How KMRC is revolutionising Kenya’s mortgage industry

Kenya is grappling with an estimated housing deficit of over two million units, particularly in urban areas where rapid population growth and urbanisation outpace housing supply.

On the demand side, high interest rates, short loan tenures, and low household incomes, restrict many Kenyans from accessing mortgages, especially lower and middle-income households.

On the supply side, rising land and construction costs, along with regulatory bottlenecks, have driven up housing prices, making it difficult for developers to deliver affordable housing. Moreover, primary mortgage lenders (PMLs) face liquidity constraints due to their reliance on short-term deposits to fund long-term mortgages, exacerbating the affordability gap by pushing up interest rates and shortening loan tenures.

The Kenya Mortgage Refinance Company (KMRC), established in 2018 as a non-deposit-taking financial institution under the Companies Act 2015, operates under a public-private partnership model and plays a transformative role in reshaping the country’s housing finance landscape.

Regulated by the Central Bank of Kenya (CBK) and overseen by the Capital Markets Authority (CMA) for its bond issuance, KMRC complements the government's efforts to turn the housing challenge into an economic opportunity.

By providing long-term liquidity to primary mortgage lenders (PMLs), including banks, microfinance banks, and SACCOs, KMRC addresses the maturity mismatch caused by the reliance on short-term deposits to finance long-term mortgage loans, positioning itself as a lender of first resort.

The company is a key driver in increasing homeownership in Kenya by providing long-term funding to PMLs, enabling them to offer home loans with extended repayment periods of up to 25 years, fixed rates, and single-digit interest rates below 10 percent. The fixed-rate mortgages provided through KMRC ensure predictable and stable payments for homeowners, protecting them from interest rate volatility and allowing for better financial planning.

Initially focused on refinancing loans for its shareholder institutions, including banks, microfinance institutions, and SACCOs, KMRC has now expanded its refinancing scope to include non-shareholder PMLs, broadening the pool of financial institutions that can access long-term funding, to benefit more Kenyans.

By making homeownership more affordable and inclusive, KMRC is setting the stage for sustained growth in a market that has historically been inaccessible for many, while promoting a more equitable future for homeowners across the country.

In conclusion, KMRC’s innovative approach to addressing the housing finance challenges in Kenya is pivotal in expanding homeownership opportunities, particularly for lower and middle-income households.

By providing long-term, affordable financing to mortgage lenders, KMRC is effectively closing the gap between short-term deposits and long-term mortgage needs, thereby enhancing the affordability and stability of mortgage products.

Through its continued efforts, KMRC is not only reshaping Kenya’s housing finance landscape, but also laying the foundation for a more inclusive and sustainable future for homeownership in the country.

For more information, visit kmrc.co.ke