Faith Birgen, an assistant sales manager with an agricultural organization based in Eldoret Kenya, had for long been struggling to ramp up her savings, hoping to realize her target of being a homeowner by the time she was 30 years. She was bothered by the fact that the Ksh. 40,000 (USD $353) she paid in monthly rent (Ksh. 480,000/USD $4242 per annum) would never translate into an asset she would own eventually.
Still, she grappled with the inaccessibility of mortgage facilities in the market with double digit interest rates and short tenures. Today Birgen is 29 and has moved into her own house purchased at a cost of Ksh. 5.4 million (USD $47,724) courtesy of the Kenya Mortgage Refinance Company (KMRC) enabled mortgage.
“I was looking for a mortgage plan then I visited a credit officer at my sacco who proposed two mortgage plans, one was the sacco’s stand alone and another was the KMRC-backed through my sacco. I opted for the KMRC-backed mortgage because it was quite friendly in terms of the interest rate. I have borrowed Ksh. 3.0 million (USD $26,513) from my sacco as supported by the KMRC facility”, says Birgen.
Birgen is paying about Ksh. 74,000 (USD $654) monthly towards servicing her mortgage priced at 9.0 per cent with a 48-month repayment period. Had she borrowed the same amount with the same repayment period but priced at the prevailing 13.5 per cent market rate, she would be paying about Ksh. 81,000 (USD $715) in month servicing. Birgen says the saving realized through the KMRC-supported mortgage facility has provided her with a financial cushion, particularly following the COVID-19 induced economic downturn which has adversely affected the business environment.
“Instead of paying my monthly rent which at the end of it the house will not be your asset, KMRC has enabled me to invest now in an asset. The amount that I pay monthly is quite friendly and my living standard has not changed. I am now able to manage my finances better”, she says.
Kenya has made great strides in formal financial inclusion. According to the Central Bank of Kenya and the Kenya National Bureau of Statistics, the rate of formal financial inclusion stands at 82.9 per cent in the country. Amongst the youth, however, a lot remains to be done with 23.0 per cent of persons aged between 18 and 25 years being excluded from formal financial services. Affordability remains one of the key impediments to widening the accessibility of formal financial services to the youth. Birgen argues that interventions such as the KMRC enabled mortgages promise to change this narrative for the better.
“I was able to follow through the process quite easily. It took me two and a half months. I would advise young people out there to consider the KMRC enabled mortgage facility from their Sacco”, Birgen says.
The affordable housing program is helping youth such as Faith fulfil their home ownership dream which seemed unattainable in the past. With support from the World Bank Group (WBG), the KMRC mandate is to provide long term funds to primary mortgage lenders (Banks, Microfinance Banks & Saccos) to increase the availability and affordability of home loans to Kenyans.