With an eye to checking the growth of slums in rapidly urbanising Kenya, the World Bank has approved a $250m loan to help Kenyans get mortgages for affordable housing.
Now, most middle-to-low income people are locked out of home ownership by interest rates of 12% and tough mortgage conditions, such as short loan tenures of five years or fewer.
In a country of just under 50 million people, commercial banks hold only about 26,000 mortgage loans, the World Bank said this week.
The plan is to get banks lending to people on low or irregular incomes, and support the Kenyan government’s plan to build 500,000 affordable homes in the next five years.
Ninety-five percent of the Kenya’s formally-employed population are classed by the government as locked out; the World Bank hopes the loan will triple the proportion of urban households having access to a mortgage.
“We believe that Kenya’s vibrant private sector offers an excellent opportunity to crowd in privately held skills and resources towards achieving the country’s Big 4 affordable housing goals,” said Felipe Jaramillo, World Bank Kenya Country Director.
The money will be disbursed by the Kenya Mortgage Refinance Corporation (KMRC), a largely private sector-owned institution supervised by the Central Bank of Kenya.
World Bank finance specialist and leader of the project, Caroline Cerruti, said the plan should work because of Kenya’s “supportive” macroeconomic conditions and mature capital markets.
“The project will endeavour to boost shared prosperity for all Kenyans by addressing rapid urbanisation which often manifests itself through the development of slums,” she said.