KMRC starts drawing WB Sh35b kitty
Kenya Mortgage Refinance Company (KMRC) has started to draw Sh35 billion credit line from the World Bank (WB) to cushion mortgage lenders from errant borrowers.
In a statement in the Budget Policy Statement (BPS) the National Treasury Cabinet Secretary Ukur Yattani said it had mobilised resources to improve the liquidity of the housing agency which last year gave out Sh2.75 billion to KCB and HFC for onward lending.
“The National Treasury has mobilised additional Sh35 billion from partners to support the company’s operations,” Treasury CS Ukur Yattani said in the budget statement Monday.
This as lenders face up to Sh1.4 trillion in defaults on Covid-19 shocks, raising concerns the situation could pull back lending, slowing down the government’s affordable housing push.
“In the short term, KMRC is well positioned to support emergency interventions aimed at stabilising the housing market post Covid-19 pandemic,” KMRC Chief Executive Johnstone Oltetia said.
The housing agency said it will support mortgage lenders by providing secure long term funds against eligible portfolio of mortgages.
This will offer a transition path back to growth and profitability for lenders.
KMRC communication officials are preparing a comprehensive statement on the matter and will soon brief the public.
According to Treasury, the funds will help maintain adequate liquidity to keep housing finance and housing markets functioning even in the wake of Covid-19 Pandemic, which has affected the business environment.
KMRC said 80 per cent of World Bank credit line is earmarked for affordable housing which is a loan of up to Sh4 million in Nairobi metropolitan area which includes Kiambu, Machakos and Kajiado, and up to Sh3 million elsewhere.
The difference, 20 per cent will be available for upper middle income housing. On the other hand, 40 per cent of AfDB funds will be used to refinance mortgages of up to Sh5 million and 60 per cent will go into refinancing mortgages of up to 8 million.
World Bank approved a Sh2.5billion ($250m) International Bank for Reconstruction and Development (IBRD) credit to support the affordable housing program followed by African Development Bank (AfDB) $100 million approval to support the program.
KMRC will lend to banks at an annual interest of 5 per cent, enabling them to write home loans at less than 10 per cent.
The initiative is part of the Big Four Agenda project in the Jubiliee administration.
For purposes of affordable housing, the borrower’s income threshold is Sh150,000 per month