# KMRC: Demystifying Homeownership

An episode of [The Mwango Capital Podcast](https://invisiblenetwork.ai/podcast/1583367792), 25 Apr 2025, 48 min.

Audio: https://api.substack.com/feed/podcast/162037521/78dc95272939a455b871dcd0b5432f6b.mp3

In this episode recorded on 10.04.2025, we are joined by the Kenya Mortgage Refinance Company CEO & MD, Johnstone Oltetia, to unpack the mortgage process and clear up common misconceptions about homeownership. Subscribe to get notified when we make a new post. Show Notes 00:00:00 Introduction 00:01:00 Affordable Housing Challenges 00:07:07 Home-Ownership Market In Kenya 00:11:47 Facilitating Mortgages 00:20:12 Fixed Single-Digit Interest Rates 00:25:19 Myths, Misunderstandings, and Misconceptions about Mortgages 00:33:46 Kenya Mortgage Guarantee Trust 00:45:10 Closing Remarks Get full access to The Mwango Weekly at mwangocapital.substack.com/subscribe

## Transcript

[0:00] SPEAKER_00: Welcome to this edition of Wango Spaces this Thursday, Yune.
[0:03] SPEAKER_00: Really grateful to have the CEO of KMRC here.
[0:06] SPEAKER_00: And for the next hour, I'll also be demissifying home ownership.
[0:08] SPEAKER_00: My name is Eric Mokai.
[0:09] SPEAKER_00: I'm the founder of Wango Capital.
[0:12] SPEAKER_00: I'm hosting the spaces today.
[0:13] Join us in this journey to understanding a bit more about home
[0:16] ownership and how
[0:17] SPEAKER_00: KMRC facilitates that.
[0:19] SPEAKER_00: But just move to the CEO right now so that he can introduce himself.
[0:22] Maybe you can tell us about you and your journey to becoming
[0:24] the CEO of KMRC.
[0:26] SPEAKER_01: My name is Omutetia, CEO of KMRC.
[0:30] SPEAKER_01: I really don't like talking about myself,
[0:33] but this journey started a couple of years back when I was
[0:36] working at the National
[0:37] Treasury advising on financial sector matters and the
[0:40] affordable housing issue,
[0:42] SPEAKER_01: which was part of the Big Four agenda to development at that time.
[0:46] One of the responsibilities I was given when I was at the
[0:49] National Treasury was to
[0:50] SPEAKER_01: lead on the housing part of the Big Four agenda.
[0:54] And we had to do a couple of things,
[0:56] shaping policies for purposes of developing housing.
[1:00] And one of the key impediments at the time on the development
[1:04] of housing was long-term finance.
[1:07] For sure,
[1:08] banks obviously have money,
[1:09] but usually the funds that are held by banks are shorter.
[1:13] SPEAKER_01: The deposits you give to banks are considered short-term funds.
[1:16] SPEAKER_01: And therefore, banks not have privilege to extend loans longer.
[1:21] SPEAKER_01: Then they run into a mismatch.
[1:23] SPEAKER_01: And that's how we essentially developed KMRC from a concept.
[1:27] SPEAKER_01: And one of the key things that came up was affordability.
[1:30] And a study which was actually funded by Nash Bank together
[1:34] with us at the National
[1:35] SPEAKER_01: Treasury came at all that says unavailable and unaffordable.
[1:39] SPEAKER_01: And that essentially created and put into place KMRC.
[1:43] SPEAKER_01: So here we are and KMRC currently is running.
[1:46] SPEAKER_01: And I think we are going to talk a little more about that.
[1:48] But the main objective of KMRC is to enable a lot more people
[1:52] to be able to own homes.
[1:54] SPEAKER_01: When we started,
[1:55] SPEAKER_01: we noted that,
[1:57] SPEAKER_01: and I think we still do,
[1:58] SPEAKER_01: have a significant deficit of housing in the country.
[2:02] Over 2 billion units,
[2:03] we have almost about 50,000 homes coming to market.
[2:08] SPEAKER_01: We don't have the current data to see how many are now coming to market,
[2:11] SPEAKER_01: but that was the estimate.
[2:13] SPEAKER_01: But the shortage is still significant.
[2:15] SPEAKER_01: It's about 150,000 units every year.
[2:18] SPEAKER_01: Now, that is the gap.
[2:20] SPEAKER_01: that we are trying to address.
[2:22] SPEAKER_01: The solution that KMRC provides is essentially around affordability.
[2:28] SPEAKER_01: We are trying to resolve the affordability problem that we have.
[2:31] We actually have what we call an affordability crisis on home
[2:36] ownership in Ken.
[2:37] And one of the ways to look at affordability is even when you
[2:40] just look at the rent,
[2:41] SPEAKER_01: for example,
[2:42] SPEAKER_01: taking rent as a share of household costs.
[2:47] SPEAKER_01: And on average, we know that it's about 37 to 40%.
[2:52] So that in itself is an affordability crisis because you will
[2:55] not be able to afford
[2:55] because that essentially crowds out the other obligations that
[3:00] anyone has if
[3:01] SPEAKER_01: housing alone takes more than a third of the costs of a household.
[3:06] SPEAKER_01: Now,
[3:06] SPEAKER_01: for purposes of addressing that affordability issue,
[3:09] SPEAKER_01: that's why we came up with a number of considerations.
[3:12] SPEAKER_01: Number one, we obviously are providing financing that is lower cost.
[3:17] And the main cost of a loan is usually the rate or the interest
[3:21] that you're going to pay.
[3:22] We significantly reduced that to the extent that CAMRC is
[3:26] offering single-digit
[3:27] SPEAKER_01: rates or below 10% rates.
[3:30] SPEAKER_01: The other one,
[3:32] SPEAKER_01: which is also more critical,
[3:33] SPEAKER_01: in fact,
[3:34] SPEAKER_01: is the fact that we ensure that financing is actually fixed.
[3:38] SPEAKER_01: Now, variable costs tend to be problematic when markets change.
[3:42] SPEAKER_01: Like last year and earlier this year,
[3:44] the market had completely changed to the extent that interest
[3:47] rates were going up
[3:48] SPEAKER_01: all the time.
[3:49] SPEAKER_01: Usually what happens,
[3:50] you find that the banks would send you a text or a financial
[3:54] institution would send
[3:55] SPEAKER_01: you a text advising you that the rates have increased.
[3:57] SPEAKER_01: And therefore, your monthly repayment has increased to a certain amount.
[4:01] You can imagine what that implies to a person whose income has
[4:05] not increased in tandem.
[4:06] SPEAKER_01: In most cases, it doesn't.
[4:08] So we have fixed the rates to the extent that you borrow a loan
[4:12] or someone borrows
[4:12] SPEAKER_01: a loan for whatever number of years,
[4:15] SPEAKER_01: then 15,
[4:16] SPEAKER_01: 20 or 25 years,
[4:17] and they have a constant repayment for the duration of the
[4:20] repayment of the loan.
[4:21] SPEAKER_01: That is significantly important.
[4:23] SPEAKER_01: We are also providing loans at high LTVs.
[4:26] SPEAKER_01: LTV is essentially the loan to value ratio.
[4:29] SPEAKER_01: That means you will not have to make a down payment.
[4:33] SPEAKER_01: The bank essentially or the financial institution or SACO in this case,
[4:36] SPEAKER_01: because KMRC works with banks and SACOs,
[4:39] will extend the loan to you without necessarily have to make a
[4:42] down payment or what
[4:43] SPEAKER_01: is called a deposit.
[4:44] SPEAKER_01: And that's why it's high LTVs.
[4:46] SPEAKER_01: In fact, it's up to 105%.
[4:49] SPEAKER_01: The 5% above that is meant for incidental cost.
[4:55] The incidental cost essentially is what you pay as extra for
[4:59] processing of the loan.
[5:00] Like,
[5:00] for example,
[5:01] you'll have to pay stamp duty,
[5:02] which is a tax to government.
[5:04] SPEAKER_01: You'll have to pay legal fees.
[5:06] SPEAKER_01: You'll have to pay valuation fees.
[5:08] SPEAKER_01: And such like fees, those are incidental costs.
[5:11] SPEAKER_01: And therefore,
[5:12] SPEAKER_01: the deposit or the down payment,
[5:14] SPEAKER_01: which essentially acts as a barrier to entry in certain cases,
[5:18] SPEAKER_01: is removed.
[5:19] SPEAKER_01: So that if you need a home loan today, you get it with outside barriers.
[5:22] The only thing that you have to fulfill is essentially having
[5:26] ability to repay the loan.
[5:28] SPEAKER_01: And that is usually checked by a financial institution.
[5:32] SPEAKER_01: We try as much as possible to push financing down market.
[5:34] SPEAKER_01: And that means we are going to the middle to low income earners.
[5:38] And that is because that is the category of people who are
[5:41] disproportionately affected.
[5:43] SPEAKER_01: Majority of the people who are middle to high income can afford a loan.
[5:48] So we want to serve Kenyans who essentially will otherwise
[5:52] never have gotten an
[5:53] SPEAKER_01: opportunity to take that home loan because they are a lot more expensive.
[5:57] SPEAKER_01: And so that's why we essentially put a cap on the loan size.
[6:02] SPEAKER_01: And the cap is about $10.5 million.
[6:05] SPEAKER_01: And that amount has evolved over time.
[6:07] SPEAKER_01: We started with a low amount of about $4 million.
[6:10] SPEAKER_01: We moved to $6 million.
[6:11] SPEAKER_01: And then now we are at $10.5 million.
[6:16] SPEAKER_01: The idea is to serve the low to middle income.
[6:18] But again,
[6:19] we also don't want to essentially skew the markets to one
[6:23] particular direction.
[6:24] So we have a blend where we say that 80% of the loans
[6:29] essentially go into the low
[6:30] SPEAKER_01: to middle income and 20% will essentially serve the middle income market.
[6:36] SPEAKER_01: So that of course we try to balance the market.
[6:38] SPEAKER_01: So that is the solution that KMRC is providing.
[6:42] SPEAKER_01: We obviously are strengthening our research.
[6:45] SPEAKER_01: We already have numbers.
[6:47] SPEAKER_01: that we get from time to time from the Central Bank of Kenya,
[6:50] SPEAKER_01: from the Kenya National Bureau of Statistics.
[6:52] And those numbers,
[6:55] that research information help us to make informed decisions.
[6:59] SPEAKER_01: So from time to time,
[7:00] we check on those and that's when we shape policy according so
[7:03] that we can support
[7:05] SPEAKER_01: a greater home ownership in the country.
[7:07] SPEAKER_00: When you survey the landscape in terms of homeownership in Kenya,
[7:10] SPEAKER_00: what are your key observations in the market?
[7:13] SPEAKER_00: Where are the bottlenecks that maybe KMS is also trying to address?
[7:16] SPEAKER_00: Just give us a brief overview of the homeownership market in Kenya.
[7:19] SPEAKER_01: So when you look at the homeownership in the country,
[7:21] SPEAKER_01: there obviously have been a number of bottlenecks,
[7:23] SPEAKER_01: some of which are being addressed.
[7:25] SPEAKER_01: Some of us, we still have a bit of rigidity.
[7:28] SPEAKER_01: But one of the main factors
[7:30] SPEAKER_01: rigidities was essentially financing.
[7:33] SPEAKER_01: Financing is a key component of any form of ownership.
[7:38] SPEAKER_01: The kind of financing that we need is actually long-term finance.
[7:42] That is currently being addressed by KMRC,
[7:45] but that was one of the key concerns.
[7:48] SPEAKER_01: However,
[7:48] SPEAKER_01: we still have a bit of challenge with what we call developer finance or
[7:53] SPEAKER_01: construction finance.
[7:55] SPEAKER_01: KMRC does end-user finance, but we still need developer finance.
[7:59] The reason why we need developer finance is because we need
[8:02] affordable units or
[8:03] SPEAKER_01: affordable homes so that when you get affordable finance,
[8:07] SPEAKER_01: then certainly that increases the affordability that we're talking about.
[8:10] But there's also some work going on around that because that's
[8:14] essentially why we
[8:15] SPEAKER_01: are contributing a certain levy that we all know about,
[8:18] SPEAKER_01: which is called the affordable housing levy.
[8:20] That levy is a government tax and it is an institution which
[8:24] was established to
[8:26] SPEAKER_01: manage that,
[8:26] SPEAKER_01: which is called the affordable housing board.
[8:29] And what they do essentially is to support greater developments,
[8:33] that is construction.
[8:35] And we are told there are a couple units that are coming up
[8:38] from time to time,
[8:39] SPEAKER_01: partly under government land and some are in private land.
[8:43] SPEAKER_01: But that's a key concern.
[8:45] SPEAKER_01: Of course,
[8:45] we're waiting to see how that turns out because of course we
[8:49] have not seen the
[8:49] SPEAKER_01: units yet,
[8:50] but we are told there are a number of units that are coming up
[8:52] in the market.
[8:54] SPEAKER_01: The other key challenges,
[8:56] SPEAKER_01: essentially around policy matters,
[8:58] SPEAKER_01: which includes the rigidity sometimes we have in the Ministry of Land.
[9:02] SPEAKER_01: Of course, when you need a home, you need a title.
[9:05] SPEAKER_01: And in any case,
[9:06] you can't get financing for a home without a title because
[9:09] that's what is held as security.
[9:10] SPEAKER_01: We've had a bit of challenges with that.
[9:12] SPEAKER_01: And of course,
[9:14] we understand there's some work that is going on digitalization
[9:16] and things like that.
[9:17] We actually understand there's a bit of improvement,
[9:19] but it's not nearly enough.
[9:21] SPEAKER_01: because we want greater efficiencies on the production of titles,
[9:25] SPEAKER_01: that's number one,
[9:27] SPEAKER_01: and as well as on the registration of the security documents,
[9:31] which sometimes takes a little longer than expected for someone
[9:35] to be able to get
[9:36] SPEAKER_01: into their home.
[9:36] SPEAKER_01: When you get a loan and you have the title,
[9:39] you want a little bit of speed and certainty as to when you'll
[9:43] actually be able to
[9:43] SPEAKER_01: get the process to be concluded for you to be able to get into your home.
[9:48] One of the other key challenges that certainly affects housing
[9:52] is the cost of land.
[9:53] SPEAKER_01: There has been a lot of significant speculation on land in the country,
[9:58] SPEAKER_01: particularly within the city centers,
[9:59] SPEAKER_01: in Nairobi particularly,
[10:01] SPEAKER_01: which has affected the cost of land.
[10:03] SPEAKER_01: Land is unbelievably pricey.
[10:05] SPEAKER_01: And in fact, land contributes almost 40% of the cost of a unit or a home.
[10:12] SPEAKER_01: And that is terribly expensive.
[10:13] SPEAKER_01: We need a correction on that.
[10:15] SPEAKER_01: But then the issue is the speculation that people believe you buy land,
[10:19] SPEAKER_01: you hold it for speculative purposes.
[10:22] SPEAKER_01: And that just keeps subtracting the cost of housing units.
[10:25] SPEAKER_01: Construction costs tend to be high.
[10:27] SPEAKER_01: Of course, the input costs come in there.
[10:30] SPEAKER_01: There is government taxation in there.
[10:33] Those input costs like cement,
[10:35] the roofing tiles,
[10:36] and things like that tend to be pricey.
[10:38] SPEAKER_01: And that exactly contributes to the high cost of housing units.
[10:43] SPEAKER_01: There is a number of things that are happening around that.
[10:45] SPEAKER_01: The government,
[10:46] SPEAKER_01: obviously,
[10:47] SPEAKER_01: because housing is considered a key development priority,
[10:52] SPEAKER_01: of course,
[10:52] SPEAKER_01: there is a bit of relaxation on a number of those factors,
[10:57] particularly on the inputs for construction of housing that
[11:01] we're beginning to see.
[11:02] SPEAKER_01: And government is also actually providing some incentives around that.
[11:06] For example,
[11:06] there is an incentive on zero taxation for a first home buyer.
[11:10] SPEAKER_01: That is on stamp duty.
[11:12] SPEAKER_01: A lot of people actually are not aware about that.
[11:14] But then there is certainly an incentive that government has
[11:18] provided for a subsidy
[11:20] SPEAKER_01: that government has provided in relation to that.
[11:23] SPEAKER_01: And there are a few others.
[11:24] SPEAKER_01: So those are some of the challenges we face.
[11:26] SPEAKER_01: A majority of these challenges are actually being addressed.
[11:29] SPEAKER_01: It tends to grind slow, but we begin to see some improvements.
[11:33] SPEAKER_00: I was a bit surprised about land taking 40% of cost over home.
[11:37] I think that speaks to the very high prices that you tend to
[11:40] have in the market.
[11:41] SPEAKER_00: And I think for most Gen Zs and the younger people,
[11:43] they are hoping that these land prices would go a bit lower
[11:46] than they can be able
[11:47] SPEAKER_00: to afford.
[11:47] SPEAKER_00: But if you're talking to someone maybe new to us today,
[11:51] could you explain what a mortgage is and then what KMRC's role
[11:54] in facilitating that
[11:55] SPEAKER_00: mortgage would be?
[11:56] SPEAKER_00: Like if I am a young person who wants a mortgage with a KMRC,
[12:01] SPEAKER_00: where should I go to start that journey?
[12:03] A mortgage is a home loan or a loan that you take for you to be
[12:07] able to buy a home
[12:08] SPEAKER_01: immediately or actually to construct one.
[12:10] Usually you take a mortgage because you don't have ability or
[12:15] sufficient funding to
[12:16] SPEAKER_01: be able to pay for the home upfront.
[12:19] SPEAKER_01: And that's why you take a mortgage for that kind of loan.
[12:23] SPEAKER_01: It's actually a lot more efficient because you need a home now,
[12:27] SPEAKER_01: you take a loan now,
[12:29] SPEAKER_01: and you pay overtime.
[12:30] SPEAKER_01: The other side is that you have to wait because,
[12:33] SPEAKER_01: of course,
[12:34] SPEAKER_01: you'll have to build a saving for you to be able to buy a home cash.
[12:38] SPEAKER_01: And that tends to be inefficient.
[12:39] You can imagine if you want to buy a home or you want to get
[12:42] into a home now,
[12:43] SPEAKER_01: the option is for you to continue paying rent and rent is usually,
[12:46] SPEAKER_01: of course,
[12:47] SPEAKER_01: a sinking.
[12:48] SPEAKER_01: fund arrangement because you'll never be able to recover that money.
[12:51] But your rent can actually pay or buy you a home because that
[12:54] would actually be
[12:55] SPEAKER_01: your repayment,
[12:56] SPEAKER_01: especially because of the current affordability that we have.
[12:59] SPEAKER_01: So instead of you paying rent,
[13:02] SPEAKER_01: you use that as a repayment for your home,
[13:05] SPEAKER_01: which you leave in immediately.
[13:06] The other advantage of that is that as you continue repaying,
[13:10] usually you build on equity.
[13:12] SPEAKER_01: Equity is essentially having
[13:14] a contribution because the value of your home potentially
[13:17] increases over time.
[13:18] And in certain cases,
[13:19] it increases faster than the rate at which you are paying.
[13:22] SPEAKER_01: And so as you build that,
[13:24] which essentially is an advantage you'll never be able to have
[13:26] when you're paying rent,
[13:27] it obviously makes sense for you to be able to pay or to buy a
[13:31] home using a mortgage.
[13:32] And certainly there is never a requirement for you to hold on
[13:35] to that mortgage for
[13:37] SPEAKER_01: the duration that you have taken the mortgage.
[13:39] So assuming you take a mortgage for 10,
[13:42] 15 years,
[13:42] it's usually an entry issue.
[13:44] SPEAKER_01: So you want to enter into a home now,
[13:47] SPEAKER_01: you take a mortgage now,
[13:49] SPEAKER_01: but you don't have to stick on to that mortgage for those 15 years.
[13:53] SPEAKER_01: When you enter into your home,
[13:54] SPEAKER_01: your circumstances improve,
[13:56] SPEAKER_01: your income may have increased at that time.
[13:58] You repay it quickly within the shortest time duration that you
[14:01] can afford to,
[14:02] SPEAKER_01: and you get out of that mortgage situation,
[14:05] SPEAKER_01: and suddenly you own your home.
[14:07] SPEAKER_01: You can imagine if you have to wait,
[14:09] SPEAKER_01: pay rent,
[14:10] and then you try to make a saving overtime for you to be able
[14:13] to get sufficient
[14:14] SPEAKER_01: money to be able to build your home using cash.
[14:17] SPEAKER_01: It will take so long,
[14:18] SPEAKER_01: and if you do your calculations properly,
[14:20] SPEAKER_01: you'll actually find that it's a lot more expensive.
[14:23] SPEAKER_01: compared to the repayment that you make.
[14:25] SPEAKER_01: For purposes of getting a loan from KMRC, KMRC is a wholesale lender.
[14:30] SPEAKER_01: So it's a lender to other lenders.
[14:33] We lend to banks,
[14:34] we lend to circles,
[14:36] we lend to microfinance institutions.
[14:39] And the reason that we decided to do that at the start is that
[14:43] we knew for sure it
[14:44] will take so long to build an institution to have enough
[14:47] branches all over the
[14:48] SPEAKER_01: country for its impact to be felt.
[14:51] And so there was no need to create another institution that
[14:54] will compete the
[14:55] SPEAKER_01: current retail financial institutions that we have.
[14:58] And the idea was essentially to stimulate liquidity within the
[15:01] financial system.
[15:02] SPEAKER_01: And that is why it's a lender to other lenders,
[15:06] SPEAKER_01: with a distribution network being the financial institution,
[15:08] SPEAKER_01: the banks and the circles.
[15:10] SPEAKER_01: And the impact will be felt immediately because...
[15:13] SPEAKER_01: The financial institutions are current primary lenders.
[15:16] They already do mortgage lending and therefore they only get
[15:19] financing and they move.
[15:20] SPEAKER_01: So the financing will be,
[15:22] SPEAKER_01: of course,
[15:23] accessed from all financial institutions that lend or provide
[15:28] home loans in the country.
[15:30] SPEAKER_01: At the start,
[15:30] we only were lending to 20 financial institutions because
[15:34] that's a model we built initially.
[15:35] The shareholders of KMRC who are primary lenders were the ones
[15:39] that would receive
[15:40] SPEAKER_01: funding from KMRC.
[15:41] SPEAKER_01: Last year, we changed that and we opened it up to all primary lenders.
[15:46] So when we opened immediately,
[15:48] we increased the number of institutions by 100%.
[15:52] So we actually got another 20 institutions that are accessing
[15:55] KMRC or are in the
[15:57] SPEAKER_01: process of accessing KMRC funding this year.
[16:00] SPEAKER_01: So anyone should be able to get funding from wherever they are,
[16:04] SPEAKER_01: either from ASACO or from a bank.
[16:08] SPEAKER_01: And that essentially has enabled us to
[16:11] SPEAKER_01: increase the number of homeowners in the country.
[16:13] SPEAKER_01: So far,
[16:14] we have almost 3,900 additional homeowners who have accessed
[16:19] homeownership at
[16:20] SPEAKER_01: affordable rates.
[16:23] SPEAKER_01: And 47% of those are women.
[16:25] In addition to obviously the impact that creates to the
[16:28] homeowners who are now
[16:29] SPEAKER_01: repaying loans lower than anything they will have ever gotten,
[16:33] the financial institution will have increased availability of
[16:35] liquidity within the
[16:37] SPEAKER_01: financial sector.
[16:38] SPEAKER_01: by about 14 billion Kenya shillings of December 31st, 2024.
[16:43] SPEAKER_01: So we also,
[16:45] SPEAKER_01: of course,
[16:46] SPEAKER_01: brought in CERCOS,
[16:47] SPEAKER_01: who were never part of the primary mobile lenders,
[16:50] SPEAKER_01: will help them to build the underwriting frameworks.
[16:53] SPEAKER_01: And they have been now part of the lending institutions.
[16:57] SPEAKER_01: We also standardized the underwriting processes.
[17:00] SPEAKER_01: And certainly now,
[17:01] that means we have essentially democratized our home ownership
[17:05] because it's
[17:05] SPEAKER_01: available from a number of financial institutions,
[17:08] SPEAKER_01: not only the traditional financial institutions,
[17:11] SPEAKER_01: that is banks that have been there.
[17:13] SPEAKER_01: For you to get a mortgage from KMRC,
[17:15] SPEAKER_01: all that you need is to just go to any lender,
[17:19] SPEAKER_01: your bank,
[17:20] SPEAKER_01: your circle,
[17:21] SPEAKER_01: and ask for a home loan.
[17:23] SPEAKER_01: And...
[17:24] If you have a discussion with a primary lender,
[17:26] they should be able to give you two options.
[17:28] SPEAKER_01: Option number one will be a KMRC mortgage.
[17:31] SPEAKER_01: And I think when you enter in there,
[17:33] you'll find some of them actually have clear indications that
[17:36] they have KMRC mortgages.
[17:38] SPEAKER_01: Option number two,
[17:39] SPEAKER_01: they can give you a regular mortgage of their own,
[17:42] SPEAKER_01: but which tends to be pricey.
[17:44] SPEAKER_01: And therefore,
[17:45] SPEAKER_01: of course,
[17:45] you don't want to go into a commercial or a regular mortgage
[17:49] when there's one that
[17:50] SPEAKER_01: is a lot more pricey.
[17:52] SPEAKER_01: All that you need to have is an income and the income essentially will be
[17:55] SPEAKER_01: determined by the financial institutions.
[17:58] SPEAKER_01: You realize that when you go in,
[17:59] SPEAKER_01: whenever you want any loan,
[18:00] SPEAKER_01: not just a home loan,
[18:02] a financial institution will ask you for a pay slip or they
[18:04] will actually ask you
[18:05] SPEAKER_01: for your income.
[18:06] SPEAKER_01: And usually it's evidenced by your pay slip or your bank statements.
[18:11] And so that is a very easy way of assessing,
[18:15] but of course you'll have to make a decision.
[18:17] SPEAKER_01: You will have to sit down and say, you know what, I need a home.
[18:20] SPEAKER_01: And since a home is very personal,
[18:23] SPEAKER_01: and of course we recognize that,
[18:24] of course you'll have to look for the home yourself because
[18:27] you'll have to look for
[18:27] SPEAKER_01: a place that suits your circumstances.
[18:30] SPEAKER_01: And that's now when you come back to the primary lender,
[18:34] SPEAKER_01: the bank or the circle,
[18:35] once you have clarity as to where you want to live and you
[18:38] actually potentially
[18:39] SPEAKER_01: could have done some determination of the pricing of that home.
[18:44] SPEAKER_01: And when you come to a primary lender,
[18:45] SPEAKER_01: you now talk about financing and anything else,
[18:49] SPEAKER_01: of course,
[18:50] SPEAKER_01: with that.
[18:51] SPEAKER_01: So that's a journey, but you take it relatively easy.
[18:54] SPEAKER_01: It's faster.
[18:55] I understand from the lawyers who work with us that these days
[19:00] and the conveyancing
[19:01] SPEAKER_01: process after the registration doesn't take too long.
[19:04] There's a bit of inefficiency that has been built in the
[19:07] Ministry of Lands,
[19:08] SPEAKER_01: particularly on the registration.
[19:10] SPEAKER_01: And that I understand in certain cases, it takes about a month.
[19:13] SPEAKER_01: In certain cases, it takes a couple of weeks.
[19:15] And so it no longer takes too long for you to be able to get
[19:18] access to that home
[19:19] SPEAKER_01: loan and obviously get into your home.
[19:23] SPEAKER_00: Well,
[19:23] SPEAKER_00: a key takeaway is,
[19:24] SPEAKER_00: of course,
[19:24] SPEAKER_00: that KMRC works with primary lenders,
[19:26] SPEAKER_00: and those are the ones you should go to and ask them for a KMRC loan.
[19:31] SPEAKER_00: And then they will ask with KMRC to be able to take the loan.
[19:34] SPEAKER_00: And at least for some of the primary lenders, they are on their website.
[19:37] SPEAKER_00: So if you go to KMRC.co.uk,
[19:41] SPEAKER_00: You'll be able to get a list of them.
[19:43] SPEAKER_00: I can mention a few of them.
[19:44] SPEAKER_00: There's ABSA,
[19:45] SPEAKER_00: Bingo Circle,
[19:46] SPEAKER_00: Karambe Circle,
[19:47] SPEAKER_00: Credit Bank,
[19:48] SPEAKER_00: DTB,
[19:49] SPEAKER_00: HF Group,
[19:50] SPEAKER_00: Imarika Circle,
[19:51] SPEAKER_00: KCB,
[19:51] SPEAKER_00: Mwalimu National,
[19:53] SPEAKER_00: Stanby,
[19:54] SPEAKER_00: Abstar,
[19:54] SPEAKER_00: Steema Circle,
[19:56] SPEAKER_00: Unitas,
[19:56] SPEAKER_00: Tawa Circle,
[19:58] SPEAKER_00: NCBA,
[19:59] SPEAKER_00: Police Circle,
[20:00] SPEAKER_00: Kenya Women's Finance Trust,
[20:02] SPEAKER_00: AWFT,
[20:03] SPEAKER_00: Imarisha Sako, Imarika Sako.
[20:06] SPEAKER_00: There are 20 of them listed there.
[20:07] So if you walk into any of them,
[20:09] they should be able to connect you directly to KMRC loans.
[20:12] SPEAKER_00: A question that I often get is the single digit rates.
[20:14] SPEAKER_00: I think people don't tend to believe that's possible.
[20:17] So perhaps you can explain how you come about to single digit
[20:20] lending rates,
[20:21] SPEAKER_00: which are fixed,
[20:21] SPEAKER_00: and then to be able to lend at low rates.
[20:23] I think Kenyans have been scammed a bit too often and they want
[20:27] to know,
[20:27] is it real?
[20:29] SPEAKER_01: Absolutely.
[20:29] SPEAKER_01: It's very real.
[20:30] SPEAKER_01: But let me just take a step back.
[20:32] There are actually a number of other institutions and we'll
[20:35] publicize those very soon.
[20:37] SPEAKER_01: The 20 you've mentioned are those that started with us,
[20:40] SPEAKER_01: but we actually have another 20 that we are currently considering.
[20:44] And that may just be the additional institutions that you may
[20:47] want to go into.
[20:48] But once we extend financing to them,
[20:51] we list them in our website as part of the landers.
[20:55] SPEAKER_01: When we go into matters to do with single digit, it's real.
[20:59] We actually have testimonials of people who currently enjoy
[21:02] that facility.
[21:03] And I mentioned earlier that at the moment we have at least
[21:06] 3,900 homeowners who got...
[21:09] SPEAKER_01: financing through KMRC at those single digits.
[21:13] SPEAKER_01: So there is no further truth than that.
[21:16] SPEAKER_01: But the way you get single digits,
[21:18] SPEAKER_01: actually for purposes of any loan,
[21:20] SPEAKER_01: the key determinant of the rate is the cost of funds.
[21:24] SPEAKER_01: And that's why I think you keep hearing from time to time.
[21:27] SPEAKER_01: And if you read in the papers,
[21:29] the kind of discussion that they're currently going on the
[21:32] market rates that the
[21:33] banks are charging against what the regulator talks about or
[21:37] the CPR or the central
[21:38] SPEAKER_01: bank rate,
[21:39] SPEAKER_01: Usually,
[21:40] SPEAKER_01: where you get the financing,
[21:41] SPEAKER_01: at what cost is what determines at what rates then you extend.
[21:46] SPEAKER_01: KMRC accesses financing from development finance institutions.
[21:51] So our financing,
[21:51] in fact,
[21:52] comes from the World Bank and the African Development Bank.
[21:56] SPEAKER_01: They are relatively cheaper.
[21:58] And so when we extend financing,
[22:00] we do about 5% to financial institutions.
[22:04] And we have agreed with them that their margin must not be
[22:07] higher to the extent
[22:08] SPEAKER_01: that the loan,
[22:10] SPEAKER_01: the cost will increase to more than 10%.
[22:12] SPEAKER_01: So at the moment,
[22:13] we extend financing at around 5.6% and the banks charge a
[22:18] minimal 3 to 4% maximum.
[22:22] And that's how you arrive at 9.5,
[22:24] sometimes 9.6% from the financial institutions.
[22:30] SPEAKER_01: So that's how you essentially determine at what rate.
[22:34] SPEAKER_01: In the recent past,
[22:35] SPEAKER_01: in fact,
[22:35] SPEAKER_01: we started around 5%,
[22:37] SPEAKER_01: but then when we raised further funds from the capital markets,
[22:41] SPEAKER_01: capital markets financing tend to be costly because we issued a bond,
[22:46] SPEAKER_01: I think in 2022 and listed it in the stock exchange in 2023.
[22:50] SPEAKER_01: And that's slightly more pricey.
[22:52] But what we did was because we essentially want to ensure that
[22:56] it's affordability,
[22:58] SPEAKER_01: We did blending.
[22:59] So we blended the capital markets funds with the more
[23:03] concessional financing that
[23:04] SPEAKER_01: we currently have.
[23:04] And the weighted average cost of funds came down and we still
[23:08] extended the
[23:09] SPEAKER_01: financing at an additional 60 basis points to the primary mobile lenders.
[23:13] So we keep monitoring that because we have an understanding
[23:17] with the banks and the
[23:18] SPEAKER_01: circles that we maintain single digit rates.
[23:21] SPEAKER_01: Now for purposes of the fixed rates,
[23:23] when we negotiated financing from the African Development Bank
[23:27] and the World Bank,
[23:28] SPEAKER_01: we actually fixed the rates at the time we were borrowing.
[23:31] And it was essentially intentional from the beginning that we
[23:34] wanted to introduce
[23:36] SPEAKER_01: fixed rate mortgages in our country at the time.
[23:39] SPEAKER_01: there was almost 90% of loans were on variable rates.
[23:43] And that obviously tend to be problematic because whenever the
[23:46] rates change,
[23:47] SPEAKER_01: they increase,
[23:48] SPEAKER_01: people tend to default.
[23:51] SPEAKER_01: The rate of default,
[23:52] SPEAKER_01: which you call non-performing loans,
[23:54] SPEAKER_01: essentially continues to escalate whenever there are those changes.
[23:57] But we wanted a market that people get constant repayments so
[24:02] that in fact we
[24:03] SPEAKER_01: reduce the problem of non-performing loans,
[24:06] SPEAKER_01: particularly for homeownership.
[24:08] So we fixed the rate at the access of funds and essentially we
[24:12] extended the same
[24:13] benefit all the way to the financial institutions and to the
[24:17] end user who is the
[24:18] SPEAKER_01: home loan borrower.
[24:20] SPEAKER_01: It's very intentional.
[24:21] SPEAKER_01: It's very purposeful.
[24:23] SPEAKER_01: that we are doing that,
[24:25] SPEAKER_01: and that's because we need stability,
[24:27] SPEAKER_01: particularly when people are borrowing and taking in home loans.
[24:31] SPEAKER_01: We want people to have stability in their homes.
[24:34] Their circumstances can change,
[24:36] but they will nonetheless continue to repay the loans.
[24:40] SPEAKER_01: at the same rate that they have started.
[24:42] SPEAKER_01: We believe with that kind of arrangement,
[24:44] SPEAKER_01: usually people's circumstances tend to improve in most cases.
[24:47] SPEAKER_01: Rarely, of course, you will get circumstances where that doesn't happen.
[24:51] SPEAKER_01: But when that improves,
[24:53] it increases a lot more stability at the home because you will
[24:56] then apply the
[24:56] SPEAKER_01: additional funds that you have to meet other obligations.
[25:00] SPEAKER_00: You said 20 more situations coming up.
[25:02] SPEAKER_00: We've gotten a list of 10, which have already been onboarded.
[25:04] SPEAKER_00: So if you're a member of Thai SACO,
[25:06] SPEAKER_00: Nation SACO,
[25:08] SPEAKER_00: SBM Bank,
[25:08] SPEAKER_00: Kingdom Bank,
[25:09] SPEAKER_00: Eco Bank,
[25:11] SPEAKER_00: I&M Bank,
[25:12] SPEAKER_00: Kingdom SACO,
[25:14] SPEAKER_00: Wanandege SACO,
[25:15] SPEAKER_00: Amar SACO,
[25:16] SPEAKER_00: and Cyndian Bank,
[25:16] SPEAKER_00: you should be able to access KMRC loans.
[25:19] SPEAKER_00: I have one more question for you.
[25:21] SPEAKER_00: You've been in this space for a while.
[25:22] SPEAKER_00: You should be able to tell us a bit more about it.
[25:24] Some of the common misunderstandings and misconceptions about
[25:28] mortgages generally in Kenya.
[25:30] One of the things I've learned from you today is that you don't
[25:32] need to stick with
[25:32] SPEAKER_00: the mortgage.
[25:33] SPEAKER_00: If you took at first, you can actually pay it back very quickly.
[25:36] You don't have to stick with it until the 15 years that you've
[25:39] taken it up for.
[25:40] SPEAKER_00: That's something I didn't know.
[25:41] So perhaps some of the other things in your course of dealing
[25:44] with clients that
[25:45] SPEAKER_00: you've seen as misconceptions,
[25:46] SPEAKER_01: you can share them.
[25:47] SPEAKER_01: There are quite a number of misconceptions about formed mortgages.
[25:51] SPEAKER_01: One of the key ones is essentially that a mortgage is for the rich.
[25:56] People tend to associate mortgages to people who are elite or
[26:00] elitists for that matter.
[26:02] SPEAKER_01: It's far from the truth.
[26:03] SPEAKER_01: A home loan is available to anyone and everyone who has capacity,
[26:09] SPEAKER_01: who has an income sufficient enough to be able to repay a loan.
[26:13] SPEAKER_01: So that essentially remains a myth.
[26:16] It's a terrible misconception because people who otherwise will
[26:20] have been able to
[26:21] SPEAKER_01: take a mortgage,
[26:22] SPEAKER_01: but because of that misconception,
[26:23] they tend to want to build a saving enough to be able to build
[26:27] their own home in future.
[26:29] SPEAKER_01: And that takes long.
[26:31] The other one is that people tend to associate mortgage with
[26:36] significant costs,
[26:37] SPEAKER_01: that it's very expensive and therefore it's something not to consider.
[26:42] Now,
[26:43] a mortgage or a home loan or accessing a home loan is super efficient.
[26:48] SPEAKER_01: Of course,
[26:48] there are costs that are associated with it and the fact that
[26:52] the costs are
[26:52] SPEAKER_01: calculatable
[26:53] SPEAKER_01: Of course,
[26:54] you'll be able to get the cost immediately because a financial
[26:57] institution will
[26:57] SPEAKER_01: share with you.
[26:59] SPEAKER_01: The other option of self-build or something like that,
[27:03] you do not see that cost or you do not do the calculations in
[27:06] now for you to be
[27:07] SPEAKER_01: able to see that that's a lot more expensive.
[27:10] SPEAKER_01: Because of the time it takes to do the construction and,
[27:13] SPEAKER_01: of course,
[27:14] SPEAKER_01: the complexities of constructions and that kind of thing,
[27:18] you will realize that it's actually a lot more pricey to do
[27:21] that than taking a mortgage.
[27:23] The protection you have for taking a mortgage is usually there
[27:26] are a number of
[27:27] SPEAKER_01: actors that tend to review the mortgage.
[27:31] And,
[27:31] of course,
[27:31] there's a lot of due diligence that is done on your behalf.
[27:34] by the financial institutions and of course the agents that are
[27:38] appointed in
[27:39] SPEAKER_01: between to be able to do that.
[27:41] And that essentially just protects or provide protection to the
[27:44] mortgage person.
[27:46] SPEAKER_01: So while there are costs,
[27:47] SPEAKER_01: and I think I mentioned earlier,
[27:48] there are those incidental costs that range from stamp duty to
[27:52] legal fees and matters,
[27:54] SPEAKER_01: which I think on aggregate tend to take about an additional 7%,
[27:59] SPEAKER_01: it is recognizable.
[28:01] SPEAKER_01: You'll be able to see that cost is actually there.
[28:04] And of course,
[28:05] that's a cost you just need to meet for you to be able to get
[28:08] in there.
[28:09] The other costs,
[28:09] they usually know data to be able to determine the cost or how
[28:14] much it takes.
[28:15] SPEAKER_01: But we understand it's actually a lot more costly.
[28:19] One of the other myths is the fact that mortgages have gotten a
[28:22] bad name in the past.
[28:24] SPEAKER_01: And because we have legacy issues in relation to mortgages,
[28:28] SPEAKER_01: and this was mainly driven by the variability of rates.
[28:31] SPEAKER_01: The fact that all loans were on variables, they tended to change.
[28:37] And when that happens,
[28:38] and you do not have an income you cannot afford to pay anymore.
[28:43] SPEAKER_01: you enter into a default.
[28:44] And that drove people to believe that financial institutions
[28:48] were driving them to
[28:49] SPEAKER_01: take mortgages so that they can come in and take your home,
[28:52] SPEAKER_01: either by foreclosures or things like that,
[28:55] SPEAKER_01: and you lose.
[28:56] So we have had those legacy issues,
[28:58] which was driven mainly by the variable rates.
[29:01] SPEAKER_01: And that's why we decided to do fixed,
[29:03] SPEAKER_01: so that the chances of default,
[29:06] SPEAKER_01: and as a result,
[29:07] SPEAKER_01: a foreclosure of your home is reduced,
[29:10] SPEAKER_01: if not totally eliminated.
[29:12] SPEAKER_01: Foreclosures are bad,
[29:14] and the fact that people believe that financial institutions
[29:16] are ruthless and they
[29:17] tended to target people because of their unfortunate defaults
[29:21] should not be an
[29:22] SPEAKER_01: issue that should stop anyone from borrowing,
[29:25] SPEAKER_01: particularly right now,
[29:26] because you will not be able to go into a foreclosure situation
[29:29] if you can make
[29:30] SPEAKER_01: your accounts and repayment over time.
[29:32] SPEAKER_01: In any case these days,
[29:33] SPEAKER_01: even if you default or because of maybe some unfortunate circumstances,
[29:38] SPEAKER_01: you'll have to have an agreement with the financial institution.
[29:41] SPEAKER_01: You'll have to enter into an agreement of,
[29:42] SPEAKER_01: say,
[29:43] I want to dispose the house myself and then I repay the loan
[29:46] and then I keep the difference.
[29:47] Or the financial institution can do that on your behalf with a
[29:50] clear understanding
[29:51] SPEAKER_01: that the amount that is above or more than the loan,
[29:54] SPEAKER_01: of course,
[29:55] SPEAKER_01: will be paid back to you.
[29:57] We have lost a bit of trust on the financial institutions
[30:00] because of that.
[30:01] SPEAKER_01: And that's also,
[30:02] SPEAKER_01: I think,
[30:03] one of the common misunderstanding that continues to affect
[30:07] people to take mortgages.
[30:08] SPEAKER_01: Trust is a key issue.
[30:11] If people don't trust the situation,
[30:13] of course,
[30:13] they will not enter into any form of agreement.
[30:16] SPEAKER_01: And of course,
[30:17] we recognize that we had challenges in the past that actually
[30:20] destroyed the kind of
[30:21] SPEAKER_01: trust that we have.
[30:23] SPEAKER_01: But we are slowly rebuilding that.
[30:24] SPEAKER_01: Okay, Mars is helping essentially to rebuild that trust.
[30:27] Because the kind of loans or the kind of protection we're
[30:31] providing right now is
[30:32] SPEAKER_01: essentially useful.
[30:33] SPEAKER_01: And we believe it's for the long time.
[30:36] I appreciate that bit of you explaining a bit on the context
[30:39] around mortgages and all,
[30:40] because there's a lot of people who remember their parents
[30:42] being kicked out of homes,
[30:43] SPEAKER_00: perhaps because of the poor way in which those situations were handled.
[30:46] SPEAKER_00: I think it's better now.
[30:48] SPEAKER_00: As you say, there's a lot of options when there's foreclosure for you.
[30:51] So you don't need to fear,
[30:52] starting more in fear of foreclosure at some point.
[30:55] SPEAKER_00: Perhaps to double click on that,
[30:57] SPEAKER_00: what are some of the options when it comes to,
[30:58] SPEAKER_00: okay,
[30:58] SPEAKER_00: I've taken up the mortgage,
[31:00] SPEAKER_00: I'm not able to pay.
[31:01] What can someone do in that instance to be able to protect
[31:04] themselves and to be
[31:04] SPEAKER_00: able to get out of the situation in a better way?
[31:07] SPEAKER_01: So if you enter into a mortgage situation or under home loan,
[31:11] SPEAKER_01: and you are no longer able to make the repayments,
[31:16] the first thing usually is to approach your lender and have a
[31:20] conversation to the
[31:21] SPEAKER_01: extent that at the moment they're unable to make the repayments.
[31:25] Usually they have special circumstances under which they will
[31:29] review based on your circumstances.
[31:32] SPEAKER_01: If you are in between jobs, for example, they may give you a time
[31:36] They may restructure your loan to provide you a slightly longer
[31:40] time or maybe
[31:42] extend the repayment duration even longer so that you can be
[31:46] able to pay smaller
[31:47] SPEAKER_01: installments that way to enable you to recover at some point.
[31:52] SPEAKER_01: So they give you a recovery period.
[31:54] SPEAKER_01: If it is totally impractical that you are unable to,
[31:59] SPEAKER_01: even with extended time,
[32:01] SPEAKER_01: for example,
[32:01] SPEAKER_01: if they provide unstopped or stop the repayment for a certain duration,
[32:07] SPEAKER_01: of course,
[32:07] as you work on your circumstances and it inevitably have to be
[32:11] a foreclosure,
[32:12] SPEAKER_01: or a sale of the house,
[32:14] if you cannot be able to raise financing from any other
[32:16] property or any other way,
[32:17] then a foreclosure arrangement can be discussed with a
[32:20] financial institution.
[32:22] SPEAKER_01: And with the option that I think that I discussed earlier,
[32:24] whether you can do the sale yourself and make a repayment on
[32:28] the understanding that
[32:29] you have with a financial institution or the financial
[32:32] institution can do it with
[32:33] understanding that they pay you sure the properties turns out
[32:37] to be higher or
[32:39] SPEAKER_01: higher value than the loan that you have.
[32:41] SPEAKER_01: So that is a clear and I think very transparent way of doing things.
[32:46] SPEAKER_01: It's a lot more transparent these days to the extent that you,
[32:49] SPEAKER_01: that understanding is actually very clear.
[32:52] SPEAKER_01: So those are rare circumstances.
[32:53] SPEAKER_01: In fact, they are completely not common.
[32:56] SPEAKER_01: There are very few situations when you enter into that,
[32:59] SPEAKER_01: but certainly when you enter into an arrangement,
[33:02] SPEAKER_01: for some,
[33:03] those are some of the things you should also be having in mind
[33:05] when you're in there.
[33:06] That's a very important thing to reiterate for other people who
[33:10] are afraid to take
[33:10] SPEAKER_00: up mortgages.
[33:11] SPEAKER_00: So come discuss.
[33:12] SPEAKER_00: There is room for discussions.
[33:14] SPEAKER_00: And I think the earlier you do that in terms of discussing, the better.
[33:17] Unless you have something to add,
[33:18] I wanted to ask you a bit about the 2024 results of KMRC.
[33:22] SPEAKER_00: They are pretty impressive.
[33:24] It would be good for you to maybe give us a little bit of
[33:26] flavor on how they were generally.
[33:28] SPEAKER_01: Before I do that, can I just add, we are already facilitating KMRC.
[33:33] SPEAKER_01: affordable home loans.
[33:35] And I think some of the numbers which we have published
[33:38] demonstrates what we have
[33:39] SPEAKER_01: done so far around that because they are all public information.
[33:44] SPEAKER_01: But we actually even trying to make it a lot better.
[33:46] The way we are looking at it is we want to provide or we want
[33:51] to have a situation
[33:52] SPEAKER_01: where we have a backup or a guarantee.
[33:55] And that is why we are just about to launch what we call a risk
[33:58] sharing facility or
[34:00] SPEAKER_01: a partial mortgage guarantee arrangement.
[34:02] Partial mortgage guarantee is usually where you find a third
[34:05] party providing a
[34:07] SPEAKER_01: guarantee cover for what any potential defaults that can arise.
[34:12] SPEAKER_01: And the cover is usually given to a financial institution.
[34:16] So the intention is actually to take care of the credit risk or
[34:20] the risk of
[34:21] SPEAKER_01: defaults by a borrower.
[34:23] SPEAKER_01: We have developed that institution.
[34:25] It's called Kenya Mortgage Guarantee Trust,
[34:28] which is currently a subsidiary of KMRC.
[34:30] It's a trust because it will run on its own because it has a
[34:34] whole set of different
[34:35] risks and therefore it will have its own balance sheet for
[34:38] purposes of covering the
[34:40] SPEAKER_01: guarantees that we have.
[34:41] The way it works is that the Kenya Mortgage Guarantee Trust
[34:45] will provide cover of
[34:46] SPEAKER_01: up to 40% should there be a default by a borrower.
[34:50] SPEAKER_01: The intention is essentially to de-risk the end user or the end borrower.
[34:55] And this is because we are trying to shift financing even
[34:58] further down the market,
[34:59] SPEAKER_01: particularly for first-time homeowners.
[35:03] People who are owning a home for the first time are the kind of
[35:06] eligible candidates for that.
[35:08] The other category of people we are looking at is those who do
[35:11] not have a reggae line.
[35:13] You have a couple of people who have income or post SMEs and
[35:17] things like that,
[35:18] SPEAKER_01: or they work,
[35:18] SPEAKER_01: say,
[35:19] SPEAKER_01: for example,
[35:20] SPEAKER_01: a taxi driver or something like that,
[35:22] SPEAKER_01: or even someone who runs a small business,
[35:24] SPEAKER_01: a shop or something.
[35:26] SPEAKER_01: They actually have an income,
[35:27] but the income is not as regular as a person who has a regular
[35:31] job where they have
[35:32] SPEAKER_01: a payslip.
[35:34] SPEAKER_01: Those people can actually be able to repay a loan.
[35:37] And so what we are saying is that we are providing the
[35:40] guarantee to the financial
[35:41] institution to the extent that they originate mortgages or
[35:45] underwrite mortgages
[35:46] SPEAKER_01: from that category of people.
[35:48] SPEAKER_01: And should they default, they get a 40% cover.
[35:53] SPEAKER_01: This means if you take a loan of $1 million and there is a default,
[35:57] Kenya Monk Guarantee Trust will repay $400,000 out of that $1
[36:02] million loan.
[36:03] SPEAKER_01: And so that cover is significant.
[36:06] SPEAKER_01: The assumption is that the difference is,
[36:09] SPEAKER_01: of course,
[36:09] SPEAKER_01: part of the credit risk that is borne by the financial institution.
[36:13] SPEAKER_01: And that's why it's a shared investment, that's risk sharing investment.
[36:18] SPEAKER_01: Having said that,
[36:18] SPEAKER_01: if we talk about the KMRC financial performance,
[36:22] SPEAKER_01: I think we have built our institution over time,
[36:25] SPEAKER_01: our gradually.
[36:26] SPEAKER_01: When you look at KMRC performance since 2020,
[36:30] SPEAKER_01: 2021,
[36:30] SPEAKER_01: you can actually see the gradual increase on a number of areas.
[36:34] Starting,
[36:35] for example,
[36:35] when you look at our balance sheet,
[36:37] it expanded by almost 25%.
[36:39] SPEAKER_01: reaching about 32 billion by the end of last year.
[36:44] SPEAKER_01: And that's, at least in our view, not a mean achievement.
[36:47] Building over 30 billion balance sheet within five years is
[36:51] another mean task.
[36:52] We also have increased the number of institutions who have
[36:57] received funds from KMRC
[36:59] SPEAKER_01: to the extent that the kind of liquidity that has gone to the market.
[37:02] increased by another 46% last year from $9.6 billion in 2023 to
[37:08] about $14 billion
[37:09] SPEAKER_01: by December 2024.
[37:09] I mentioned earlier about the number of people who have
[37:15] directly benefited,
[37:16] SPEAKER_01: who have essentially taken loans that are affordable.
[37:19] SPEAKER_01: The loans at the single digit,
[37:22] SPEAKER_01: at the fixed rates,
[37:23] SPEAKER_01: were almost 3,900 additional mortgage borrowers.
[37:28] SPEAKER_01: Of course,
[37:28] SPEAKER_01: when you look at the profitability,
[37:30] SPEAKER_01: that also increased by about 56%,
[37:34] SPEAKER_01: closing at about $1.3 billion in 2024.
[37:37] SPEAKER_01: And of course,
[37:38] SPEAKER_01: that is mainly driven by the interest income,
[37:41] which also rose by about 34% to about $3.2 billion from $3.4
[37:44] billion in 2020.
[37:48] SPEAKER_01: So our broad momentum continues.
[37:51] SPEAKER_01: Of course,
[37:52] SPEAKER_01: we anticipate that it's going to continue,
[37:55] but we are also going to broaden a lot more on the people who
[38:00] are going to take up mortgages,
[38:02] SPEAKER_01: the financial institutions who are going to borrow.
[38:04] SPEAKER_01: We are taking small margins in the business,
[38:07] but we are as much as possible optimizing our costs to ensure
[38:10] that the benefit is
[38:11] SPEAKER_01: actually passed to the people who are borrowing funds that are provided.
[38:17] SPEAKER_01: by KMRC.
[38:18] SPEAKER_01: The most important thing is what we're encouraging people to do,
[38:22] SPEAKER_01: that they take advantage because people will always need a home.
[38:27] SPEAKER_01: There is absolutely no time that someone will ever not need a home.
[38:32] Home can be owned,
[38:34] which is the ideal or the best,
[38:36] and home can also be for rental.
[38:39] SPEAKER_01: But then,
[38:39] SPEAKER_01: of course,
[38:39] you understand that it's actually you're sinking your funds
[38:43] when you're doing that.
[38:44] SPEAKER_01: And now that affordability is equivalent to your rent,
[38:49] SPEAKER_01: so there's absolutely no reason why you continue to pay rent,
[38:53] SPEAKER_01: which would be your repayment of your mortgage,
[38:56] SPEAKER_01: and you own your home.
[38:58] SPEAKER_01: And essentially, there's certainly no need to wait.
[39:03] SPEAKER_01: When you want a home,
[39:04] you actually need to take a home loan or have your home only in
[39:07] your life so that
[39:08] SPEAKER_01: you have sufficient time to make those payments.
[39:11] SPEAKER_01: In a number of jurisdictions that we know of,
[39:14] SPEAKER_01: people take what they call multi-generational mortgages.
[39:17] SPEAKER_01: And in most countries, actually, credit drives markets.
[39:21] SPEAKER_01: Credit, a mortgage is a credit.
[39:23] And so people don't wait for cash and people generally don't
[39:26] even have cash.
[39:28] SPEAKER_01: So the idea is you take a mortgage for 30,
[39:31] SPEAKER_01: 40 years,
[39:32] SPEAKER_01: and that's what they call a monthly generational,
[39:35] SPEAKER_01: and the mortgage can actually be passed to you.
[39:38] SPEAKER_01: your children to continually pay because in their view,
[39:41] there is no hurry to pay now if someone else can take over the
[39:45] payments over time.
[39:46] SPEAKER_01: But of course, we understand that people are different.
[39:49] SPEAKER_01: The study we did last year,
[39:51] we noted that people actually love short-term funds as opposed
[39:54] to long-term.
[39:55] SPEAKER_01: But sometimes in our view, it's a misunderstanding.
[39:57] SPEAKER_01: It's maybe lack of information.
[40:00] Why would you want to repay if you know that you can make a
[40:03] repayment for a number of years?
[40:06] SPEAKER_01: But of course,
[40:06] SPEAKER_01: in our situation,
[40:08] the loan you take in most cases is back to your retirement from
[40:11] the current income
[40:12] SPEAKER_01: that you continue to earn.
[40:14] SPEAKER_01: But if you are young,
[40:15] your repayment can actually start now and you'll pay it for
[40:19] whatever duration that
[40:20] SPEAKER_01: you want.
[40:21] But again,
[40:21] it doesn't have to be long or long-term if people prefer to do short.
[40:26] SPEAKER_01: So you take a long-term loan,
[40:28] SPEAKER_01: enter into that now,
[40:30] SPEAKER_01: and then you exit out of it within a short time,
[40:33] SPEAKER_01: as fast as you can manage to repay.
[40:36] SPEAKER_00: You've comprehensively covered the issue of mortgages and all.
[40:40] SPEAKER_00: Only one or two questions remain.
[40:42] SPEAKER_00: One is from the audience.
[40:43] SPEAKER_00: Someone is asking,
[40:44] SPEAKER_00: apart from the 40 institutions that you'll be working with,
[40:47] SPEAKER_00: someone who's outside the 40 institutions,
[40:49] SPEAKER_00: what can they do to get in?
[40:50] SPEAKER_00: And I know you're working with more to bring on board.
[40:53] SPEAKER_01: We have actually broadened this up to any lender that does mortgages.
[40:59] SPEAKER_01: So if your institution is not coming to work with us,
[41:03] SPEAKER_01: you have an option to shift into another one.
[41:05] SPEAKER_01: In any case, that's why we are creating competition.
[41:07] SPEAKER_01: You can shift to a circle or you can actually shift to
[41:11] another financial institution that is more keen on getting
[41:14] funding from KMRC.
[41:15] SPEAKER_01: And we have seen a lot of that.
[41:17] SPEAKER_01: We have seen actually a number of people who have shifted.
[41:20] And we have also seen a number of financial institutions coming
[41:23] to KMRC driven by that pressure.
[41:26] They come and tell us our customers are shifting because we are
[41:29] unable to provide
[41:30] SPEAKER_01: lower cost mortgages and therefore we want to work with KMRC to get
[41:33] SPEAKER_01: this so that we can also retain our customers.
[41:36] SPEAKER_01: So one of the key things that I think we have helped to do is to increase
[41:40] SPEAKER_01: competition in the market,
[41:41] SPEAKER_01: which tends to serve customers.
[41:43] And that's one thing that I think that's what makes financial
[41:48] institutions to take
[41:49] SPEAKER_01: action that tend to serve their customers.
[41:52] SPEAKER_00: The second question, what would be your vision for KMRC going forward?
[41:55] What would be your ideal vision for KMRC and for Kenya as a
[41:59] whole in terms of home
[42:00] SPEAKER_00: ownership generally?
[42:02] So we are keen on providing or supporting or promoting or
[42:07] enabling people to be
[42:09] SPEAKER_01: able to own homes.
[42:11] SPEAKER_01: It is increasing decent access to housing in Kenya.
[42:16] SPEAKER_01: That's actually our vision.
[42:19] SPEAKER_01: We have a lot of migration,
[42:20] SPEAKER_01: urban migration,
[42:21] and that is going to actually significantly increase over the
[42:25] years because most of
[42:26] the majority of the people now will tend to live in the cities
[42:29] or peri-urban areas.
[42:31] And so as they shift into those,
[42:34] we believe they should be indecent homes.
[42:37] SPEAKER_01: The pressure that I supplied on cities,
[42:39] SPEAKER_01: and that's why they say cities grow the way they are financed,
[42:43] SPEAKER_01: is people come in and then there's a significant shortage of houses.
[42:47] SPEAKER_01: And what happens?
[42:48] People then tend to shift into informal settlements and that
[42:52] just creates other problems.
[42:54] So KMRC is playing his role or we want to play our role to
[42:58] support ownership of decent homes.
[43:01] We have targets for increasing home ownership and that's we
[43:07] believe will be done over time.
[43:10] When KMRC came in 2020,
[43:12] there were about what,
[43:15] 26,000 mortgages in the country.
[43:17] SPEAKER_01: And that number has been sticky.
[43:19] SPEAKER_01: It has been there forever actually.
[43:20] Now we are beginning to see a shift and a gradual upward shift
[43:25] of that to the
[43:26] SPEAKER_01: extent that now the numbers we got last year is now 30,000 mortgages.
[43:31] SPEAKER_01: So we believe that is going to increase.
[43:33] SPEAKER_01: We lack data on how the other homes are financed.
[43:37] SPEAKER_01: In most cases,
[43:38] SPEAKER_01: they're still financed by loans,
[43:40] SPEAKER_01: but then that data is not appropriately aggregated,
[43:43] SPEAKER_01: but we'll be able to see that and we'll get those numbers over time.
[43:48] SPEAKER_01: This is an institution that we believe is a partner for Kenyans,
[43:53] for home ownership or for Kenyans who want to own homes or who
[43:57] want to own decent homes.
[43:59] SPEAKER_01: There is never going to be only one way of doing that.
[44:02] SPEAKER_01: We'll of course keep changing or growing or developing more products.
[44:06] SPEAKER_01: At the moment, it's just a plain vanilla mortgage.
[44:09] And we have a number of other options which we introduced recently,
[44:13] like the buy to build.
[44:15] SPEAKER_01: You can buy land and then you build that home.
[44:18] SPEAKER_01: And we also have what we call tenant purchases,
[44:21] SPEAKER_01: which is also another great way of owning a home,
[44:23] SPEAKER_01: which you can do over time.
[44:25] And so we are going to experience some shifts in home ownership
[44:30] over time.
[44:30] SPEAKER_01: But of course, KMRC is going to be a greater partner.
[44:34] We want to be associated with a significant growth of people in
[44:39] Kenya who own their
[44:40] own homes and who are essentially then stable or have stability
[44:45] in their homes
[44:46] SPEAKER_01: arising from the support that they have gotten from their mercy.
[44:49] SPEAKER_01: So that's essentially our vision.
[44:51] SPEAKER_00: Thank you so much.
[44:52] SPEAKER_00: That's been a very good conversation.
[44:54] SPEAKER_00: I hope to have you again soon to discuss more about homeownership.
[44:58] You've been in depth in the spaces in terms of dealing with
[45:01] homeownership here and there,
[45:02] SPEAKER_00: and you have a passion for it.
[45:04] So we really appreciate that you're able to take that hour to
[45:07] come and share with
[45:08] SPEAKER_00: us a little bit of perspective on that.
[45:10] So I want to give you maybe one more chance now as we close up
[45:13] the spaces,
[45:14] perhaps you can tell us a bit about maybe something or some
[45:17] tidbit that you've
[45:18] gleaned from your career in this space that you can share with
[45:21] the young person
[45:22] SPEAKER_00: who's starting out in their journey,
[45:24] SPEAKER_00: maybe in home ownership generally or just specifically career-wise.
[45:27] SPEAKER_01: Sure.
[45:28] SPEAKER_01: Thank you very much.
[45:29] SPEAKER_01: It is about spending your time and spending your work life.
[45:34] The decisions that you make when you're young will impact how
[45:39] your life will turn
[45:40] SPEAKER_01: out when you're older.
[45:41] SPEAKER_01: And so that's important.
[45:43] If you have the advantage of having someone wise who can advise
[45:46] you and you take
[45:47] SPEAKER_01: the advice earlier,
[45:49] SPEAKER_01: for example,
[45:49] SPEAKER_01: the advice you are giving on home ownership,
[45:52] SPEAKER_01: that you don't need to wait,
[45:54] SPEAKER_01: you just need to buy that home now and then you wait,
[45:58] your circumstances will be very different in the future
[46:01] compared to somebody,
[46:02] SPEAKER_01: for example,
[46:03] who decided to wait and try to enter into a home ownership
[46:06] discussion in the future.
[46:08] SPEAKER_01: So that's one lesson that at least I have learned over my career life.
[46:14] SPEAKER_01: And I believe it's very important.
[46:17] And that is,
[46:18] I think,
[46:18] my parting shot that please don't wait to buy a home,
[46:22] buy a home and wait.
[46:24] SPEAKER_01: We'll have further discussions,
[46:25] SPEAKER_01: of course,
[46:26] because we'll want from time to provide greater detail as to
[46:30] what we observe going
[46:31] SPEAKER_01: on the homeownership.
[46:33] We are strengthening capacity of the public in relation to the
[46:38] journey to going home.
[46:40] We are equally strengthening capacity of the financial
[46:42] institutions that work with us.
[46:44] SPEAKER_01: In fact, we are going around all the counties.
[46:48] I think we've been in about 10 or 11 already that we are
[46:53] inviting the financial
[46:55] SPEAKER_01: institutions that are working with us so that they can understand
[46:58] essentially how to do greater underwriting or origination of
[47:02] those mortgages.
[47:03] SPEAKER_01: The idea is to increase efficiency in the process,
[47:06] SPEAKER_01: especially when the customer onboarding or the customer journey.
[47:10] And the idea is also to just get people to come in and see the
[47:15] value that is currently there.
[47:17] SPEAKER_01: We have a significant customer proposition that we are providing,
[47:22] SPEAKER_01: and we want people to take advantage of that,
[47:24] to certainly go into their journey of home ownership using the
[47:27] various methods that
[47:29] SPEAKER_01: we have described.
[47:30] SPEAKER_01: So I want to thank you very much.
[47:32] SPEAKER_01: I thank all the listeners who were in this.
[47:34] We greatly appreciate this kind of discussion and this kind of partnership.
[47:39] We are very excited to see a number of people who have joined
[47:43] in this conversation.
[47:44] SPEAKER_01: It's very exciting.
[47:46] It means that we are serious about at least this form of
[47:52] education that we are providing.
[47:53] SPEAKER_01: And we are very glad to have you listen.
[47:56] Please pass the message to anyone and everyone about this and
[48:00] look out for more
[48:01] SPEAKER_01: information that we are providing from time to time.
[48:04] SPEAKER_01: Thank you.
[48:05] SPEAKER_00: Thank you all for joining us on this spaces today.
[48:07] SPEAKER_00: Thank you so much, the KMRC CEO, for joining us for the past hour.
[48:10] SPEAKER_00: So we are grateful for your time.
[48:11] SPEAKER_00: Thank you for facilitation from the KMRC team led by Irene.
[48:15] SPEAKER_00: Thank you for bringing the CEO to our spaces.
[48:19] SPEAKER_00: Do check out their website, kMRC.co.uk for more information.
[48:22] SPEAKER_00: Thank you so much and have a lovely evening.

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