The Co-operative Bank last year took a loan of Sh549.8 million from the Kenya Mortgage Refinance Company (KMRC) for onward lending to home buyers. Co-op Holdings, the majority shareholder of Co-op Bank, says in disclosures that the bank entered the agreement with KMRC in June last year but did not state the maximum amount that would be available to the bank under the deal.
“In June 2021, the Co-operative Bank entered into an agreement with the KMRC for a credit facility at a fixed rate of five per cent to finance affordable housing mortgage loans. As of the end of 2021, the amount disbursed to the bank was Ksh549.79 million.”
KMRC said it is lending the money to the bank at an interest rate of five per cent per annum, which will allow the institution to on-lend the same at single-digit rates to mortgage customers earning less than Sh150,000 per month. Co-op Holdings, which is owned by co-operative societies and unions, holds a 64.5 per cent stake in Co-operative Bank.
The lender accounted for five per cent of Kenya’s total outstanding mortgage loans as of the end of 2020, according to Central Bank of Kenya (CBK) data. This amounted to 1,285 mortgage accounts, with loans worth Ksh11.9 billion. Co-op Bank subsidiary Kingdom Bank had also issued mortgages worth Ksh1.19 billion at the end of the period.
The average home loan size stood at Sh8.6 million, with an average rate of 10.9 percent on the loans and a time to maturity of 11 years. This high-interest rate and the mismatch between banks’ largely short-term deposits and the long-term commitment of mortgage financing have been blamed for the low uptake and disbursal of home loans.
The KMRC was thus formed to feed the banks with long-term funding at five percent interest, which in turn allows them to commit to financing home buyers at friendlier rates and longer tenors.
The mortgage refinancer had by the end of last year accessed Ksh6.5 billion in capital for onward lending through a Ksh18 billion credit line from the World Bank and the African Development Bank through the Treasury.