The Kenyan government has injected Ksh. 603.1 million into the Kenya Mortgage Guarantee Trust (KMGT) to boost affordable housing, specifically targeting individuals in the informal sector.
This initiative was announced by the Cabinet Secretary for the National Treasury and Economic Planning, John Mbadi, at the 4th Kenya Affordable Housing Conference in Kisumu. The KMGT aims to provide partial risk cover to lenders, which will encourage them to extend credit to people with informal or irregular incomes who are typically excluded from formal financing options.
In a complementary effort, the Kenya Mortgage Refinance Company (KMRC) has secured $300 million in concessional funding from the World Bank and the African Development Bank (AfDB). This funding is intended to offer mortgages at single-digit interest rates. So far, the KMRC has refinanced over 4,600 home loans, valued at approximately Ksh. 21.7 billion, with women making up nearly half of the beneficiaries.
The KMGT is a risk-sharing facility designed to address the challenges faced by lenders when providing mortgages to people with informal or irregular incomes. By offering a partial risk cover, the KMGT aims to de-risk lending and empower financial institutions to extend credit to a segment of the population that is typically excluded from formal financing. The trust, which was incorporated as a separate entity by KMRC, will provide a 40% guarantee on eligible mortgages to protect lenders from defaults. The government provided an initial seed capital of Ksh. 550 million (or €4 million) to capitalize the trust. KMGT also has a manual for assessing informal incomes, which looks at factors like a borrower’s savings history, willingness to pay (based on utility bill payments), and the stability and source of their income.
The KMRC’s role is to provide long-term, fixed-rate financing to primary mortgage lenders (PMLs), such as commercial banks and SACCOs, enabling them to offer affordable loans to Kenyans. As of the conference, KMRC had refinanced over 4,600 home loans across 39 counties, valued at approximately Ksh. 21.7 billion. A key focus for the KMRC is gender-inclusive finance, with 48.3% of these beneficiaries being women. The company has also removed individual loan limits, capping loans at Sh10.5 million to better serve low- and middle-income first-time homebuyers. Loans can be used to buy or build homes and are restricted to owner-occupied properties. KMRC is exploring additional funding from other Development Finance Institutions (DFIs) to scale its refinancing capacity and expand access to home loans.