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15 April, 2024
Press Release

Kenya Mortgage Refinance Company (KMRC) Review 2024 - One Pager

Over the years, Kenya has grappled with rapid population growth and high urbanization rates, exacerbating the country's housing shortage. In response to this challenge, the government has implemented different measures including the Affordable Housing Program (AHP) under the Bottom-Up Economic Transformation Agenda (BETA) and the establishment of the Kenya Mortgage Refinance Company (KMRC). KMRC's mandate is to provide long-term funds to primary mortgage lenders (PMLs) for onward lending to increase the availability of affordable home loans to Kenyans. Since its inception, KMRC has made notable progress, having disbursed 3,300 loans as of 2024, contributing to increased homeownership in the country. While KMRC has achieved significant milestones, there remains a substantial gap in the annual housing deficit and the mortgage market remains underdeveloped.

The Kenya Mortgage Refinance Company (KMRC) is a non-deposit taking, public-private partnership (PPP) firm formed by the Government of Kenya and regulated by the Central Bank of Kenya (CBK). The primary mandate of KMRC is to ensure sustainable home financing in the country, by providing long-term funds to primary mortgage lenders (PMLs) such as; banks, microfinance institutions, and SACCOs at low and fixed interest rates. KMRC was incorporated in April 2018 under the Companies Act 2015, and authorized by the CBK to begin lending operations in September 2020. In 2023, KMRC had managed to disburse Kshs 8.4 bn

Section I: Overview of the Housing Sector in Kenya

In recent years, there has been a notable rise in the demand for housing in Kenya. This surge is attributed to factors such as a growing population and an elevated rate of urbanization, with more individuals relocating from rural regions in pursuit of employment opportunities, especially the young population. As of 2022, urbanization and population growth rates stood at 3.7% and 1.9% respectively, relatively higher than the global averages of 1.5% and 0.8% respectively.

In a bid to counter the housing deficit in the country, the Kenyan government has made efforts to boost both the demand and the supply side. On the supply side, the government has set an ambitious target of delivering 250,000 affordable housing units on an annual basis.

On the demand side, the government envisions increasing the number of mortgages to over 1,000,000 from less than 30,000 annually by enabling low-cost mortgages of less than Kshs 10,000. Additionally, the government aims at restructuring the housing finance scheme in the country, by instituting a National Housing Fund and Cooperative Social Housing Scheme, which will guarantee the uptake of houses that are developed under the AHP.

Section II: Home Financing in Kenya

The mortgage market is pivotal in the housing segment in Kenya with many Kenyans opting for mortgages to finance their housing development projects or when purchasing homes. Therefore, KMRC plays a crucial role in the housing segment by its role in providing loans to PMLs. For example, according to CBK, in 2022 there was a total of 27,723 mortgages in the market, meanwhile the total number of mortgages refinanced by KMRC stood at 2,522.

In 2022, the number of mortgage accounts increased by 1,063, representing a 4.0% increase to 27,786 from the 26,723 recorded in 2021. The average number of loan accounts has shown a 10-year Compounded Annual Growth Rate (CAGR) of 4.1%, indicating  growing demand for homeownership among Kenyans, driven by the expanding middle class and the continuous increase in population and urbanization rates. Despite the growing number of mortgage accounts, the mortgage to GDP ratio stood at 1.6% in 2022, indicating room for further growth in the mortgage market.

Going by the Bank Supervision Annual Report 2022, the value of mortgage loans outstanding increased by Kshs 16.7 bn, representing a 6.8% increase to Kshs 261.8 bn in 2022 from Kshs 245.1 bn in 2021. The upward trajectory of the loans which also represented a positive 10-year CARG of 8.1% was attributed to the growing number of mortgage accounts as more people try to access mortgages to finance their housing needs, this follows the economic recovery from a downturn in 2020, during which the mortgage sector was adversely impacted by the COVID-19 pandemic.

In 2022, the mortgage market recorded an average interest rate charge on mortgages of 12.3%, representing a 1.0%-point increase from 11.3% recorded in 2021. CBK noted that rates ranged between 8.2% to 17.0% compared to a range of 7.1% and 15.0% recorded in 2021.Non-performing loans recorded a 9-year CAGR of 18.0% between 2013 and 2022, mainly attributed to the significant increase of 88.0% in the value of Non-Performing Mortgage Loans to Kshs 22.0 bn in 2016 from Kshs 11.7 bn in 2015.

Section III: Kenya Mortgage Refinance Company (KMRC) Review

  1. Overview of the Kenya Mortgage Refinance Company

The Kenya Mortgage Refinance Company (KMRC) is a treasury backed non-deposit taking financial institution established in 2018 under the Companies Act 2015, and was licensed by the Central Bank of Kenya (CBK) to commence core business operations in September 2020. KMRC is the sole institution licensed to carry out Mortgage Liquidity Facility (MLF) activities in Kenya, which include the provision of long-term funds to Primary Mortgage Lenders (PMLs) such as banks, microfinance institutions, and SACCOS for purposes of increasing availability of affordable home loans to Kenyans. KMRC acts as an intermediary between PMLs and the capital markets through the issuance of bonds subject to regulation and supervision of the CBK and Capital Markets Authority (CMA), with the objective of providing long term funds at better rates. As such, KMRC does not lend directly to individual borrowers.

  1. KMRC Progress and Key Milestones Achieved

In June 2020, KMRC held its first Annual General Meeting and was later issued with its license in September 2020. To date, KMRC has disbursed around Kshs 10.5 bn and refinanced approximately 3,300 mortgages to 12 PMLs. Please see below the progress of KMRC mortgage refinancing since its operationalization.

*September 2023

 Source: Kenya Mortgage Refinance Company (KMRC) and AfDB

In Financial Year 2023, KMRC reported a 163.8% increase in Profit After Tax (PAT) to Kshs 847.8 mn from Kshs 324.4 mn recorded in FY’2022 majorly attributable to 84.6% increase in interest income to Kshs 2.4 bn in FY’2023 from 1.3 bn in FY’2022. Additionally, total assets increased by 21.4% to Kshs 25.9 bn from 21.4 bn posted in FY’2022, owing to the 32.0% and 24.5% increase in Loan and advances and Cash and Cash equivalents respectively.

  1. Recent developments
  1. Kenya Mortgage Guarantee Trust (KMGT) - KMRC unveiled the KMGT with the aim of mitigating risks for banks and SACCOs providing home loans to high-risk individuals, particularly low to mid-income workers.
  2. Increase in Maximum Loan Size – KMRC increased the maximum loan size across the country to Kshs 10.5 mn from Kshs 8.0 mn and Kshs 6.0 mn for the Nairobi Metropolitan Area and the rest of the country, respectively.

  1. Kenya Mortgage Refinance Company (KMRC) Achievements
    1. Increased liquidity to Primary Mortgage Lenders: In 2023, KMRC posted a significant increase in net loans disbursed to PMLs at Kshs 8.4 bn, up from 6.7 bn in 2022, representing a 24.5% increase
    2. Increased Mortgage Uptake in the Country: Through mortgage refinancing, KMRC had managed to refinance approximately 2,522 mortgages as of December 2022
    3. Successful issuance of its inaugural bond: KMRC got a nod from the CMA to roll out its Kshs 10.5 bn Medium Term Note programme in January 2022
    4. Promoted Financial Sector Inclusion: In 2021, KMRC effectively standardized mortgage origination practices for participating SACCOs, which are integral to Kenya's financial and housing finance sectors, as they address the housing finance gap in lower income brackets by offering unsecured, medium-term loans to their members

  1. KMRC challenges
  1. Low Qualifying Mortgage Amounts: For the majority of its operational history, KMRC maintained a maximum loan size that lagged behind the average mortgage size in the market until February 2024. At that point, KMRC increased its maximum loan size nationwide to Kshs 10.5 mn, up from Kshs 8.0 mn in the Nairobi Metropolitan Area and Kshs 6.0 mn elsewhere in the country.
  2. Cost of capital: KMRC’s current funding model is unclear and unsustainable, owing to the large negative spread between its cost of capital and lending rate.
  3. Increased credit risk evidenced by a high number of Non-Performing Loans: According to Quarterly Economic Review July- September 2023 Non-Performing Loans (NPLs) to the Real Estate Sector increased by 2.0% in Q3’2023 to Kshs 97.5 bn from Kshs 96.0 bn in Q2’2023.
  4. Increasing Property Prices: The escalating selling prices of residential properties have posed a growing challenge for low-income earners seeking access to mortgages.

SECTION IV: Case Studies and Lessons Learnt

  1. Offer innovative products targeting residential developers- to accelerate funding for KMRC, it can explore offering innovative products tailored specifically for residential developers.
  2. Narrowing down and developing mortgage products specifically targeting the low and middle-income groups is essential-KMRC can start by providing long term loans of up to 30 years. EMRC has mortgages for low and middle-income earners with tenors of up to 30 years, additionally they provide a collateral coverage ratio of 100.0% of the refinance value
  3. KMRC can diversify by introducing non-residential mortgages- In a bid to diversify and enhance its sustainability, KMRC can introduce mortgages tailored for non-residential developments such as for commercial and industrial projects.
  4. KMRC can develop a mortgage product tailored for PMLs, targeting only housing units under the AHP- EMRC in 2014, introduced "NUCA" with the aim of advancing mortgages to acquire units under the Ministry of Housing, Utilities, and Urban Communities. KMRC can facilitate this by disbursing loans to PMLs for the acquisition of units under the social and affordable housing schemes within the AHP
  5. To address the challenge of surging property prices, KMRC can introduce "Elite" mortgages- In 2013, EMRC developed "Elite" mortgages with the aim of refinancing high-end mortgage portfolios.


KMRC has made significant strides in advancing homeownership in Kenya, having disbursed more than 2,890 mortgages since its inception. PMLs have effectively supported KMRC by providing mortgages to end-users, aligning with KMRC's original vision. However, the number of mortgages refinanced compared to the market average during the same period is relatively low. Between 2021 and 2022, KMRC refinanced a total of 2,522 mortgages, compared to the 54,512 mortgages in the market during that time, representing only 4.6% of the available mortgages, which is notably low. Considering the government's goal of delivering approximately 200,000 mortgages through KMRC to boost homeownership, there remains ample opportunity for growth. KMRC has demonstrated its capacity to manage resources effectively, as evidenced by its financial statements, instilling confidence that it can handle larger funding from stakeholders. We anticipate KMRC to continue disbursing more mortgages and partnering with new PMLs. Moreover, we expect KMRC to introduce innovative initiatives to further stimulate the mortgage market in Kenya. Additionally, KMRC has shown promising progress by announcing plans for a Risk Sharing Facility (RSF).

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