Kenya’s Mortgage Refinancing Company Gets Sh15bn Seed Funding
The Kenya Mortgage Refinancing Company (KMRC), which is currently being incorporated, has received support from the World Bank through a Sh15.1 billion investment. The funds will help the company to establish itself.
KMRC was created to reduce the risks commercial banks go through by offering long-term credit while enabling real estate developers to access financing with ease. Therefore, the company will help individuals and SMEs to receive mortgages at discounted interest rates.
Henry Rotich, Treasury’s Cabinet Secretary said the government is discussing the possibility to pump more funds into the project with development partners such as local commercial banks and the African Development Bank (AfDB).
“[The] government will put in some seed money as we invite banks to participate and any other institutions that hold long-term money. Once we have that setup (KMRC) we will now lend at reasonable rates providing liquidity for mortgages,” he said.
CS Rotich said KMRC is one of the methods the government is using to promote credit access by SMEs and individuals by creating specialised financial institutions to reduce overdependence on commercial banks for mortgages and loans.
Treasury hopes KMRC will drive private sector growth in the country which has suffered from the interest rate cap law introduced in the Banking Amendment Act of 2016.
“These are part of the interventions we are doing. The problem is lack of long-term liquidity to lend at cheaper rates. If banks were to stick at the same rates, we would soon see hardly any lending on that space. Addressing the root cause is therefore important,” Rotich said.
The creation of the Kenya Mortgage Refinancing Company is in response to the demand by the private sector for the provisioning of an alternative source of funding since overreliance on commercial banks has limited access to credit.