This archive report was first published on 19 August 2021.
Published on August 19, 2021, a report by Shelter Afrique revealed that at least two million houses are required to fill the current housing shortage in Kenya.
However, the uptake of mortgages has been low, with only about 26,000 mortgages issued annually. This is largely because banks target people in formal employment, and even then, few can afford the mortgages due to high interest rates.
Fortunately, savings and credit co-operatives (Saccos) are stepping in to provide affordable financing for home buyers. Safaricom Sacco Society Chief Executive Joseph Njoroge notes that Saccos have become the go-to financial institutions for potential home owners.
"If you look at mortgage penetration, it is less than 10 per cent. There is a very huge gap that can be filled by Saccos," he said.
He added that mortgages have for long been a reserve of banks, which is gradually changing with Saccos taking the space as well. In fact, Safaricom Sacco has two mortgage products that target both salaried and self-employed individuals.
One of their products, Ustawi, has a tenure of 15 years at a rate of 12 per cent on reducing balance and needs no guarantors with a minimum of Sh3 million and upper limit of Sh20 million.
Another product, Faraji Ready Homes loan, is through Kenya Mortgage Refinance Company (KMRC) - the government-led vehicle on affordable housing. This product has a tenure of 25 years at eight per cent interest rate with a limit of Sh4 million.
Shelter Afrique is one of the firms that has invested in KMRC. Chief Executive Andrew Chimphondah noted the key role Saccos and micro-finance institutions play in affordable housing, but suggested some adjustments should be made in lending.
"One of the initiatives I would say is that you could give them a loan through a card," he said. "The card allows you to buy building materials so that the funds taken do not end up being used for other personal expenses such as buying a car."
Mr Chimphondah also suggested setting up retail financial intermediaries that do not have strict requirements on funding, allowing individuals to get short loans to fund the construction of their homes in stages.
