Lenders line up cash for cheap mortgages

A section of Canaan estate in Kibra, Nairobi.The landlords have opted to rent the properties to tenants in an effort to earn a living from the apartments.[David Njaaga, Standard]

Banks are lining up money to buy shares in the State-funded Kenya Mortgage Refinance Company as the structures of the new firm take shape.

The Government has created the company with a view to offering cheap loans to banks to target civil servants, self-employed persons or salaried employees with loans of up to 30 years to reduce the pressure of repayment.

Co-operative Bank of Kenya has already pledged a total of Sh200 million, which is so far the biggest pledge among local lenders.

Initial equity

“The board of directors of the Co-operative Bank has approved a key Sh200 million capital injection in the share capital of the Kenya Mortgage Refinance Company to support this most worthy objective become a reality,” said Co-op Bank Chief Executive Gideon Muriuki in a statement announcing the lender’s half-year financial results.

The National Treasury wants to issue Sh1.5 billion share capital divided into ordinary and/or preference shares to give it a 20 per cent stake in the firm.

The investment is to serve as the initial equity share capital of the mortgage company and the proceeds will be used to meet pre-operational and start-up expenses, initial working capital requirements and investment reserve funds.

Banks, saccos, multilateral lenders and non-bank institutions have been invited to make up additional shareholding with a minimal commitment of Sh10 million.

It is expected that the Kenya Mortgage Refinance Company (KMRC) will leverage capital markets to raise funds through bonds for on-lending to banks and other mortgage financing companies and is therefore also a positive development for capital markets deepening.

Sizeable chunk

Stanbic Bank said it will invest Sh10 million in KMRC as it seeks a piece of President Uhuru Kenyatta’s legacy project to put up half-a-million houses.

The lender's boss, Charles Mudiwa, said the board had approved the investment.

The KCB director of mortgage business, Sam Muturi, said the bank had put in a proposal for a ‘sizeable’ chunk of shareholding but declined to comment on the figures.