yet in parts, very ambitious. The housing section consists of seven policy statements. These include the objective to provide waivers and graduated taxes for first time home buyers, with a special consideration for youth, women and persons with disabilities, and another, an objective to “pursue lowering of mortgage rates”. The state also still sees itself as having a role in housing construction. The manifesto requires that 5 year housing plans are formulated at county level, where housing construction will be done, funded by the state. The manifesto advocates to “continue with the proposed slum clearance programmes, replacing them with decent housing” (an important objective, despite the unfortunate phrasing “slum clearance” rather than “slum upgrading”).

There are two other important policy statements in the manifesto worth noting; one provides that the government will “provide micro-financing loans for new home construction to low-income Kenyans”. This explicit mention of microfinance loans for lower income housing is very encouraging. It would be interesting to see what role the government sees itself as playing. Ideally the focus should not be on government as the provider of the loans at a retail level, as the statement seems to allude to. Instead, it should be a facilitator of the lending process, creating a conducive policy environment in three critical areas: financial, construction and land. Further, an apex fund such as in South Africa or liquidity facility similar to that one in Tanzania are additional useful ways the government can get involved.

The second important statement in the manifesto is that the government will encourage the establishment of local housing cooperatives and savings unions to give all Kenyans better access to credit. Saving and lending through SACCOs is well established in the housing microfinance industry in Kenya. This methodology of financing housing development has also found an important market among the middle class. Deliberate government policy recognising and encouraging this sector would be useful.

A policy to flesh out these broad statements and more importantly, implement them is crucial going forward. A copy of the manifesto is available on this link.