In a significant boost to homeownership among low-income and informal sector workers, Kenya has secured Sh559.60 million (€4.0 million) from the World Bank Group to establish a credit guarantee scheme for home loans. The initiative is aimed at supporting households with irregular incomes, commonly referred to as ‘hustlers,’ by providing access to affordable mortgages.
The funding will serve as seed capital for the newly established Kenya Mortgage Guarantee Trust (KMGT), which will underwrite home loans for informal sector workers at a guarantee rate of 40 percent. The Kenya Mortgage Refinance Company (KMRC), which incorporated KMGT as a separate independent entity last year, has confirmed that discussions are ongoing to secure additional funding from other Development Finance Institutions (DFIs).
“With €4.0 million, we have conducted sensitivity analysis, which shows that the capital will guarantee loans for nine years because it will be invested and built up,” said KMRC Chief Executive Johnstone Oltetia. “Assuming there will be no default, the guarantee fund could last even longer, giving us ample time to strengthen the capital base of KMGT.”
The government-backed mortgage guarantee scheme is expected to be operational by June 2024, coinciding with the completion of 4,888 housing units under the Housing Levy Development Fund. These units, as announced by the Affordable Housing Board, are categorized into three segments: social housing units (bed-sitters) for individuals earning below Sh20,000 per month, affordable housing for workers earning between Sh20,000 and Sh149,000, and middle-class housing for those earning above Sh149,000.
KMRC, which is 25.3 percent state-owned, with the remaining shares held by commercial banks, Saccos, and DFIs, plays a crucial role in enhancing mortgage affordability by offering long-term, low-interest financing to primary mortgage lenders.
The new credit guarantee scheme is expected to transform the housing sector by enabling more Kenyans to access mortgage financing, especially those in the informal ‘jua kali’ sector who traditionally face challenges securing home loans due to irregular income patterns. With further funding from DFIs, the program’s impact could expand significantly, bringing Kenya closer to its affordable housing goals.
This initiative marks a critical step in the government’s broader strategy to bridge the housing deficit and improve homeownership rates, particularly among low- and middle-income earners.