Mortgage solution backed by market a win for home owners
SEE ALSO :Hope for low-cost houses in new dealIn the Soviet Union, the government provided the tools to mechanics so they could fix agricultural equipment in the field. But because they had no sense of ownership over these tools, the mechanics would just throw them away instead of carrying them home. Why burden oneself when there will be a new wrench waiting for you tomorrow, at no extra cost? That is why the recently announced Kenya Mortgage Refinance Company (KMRC) is both smart and effective. The company’s goal is to increase the number of mortgages to 60,000 by the year 2022 – a massive increase from the current 22,000. While until now one could not apply for a mortgage without a “formal salary”, this initiative will finally allow a huge portion of our population to take a mortgage and fulfill their dream of owning a home.
Public goodAs this company is largely government-owned, its main objective is not profit, but rather the greater public good. As such, it will be able to provide long-term funding at a fixed rate, without exposing citizens to the risk of the volatile mortgage market that could end up costing them serious sums of money, or could even lead to the loss of their home. At the same time, there is little chance that the KMRC will end up like so many other government programmes, drowned in inefficiency and corruption. Direct government intervention is a necessary evil that should be used like harsh medicine – rarely and in moderation. Whenever a market solution can be found, it should be the preferred option. The free market understands the needs and wishes of the population better and is faster to adapt to changing circumstances. Instead of building houses which would be inadequate and of low quality, President Uhuru Kenyatta’s administration is tackling the source of the problem rather than the symptom. It is using the resources of the Treasury to provide a disenfranchised population access to loans, which then finance the construction of new houses, truly empowering Kenyans who face economic challenges. As loans are repaid, there is no further burden to the national debt – instead, the state will receive profits from the interest rates. KMRC is supported by the World Bank and African Development Bank, bodies that only support endeavours in which they truly believe. Furthermore, international oversight means it will be almost impossible for corrupt officials to embezzle funds out of the pockets of hard-working Kenyans.
Job creationAnother positive effect is job creation due to sudden increase of demand. Building 60,000 housing units requires skilled workers, equipment and transportation of building material. It will provide respectable work for thousands of young Kenyans yearning to put their skills to good use. As this takes off, they will be able to feed their families and even apply for a mortgage of their own. By opening up the mortgage market to those who need it most, the government took a big step in the right direction towards fulfilling Uhuru’s promise of affordable housing for all. The market solution of KMRC is a win-win for all.
- The writer is a banker
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