Treasury mortgage financing arm gets Sh15bn seed funding
With incorporation at the end of the month insight, the Kenya Mortgage Refinancing Company (KMRC) has received major backing from the World Bank to the tune of Sh15.1 billion to facilitate its set up.
Formed to relieve commercial banks from the risks involved in the provision of long-term credit, KMRC will allow real estate developers to easily access financing which will consequently enable individuals and Small and Medium Enterprises (SMEs) to get mortgages at discounted interests’ rates.
Speaking during a media briefing alongside African Development Bank Regional Director Calleb Weggoro, Treasury Cabinet Secretary Henry Rotich said the government was in talks with other development partners including local commercial banks over the possibility to inject more funding into the project alongside government.
“Government will put in some seed money as we invite banks to participate and any other institutions that hold long-term money. Once we have that setup (KMRC) we will now lend at reasonable rates providing liquidity for mortgages,” he said.
Mr Rotich views KMRC as one of the measures by government to ease credit access by individuals and SMEs by setting up of specialized financial institutions to reduce the over-reliance on commercial banks for loans and mortgages.
Treasury is banking on the financing arm to re-ignite private sector development in a country that has seen the sector take a hit in the past couple of years following the introduction of interest caps on loans issued by commercial banks in 2016.
“These are part of the interventions we are doing. The problem is lack of long-term liquidity to lend at cheaper rates. If banks were to stick at the same rates, we would soon see hardly any lending on that space. Addressing the root cause is therefore important,” Mr Rotich said.
The establishment of the Kenya Mortgage Refinancing Company partly answers calls for the provision of alternative funding means by the private sector that see bank substitutes as the only way of solving lack of credit access within the industry.
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