Those living in urban areas are faced with acute shortage of houses because the country produces only 30,000 houses annually against a demand of 250,000 units. The Household Survey report by FinAccess revealed that 90 percent of Kenyans earn less than Sh30,000 in monthly income with only three million people said to be on a pay slip.
A significant jump in the cost of home-loans has priced most middle-income earners and the poor out of the homes market. What is HFC doing to correct the situation?
We understand the situation and have been working hard to come up with products suitable for the market.
We are now focused on the unbanked, prospective property owners and those with some access to financing models but are not fully satisfied with services in the local market in a strategic re-organisation of our operations. We have developed some enticing products targeted at low-income earners and non-salaried customers to help them staircase their way to property ownership and we are planning to unveil some of these products soon.
Generally, mid-level and low-income earners are regarded as high risk. In fact, it is a group that most lenders try to avoid at all costs. What informed your decision to target this group?
A 2014 study by salary explorer found that an average salary in Kenya was Sh147,182, making it difficult for such individuals to set aside 30 per cent of their earnings to comfortably service an average mortgage of Sh7.5 million. The average mortgage price has risen steadily over the last three years and keeps rising.
With these figures that predictably show a huge likelihood of high risks of default and low uptake of home loans, HFC decided to go against the grain. Our experience has taught us that default rates for a common Kenyan out there is actually lower than big corporate clients. We don’t fear the risks for this category of customers, because we believe it is about having the right strategies to mitigate such.
Is there anything Housing Finance Group is doing differently to attract corporate clients?
The company is establishing its mark in corporate banking, which is dominated by commercial lenders, but in a different way. We are financing stocks, assets and provision of insurance besides a host of other banking services. We are also stepping up our engagement with the SME sector.
HFC is using these services to lure corporate firms with an annual turnover of between Sh50 million and Sh1 billion. These firms are largely considered as the engines of economic growth for the country.
What other services is HFC focussing on besides mortgage and the property market?
We want to use property financing as our hook even when we get into other businesses with customers. We don’t want to lose our competitive advantage. We have seen a lot of demand for clients wanting to buy vehicles for transport, machinery for roads and combined harvesters for farming.
In full service banking, HFC is striving to lock in clients to a wide range of customer conveniences like current accounts as well as forex exchange services, with the intention of limiting their movement to different rival lenders.
On agency banking, the company will leverage on its ecosystem using hardware outlets to capitalise on their long working hours to serve more clients conveniently. Our strategy is a mixture of learning what consumers want and how the market has evolved. Our customers want solutions that work but they were going to too many players. We saw a niche in that.