CBK wants bigger mortgage market

March 21, 2012
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NAIROBI, Kenya, Mar 21 – The Central Bank of Kenya (CBK) Governor Njuguna Ndung’u has called for the widening of the local mortgage market especially as the country faces a growing housing demand.

Despite the mortgage finance market demonstrating great potential by tripling in size between 2006 and 2010, Ndung’u said Kenya’s mortgage debt to GDP ratio of 2.5 percent is a paltry comparison to developed markets like the US, where the ratio is over 70 percent.

According to a study conducted by the CBK and the World Bank in June 2010 on mortgage finance in Kenya, the market grew from Sh19 billion in 2006 to Sh61 billion in 2010.

In the same period the number of mortgages in the banking sector grew from 7,580 to 13,803.

“The survey also identified key constraints to the mortgage market in Kenya such as low levels of income, access to long term funds, credit risk due to absence of historical information, relatively high interest rates and difficulties with property registration,” Ndung’u revealed.

Measures have since been put into place to avert such challenges including issuance of corporate and housing bonds and the roll-out of credit information sharing mechanism.

The governor was speaking during the launch of the Housing Finance current account on Tuesday which is part of the firm’s efforts to tap into lower cost funds and broaden its funding base.

HF Managing Director Frank Ireri said the current account will initially target customers in the firm’s ecosystem ranging from developers, contractors and land owners.

“Our positioning is a link to a one-stop-shop on property matters. We want this account to be a gateway for housing finance current account holders to access financial solutions, information and support from us,” he said.

Housing Finance has a mortgage portfolio of Sh26 billion and makes up about 31 percent of the total banking sector mortgage accounts in the country.

Ireri added that the firm is currently seeking long term financing from external sources to finance its mortgage business.

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